For personal use only 2 | INTELLIHR ANNUAL REPORT 2018 For personal use only A N N U A L R E P O R T 2 0 1 8 Contents Corporate directory Chairman’s letter Directors’ report Directors and Company Secretary Principal activities Dividends Review of operations Significant changes in the state of affairs Likely developments and expected results of operations Events since the end of the financial year Information on Directors Meetings of Directors Remuneration report (Audited) Shares under option Insurance of officers and indemnities Proceedings on behalf of the Company Non-audit services Declaration of Independence Corporate governance statement Financial report Directors’ declaration Independent auditor’s report Shareholder information 4 6 7 27 28 30 65 66 70 3 | INTELLIHR ANNUAL REPORT 2018 For personal use only A N N U A L R E P O R T 2 0 1 8 Corporate directory Directors G A J Baynton M.Econ St, MBA, B.Bus, P.G.Dip. Applied Fin & Inv. A Bellas B.Econ, DipEd, MBA, FAICD, FCPA, FAIM R Bromage B.Bus, CAHRI J Duffield MAICD J Fong BInfTech Secretary S M Yeates CA, B.Bus Principal Place of Business Level 32, 12 Creek Street, Brisbane QLD 4000 Registered Office C/- McCullough Roberston Central Plaza Two Level 11, 66 Eagle Street Brisbane QLD 4000 Share register Link Market Services Limited Auditor Solicitors Level 21, 10 Eagle Street Brisbane QLD 4000 www.linkmarketservices.com.au BDO Audit Pty Ltd Level 10, 12 Creek Street Brisbane QLD 4000 www.bdo.com.au McCullough Roberson Level 11, Central Plaza Two 66 Eagle Street Brisbane QLD 4000 www.mccullough.com.au Bankers Commonwealth Bank of Australia Stock exchange listing intelliHR Holdings Limited shares are listed on the Australian Securities Exchange (ASX). Website address www.intellihr.com.au 4 | INTELLIHR ANNUAL REPORT 2018 For personal use only “intelliHR is a tool that helps with our strategic cultural goal of being a great place to work, with improved engagement, communication and goal management now well on track.” F U J I T S U G E N E R A L A U S T R A L I A SAR AH G ATEHOUSE, NATIONAL MANAGER PEOPLE & CULT U RE 5 | INTELLIHR ANNUAL REPORT 2018 For personal use only A N N U A L R E P O R T 2 0 1 8 Chairman’s letter It is my pleasure to present the Annual Report of intelliHR Holdings Limited for the year to 30 June 2018. Having commenced operations in 2014, the company achieved a major milestone with two capital raising events, being an October 2017 pre-IPO round and a 23 January 2018 listing which, in total, raised $8.5 million in funds. As an early stage technology business, intelliHR is in an exciting growth phase and the capital raised has enabled the company to invest in its key product development and sales and marketing capabilities. The company now employs 45 staff, almost half of whom are dedicated to customer acquisition and delivery. This has enabled the company to achieve positive sales growth that has been driven by the significant expansion of our sales team and the development of a partner program to rapidly increase our reach into the larger markets in Sydney and Melbourne as well the other capital cities of Adelaide and Perth. In addition, the company has successfully entered the New Zealand market. Customer numbers grew positively over the year, doubling the previous year’s customer numbers on platform to 30 Customers. Importantly, there has been a significant increase in velocity of new contracted customer wins from three new customers per quarter to nine per quarter in the latter half of the financial year. Complementing our direct channel sales capability, the intelliHR Partner Program was also launched in March 2018. It is targeting professional services firms and the HR sector to resell intelliHR or refer business opportunities in return for referral incentives. The partner program is key to intelliHR building a fast scaling distribution channel locally and internationally. A key competitive advantage is our technology that now incorporates AI based Natural Language Processing capabilities. This includes predictive sentiment analysis and keyword analysis tools that uniquely position intelliHR by supporting customers with intelligence augmentation capabilities, helping them to manage all their unstructured qualitative data flowing through their platform in real-time. We believe this to be an industry first in a HR application, certainly amongst our direct competitors. In the year ahead, the company’s growth strategy will be intensely focussed on building on its market base in Australia as well as seeking expansion opportunities, particularly through the Partner Program, into new markets in Asia, the UK and USA. I would like to thank Rob and Jeremy and their talented and energetic team at intelliHR for their efforts over the year. As well, I would like to thank my two other Independent Directors, Greg Baynton and Jamie Duffield, for their diligence and support in guiding the company through this exciting phase in its development. Tony Bellas Chairman 6 | INTELLIHR ANNUAL REPORT 2018 For personal use only A N N U A L R E P O R T 2 0 1 8 Directors’ report Your Directors present their report on the consolidated entity consisting of intelliHR Holdings Limited and the entities it controlled at the end of, or during, the year ended 30 June 2018. Throughout the report, the consolidated entity is referred to as the Group. Directors and Company Secretary The following persons were Directors of intelliHR Holdings Limited during the whole of the financial year and up to the date of this report: G A J Baynton A Bellas R Bromage J Duffield J Fong The Company Secretary is Mrs S Yeates. Mrs Yeates was appointed to the position of Company Secretary in 2016. She is a Chartered Accountant, Founder and Principal of Outsourced Accounting Solutions Pty Ltd. She holds similar positions with other public and private companies. Principal activities The principal activities of the Group during the financial year were the development of an innovative, cloud-based people management platform. No significant change in the nature of these activities occurred during the period. Dividends The Directors do not recommend the payment of a dividend. No dividend was paid during the year. Review of operations intelliHR is an early stage technology business and now entering an exciting growth phase. In the 2018 FY, intelliHR successfully completed two oversubscribed capital raising events being an October 2017 pre-IPO raising and a December IPO receiving a total of $8,500,000 in funds (less costs). On the 23rd of January 2018, intelliHR was admitted to the official list of the ASX. Operationally, intelliHR focussed on scaling the sales organisation of the business. Customer numbers grew positively over the year, doubling the previous year’s customer numbers on platform to 30 Customers. 7 | INTELLIHR ANNUAL REPORT 2018 For personal use only This was supported by a significant increase in velocity of new contracted customer wins, which increased from three new customers per quarter to nine per quarter in the latter half of the financial year. Resources in both the Customer Acquisition and Delivery teams were increased to support accelerating sales and sure up capability to onboard new customers into the 2019 Financial Year. intelliHR now employs 45 staff, with 20 staff dedicated to Customer Acquisition & Delivery. Complementing our direct channel sales capability, the intelliHR Partner Program was also launched in March 2018. It is targeting professional services firms and the HR sector to resell intelliHR or refer business opportunities in return for referral incentives. The partner program is key to intelliHR building a fast scaling distribution channel locally and internationally. intelliHR ended the financial year with ten Australian partners signed up and undertaking training. Advancements in intelliHR’s technology saw AI based Natural Language Processing capabilities come into the platform during the year. This includes predictive sentiment analysis and keyword analysis tools that uniquely position intelliHR by supporting customers with intelligence augmentation capabilities, helping them to manage all their unstructured qualitative data flowing through their platform in real-time. We believe this to be an industry first in a HR application, certainly amongst our direct competitors. Overall, intelliHR has achieved positive sales growth, matched with a focus to invest into fast scaling growth by increasing sales team capacity and launching a partner program. Our technology has continued to evolve and is being developed with a healthy balance of disruptive innovation and customer feedback. We are very pleased with our progress over the year and excited by what we expect to achieve in 2019. The loss of the company for the financial year after providing for income tax amounted to $4,678,807 (2017: Loss $2,274,704). Significant changes in the state of affairs During the financial year, intelliHR Holdings gained admission to the official list of the Australian Securities Exchange after an Initial Public Offering (IPO) raising $4,500,000. In November 2017, intelliHR Holdings Limited also raised $4,000,000 through the issue of Class A shares. There were no other significant changes in the state of affairs of the Group during the financial year. Likely developments and expected results of operations Comments on likely developments and expected results of operations are included in the review of operations above. Events since the end of the financial year No matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the company, the results of those operations or the state of affairs of the company in future financial years. 8 | INTELLIHR ANNUAL REPORT 2018 For personal use only Information on Directors The following information is current as at the date of this report. A Bellas. Chair – Non-executive Experience and expertise Other current directorships Former listed directorships in last 3 years Special responsibilities Mr Bellas brings almost 30 years of experience in the public and private sectors. Tony was previously CEO of the Seymour Company, one of Queensland’s largest private investment and development companies. Prior to joining the Seymour Company, Tony held the position of CEO of Ergon Energy, a Queensland Government-owned corporation involved in electricity distribution and retailing. Before that, he was CEO of CS Energy, also a Queensland Government-owned corporation and the State’s largest electricity generation company, operating over 3,500 MW of gas-fired and coal-fired plant at four locations. Tony had a long career with Queensland Treasury, achieving the position of Deputy Under Treasurer. Tony is a director of the listed companies shown below and is also a director of Loch Exploration Pty Ltd, Colonial Goldfields Pty Ltd and West Bengal Resources (Australia) Pty Ltd. Chairman of Corporate Travel Management Ltd (ASX: CTD), ERM Power Ltd (ASX: EPW), Shine Corporate Limited (ASX: SHJ), State Gas Limited (ASX: GAS) and NOVONIX Limited (ASX: NVX). Chairman of the Endeavour Foundation. None. Chairman of the Board Member of the Audit Committee. Member of the Risk Committee. Interests in shares and options 1,383,678 ordinary shares 2,080,944 options over ordinary shares 9 | INTELLIHR ANNUAL REPORT 2018 For personal use only G A J Baynton. Non-Executive Director Experience and expertise Other current directorships Former listed directorships in last 3 years Special responsibilities Mr Baynton founded Graphitecorp in April 2012. He has been a Director of Australian exploration companies for over 19 years. He is founder and Executive Director of investment and advisory firm, Orbit Capital. Mr Baynton has experience in investment banking, merchant banking, infrastructure investment, IPOs, public company directorships, Queensland Treasury and the Department of Mines and Energy. Non-executive Director of Superloop Limited (ASX: SLC). Executive Director of State Gas Limited (ASX: GAS) and NOVONIX Limited (ASX: NVX). None. Chairman of the Audit Committee. Member of the Risk Committee. Interests in shares and options 3,638,798 ordinary shares 2,080,944 options over ordinary shares. 10 | INTELLIHR ANNUAL REPORT 2018 For personal use only J Duffield. Non-Executive Director Experience and expertise Other current directorships Former listed directorships in last 3 years Special responsibilities Jamie has over 20 years of experience in the IT industry and is the CEO of Revolution IT, a leading quality assurance consulting firm which he co-founded in 2004. He has strong risk, governance and commercial experience with expertise in driving growth through sales, marketing, mergers and acquisitions. Jamie is also a Director of www.crowdsprint.com and a graduate of the Australian Institute of Company Directors. None. None. Chairman of the Risk Committee. Member of the Audit Committee. Interests in shares and options 2,075,690 ordinary shares 1,387,296 options over ordinary shares. 1 1 | INTELLIHR ANNUAL REPORT 2018 For personal use only R Bromage. Managing Director Experience and expertise Mr Bromage is a HR Professional with 20 years in the industry. An experienced entrepreneur, his entrepreneurial flair and continuous, forward-thinking improvement is fueled by his passion for HR and high-performing business. His career has centered around the field of building validated performance prediction models, developing his expertise in human capital management analytics. He actively researches the future of people management, which drives intelliHR’s evolution. Other current directorships Former listed directorships in last 3 years Special responsibilities None. None. Managing Director. Interests in shares and options 21,029,475 ordinary shares 3,895,543 options over ordinary shares. 1 2 | INTELLIHR ANNUAL REPORT 2018 For personal use only J Fong. Executive Director Experience and expertise Mr Fong is a passionate CTO specializing in innovative tech startups. He has led successful greenfield software development projects in diverse industries, enabling businesses to create value and achieve a strategic advantage by leveraging emerging technologies. Other current directorships Former listed directorships in last 3 years Special responsibilities None. None. None. Interests in shares and options 3,378,945 ordinary shares 3,329,524 options over ordinary shares. Meetings of Directors The number of meetings of the Company’s Board of Directors and of each board committee held during the year ended 30 June 2018, and the number of meetings attended by each Director were: Full meetings of Directors Meetings of Audit Committee A Bellas G A J Baynton J Duffield R Bromage J Fong A 15 15 14 15 15 B 15 15 15 15 15 A 2 2 2 N/A N/A B 2 2 2 N/A N/A A = Number of meetings attended B = Number of meetings held during the time the director held office or was a member of the committee during the year 1 3 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (Audited) The Directors present the intelliHR Holdings Limited 2018 remuneration report, outlining key aspects of our remuneration policy and framework, and remuneration awarded this year. The report is structured as follows: (a) Key management personnel (KMP) covered in this report (b) Remuneration policy and link to performance (c) Elements of remuneration (d) Link between remuneration and performance (e) Remuneration expenses for executive KMP (f) Contractual arrangements for executive KMP (g) Non-executive Director arrangements (h) Additional statutory information 14 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) (a) Key management personnel covered in this report Non-executive and Executive Directors (see pages 9 to 13 for details about each Director) A Bellas (Non-executive Chairman) G A J Baynton (Non-executive Director) J Duffield (Non-executive Director) R Bromage (Managing Director) J Fong (Executive Director) Changes since the end of the reporting period P Trappett was appointed Chief Operating Officer on 9 July 2018. 15 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) (b) Remuneration policy and link to performance The role of a remuneration committee is performed by the full Board of Directors. The board reviews and determines the remuneration policy and structure annually to ensure it remains aligned to business needs, and conforms with our remuneration principles. In particular, the board aims to ensure that remuneration practices are: • competitive and reasonable, enabling the Group to attract and retain key talent • aligned to the Group’s strategic and business objectives and the creation of shareholder value • transparent and easily understood, and • align with shareholder interests and are acceptable to shareholders Element Purpose Performance metrics Potential value Changes for FY 2018 Fixed remuneration (FR) Nil Provide competitive market salary including superannuation and non-monetary benefits None. Positioned at median market rate STI LTI Reward for in-year performance Based on individual KPI’s. 50% of TFR. Introduction of STI’s. Alignment to long- term shareholder value Performance vesting conditions 50% of TFR. Introduction of formal LTI’s. Long term incentives are assessed periodically and are designed to promote long-term stability in shareholder returns. Assessing performance The board of directors is responsible for assessing performance against KPIs and determining the LTI to be paid. 16 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) (c) Elements of remuneration (i) Fixed annual remuneration (FR) Executives receive their fixed remuneration as cash. FR is reviewed annually and is benchmarked against market data for comparable roles in companies in a similar industry and with similar market capitalisation. The board has the flexibility to take into account capability, experience, value to the organisation and performance of the individual. The Group has not engaged an external remuneration consultant during FY2018. Superannuation is included in FR for executives. FY 2018 is the first year in which the Group has employed. (ii) Short term incentives Short term incentives for all key management personnel have been implemented for FY2018. All KMP are eligible to receive a cash bonus of up to 50% of their total fixed remuneration at the end of the financial year subject to the executive achieving the KPIs set for them during the financial year. The Group reserves the right to pay any STI in either cash, fully paid ordinary shares or performance rights at the board of director’s sole discretion. If an executive does not achieve each of the KPIs during the financial year, the board shall determine the appropriate pro rate STI to be received by the Executive. The Board of Directors shall make this determination for both the Managing Director and the Executive Director. For the year ended 30 June 2018, key performance indicators were set for each KMP and were based on the Group objectives including developing culture, execution of business plan, customer growth, brand development, technical product development and talent attraction and retention. For each KMP short-term incentive, the percentage split of the available bonus awarded and forfeited is disclosed in the following table. 2018 2017 Name Awarded % Forfeited % Awarded % Forfeited % Robert Bromage Jeremy Fong 56% 90% 44% 10% - - - - 1 7 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) (iii) Long-term incentives Executive KMP participate, at the board’s discretion, in a performance based long term incentive program (LTI) with a maximum annual benefit of 50% of TFR, which is assessed over a three year period and is payable in shares or performance rights at the discretion of the board. Performance is assessed against an earnings per share growth hurdle, unless otherwise agreed. Options There were no options granted to KMP during FY2018. (d) Link between remuneration and performance During the year, the Group has generated losses from its principal activity. As the Group is still growing the business, the link between remuneration, Group performance and shareholder wealth is difficult to define. Share prices are subject to the influence of fluctuation in the world market price for gas and general market sentiment towards the sector, and, as such, increases or decreases may occur quite independently of Executive performance. Given the nature of the Group’s activities and the consequential operating results, no dividends have been paid. There have been no returns of capital in the current or previous financial periods. The details of market price movements are as follows: Year end 30 June 2018 On admission to ASX - 23 January 2018 Share price 26 cents 30 cents 18 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) (e) Remuneration expenses for executive KMP The following table shows details of the remuneration expense recognised for the Group’s executive key management personnel for the current and previous financial year measured in accordance with the requirements of the accounting standards. Name Executive Directors R Bromage J Fong Non-executive Director A Bellas G Baynton J Duffield Total KMP remuneration expensed Year 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Fixed remuneration Variable remuneration Cash salary Non- monetary benefits Annual and long service leave** Post- employment benefits Options* STI Total 265,385 176,822 229,231 184,212 13,083 - 13,083 - 13,083 - 533,865 361,034 7,033 6,762 - - - - - - - - 112,962 25,314 26,873 9,763 - - - - - - 25,212 136,932 91,980 639,504 17,221 21,777 174,421 141,861 17,978 175,655 1,243 137,246 - 158,189 1,243 136,511 - 155,986 1,243 137,246 - 158,189 - 400,540 123,188 542,930 - - - - - - - 387,608 151,572 158,189 150,837 155,986 151,572 158,189 7,033 6,762 139,835 35,077 50,718 689,796 215,168 1,636,415 35,199 822,440 - 1,260,512 * ** Options granted under the executive options plan are expensed over the performance period, which includes the year in which the options are granted and the subsequent vesting period. Other long-term benefits as per Corporations Regulation 2M.3.03(1) Item 8. The amounts disclosed in this column represent the movements in the associated provision. They may be negative where a KMP has taken more leave than accrued during the year. 19 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) (f) Contractual arrangements with executive KMP’s Component Executive Director description MD description COO description Fixed remuneration Contract duration $273,750 $328,500 $197,100 Ongoing Ongoing Ongoing Notice by the individual / company 6 months 6 months 6 months (g) Non-executive Director arrangements All non-executive directors receive fees of $30,000 per annum plus superannuation. Fees are reviewed annually by the board taking into account comparable roles. The current base fees were reviewed with effect from 23 January 2018. The maximum annual aggregate non-executive Directors’ fee pool limit is $300,000 and was set out in the 2017 Prospectus. All Non-executive Directors enter into a service agreement with the Group in the form of a letter of appointment. The letter summarises the board policies and terms, including remuneration relevant to the office of Director. (h) Additional statutory information (i) Performance based remuneration granted, exercised and forfeited during the year The table below shows for each KMP the value of options that were granted, exercised and forfeited during FY 2018. The number of options and percentages vested/forfeited for each grant are disclosed on pages 21 to 22. 2018 A Bellas G Baynton J Duffield R Bromage J Fong LTI Options Value granted* Value exercised** $ - - - - - $ 145,666 143,307 145,666 - 659,016 * The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration ** The value at the exercise date of options that were granted as part of remuneration and were exercised during the year has been determined as the intrinsic value of the options at that date. 20 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) (ii) Terms and conditions of the share-based payment arrangements Options The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows: Grant date Vesting date Expiry date Exercise price Value per option at grant date Performance achieved % vested 23/11/2016 31/12/2016 1/12/2021 23/11/2016 31/03/2017 1/12/2021 23/11/2016 30/06/2017 1/12/2021 23/11/2016 30/09/2017 1/12/2021 23/11/2016 31/12/2017 1/12/2021 23/11/2016 31/03/2018 1/12/2021 23/11/2016 30/06/2018 1/12/2021 23/11/2016 30/09/2018 1/12/2021 23/11/2016 31/12/2018 1/12/2021 23/11/2016 31/03/2019 1/12/2021 23/11/2016 30/06/2019 1/12/2021 23/11/2016 30/09/2019 1/12/2021 23/11/2016 31/12/2019 1/12/2021 23/11/2016 31/03/2020 1/12/2021 23/11/2016 30/06/2020 1/12/2021 23/11/2016 30/09/2020 1/12/2021 23/11/2016 31/12/2016 1/12/2021 23/11/2016 31/03/2017 1/12/2021 23/11/2016 30/06/2017 1/12/2021 23/11/2016 30/09/2017 1/12/2021 23/11/2016 31/12/2017 1/12/2021 23/11/2016 31/03/2018 1/12/2021 23/11/2016 30/06/2018 1/12/2021 23/11/2016 30/09/2018 1/12/2021 23/11/2016 31/12/2018 1/12/2021 23/11/2016 31/03/2019 1/12/2021 23/11/2016 30/06/2019 1/12/2021 23/11/2016 30/09/2019 1/12/2021 23/11/2016 31/12/2019 1/12/2021 23/11/2016 31/03/2020 1/12/2021 23/11/2016 30/06/2020 1/12/2021 23/11/2016 30/09/2020 1/12/2021 16/12/2016 31/03/2017 1/12/2021 16/12/2016 30/06/2017 1/12/2021 16/12/2016 30/09/2017 1/12/2021 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.01 $0.01 $0.01 $0.1251 $0.1257 $0.1265 $0.1273 $0.1279 $0.1285 $0.1290 $0.1294 $0.1298 $0.1301 $0.1304 $0.1307 $0.1309 $0.1311 $0.1313 $0.1314 $0.0957 $0.0959 $0.0970 $0.0987 $0.1004 $0.1022 $0.1040 $0.1055 $0.1071 $0.1084 $0.1096 $0.1108 $0.1117 $0.1126 $0.1134 $0.1140 $0.1255 $0.1263 $0.1271 100% 100% 100% 100% 100% 100% 100% - - - - - - - - - 100% 100% 100% 100% 100% 100% 100% - - - - - - - - - 100% 100% 100% 100% 100% 100% 100% - - - - - - - - - 100% 100% 100% 100% 100% 100% 100% - - - - - - - - - 100% 100% 100% 100% 100% 100% 2 1 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) Grant date Vesting date Expiry date Exercise price Value per option at grant date Performance achieved % vested 16/12/2016 31/12/2017 1/12/2021 16/12/2016 31/03/2018 1/12/2021 16/12/2016 30/06/2018 1/12/2021 16/12/2016 30/09/2018 1/12/2021 16/12/2016 31/12/2018 1/12/2021 16/12/2016 31/03/2019 1/12/2021 16/12/2016 30/06/2019 1/12/2021 16/12/2016 30/09/2019 1/12/2021 16/12/2016 31/12/2019 1/12/2021 05/01/2017 31/03/2017 1/12/2021 05/01/2017 30/06/2017 1/12/2021 05/01/2017 30/09/2017 1/12/2021 05/01/2017 31/12/2017 1/12/2021 05/01/2017 31/03/2018 1/12/2021 05/01/2017 30/06/2018 1/12/2021 05/01/2017 30/09/2018 1/12/2021 05/01/2017 31/12/2018 1/12/2021 05/01/2017 31/03/2019 1/12/2021 05/01/2017 30/06/2019 1/12/2021 05/01/2017 30/09/2019 1/12/2021 05/01/2017 31/12/2019 1/12/2021 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.1277 $0.1283 $0.1288 $0.1293 $0.1297 $0.1300 $0.1303 $0.1306 $0.1308 $0.1074 $0.1111 $0.1138 $0.1158 $0.1175 $0.1190 $0.1202 $0.1213 $0.1222 $0.1230 $0.1238 $0.1244 100% 100% 100% - - - - - - 100% 100% 100% 100% 100% 100% - - - - - - 100% 100% 100% - - - - - - 100% 100% 100% 100% 100% 100% - - - - - - The number of options over ordinary shares in the Company provided as remuneration to key management personnel is shown in the table on page 23. The options carry no dividend or voting rights. See pages 21 to 22 above for conditions that must be satisfied for the options to vest. When exercisable, each option is convertible into one ordinary share of intelliHR Holdings Limited. 2 2 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) (iii) Reconciliation of options, performance rights, ordinary shares and loan notes held by KMP The table below shows a reconciliation of options held by each KMP from the beginning to the end of FY2018. No options were forfeited during the year. Options 2018 Name & Grant dates A Bellas 16/12/2016 G Baynton 16/12/2016 05/01/2017 J Duffield 16/12/2016 R Bromage 23/11/2016 J Fong 02/05/2016 23/11/2016 05/01/2017 Balance at the start of the year Balance at the end of the year Unvested Vested Granted as compensation Vested Exercised Vested and exercisable % Vested Unvested 2,312,160 462,432 2,050,000 410,000 262,160 52,432 2,312,160 462,432 3,165,130 730,413 - 3,051,000 1,714,375 395,625 990,864 228,660 - - - - - - - 924,864 693,648 693,648 33% 1,387,296 820,000 104,864 615,000 78,648 615,000 78,648 33% 33% 1,230,000 157,296 924,864 693,648 693,648 33% 1,387,296 973,884 - 1,704,297 44% 2,191,246 - 3,051,000 527,500 304,880 - - - 923,125 533,540 - 44% 44% - 1,186,875 685,984 23 | INTELLIHR ANNUAL REPORT 2018 For personal use only Remuneration report (continued) Shareholdings 2018 Name Balance at the start of the year Issued on exercise of options Other changes during the year Balance at the end of the year Ordinary shares A Bellas G Baynton J Duffield R Bromage J Fong 690,030 2,945,150 552,030 21,029,475 693,648 693,648 693,648 - 327,945 3,051,000 - - 1,383,678 3,638,798 136,364* 1,382,042 - - 21,029,475 3,378,945 * Represents shares purchased under the same terms and conditions of all other shareholders (iv) Other transactions with key management personnel There have been no other transactions with key management personnel. End of remuneration report (audited) 24 | INTELLIHR ANNUAL REPORT 2018 For personal use only Shares under option Unissued ordinary shares Unissued ordinary shares of intelliHR Holdings Limited under option at the date of this report are as follow: Date options granted Expiry date Exercise price Number under option 23/11/2016 16/12/2016 05/01/2017 23/11/2016 01/04/2017 11/08/2017 27/02/2018 23/07/2018 01/12/2021 01/12/2021 01/12/2021 01/12/2021 31/03/2022 11/08/2022 14/02/2023 30/06/2023 $0.01 $0.01 $0.04 $0.20 $0.04 $0.02 $0.32 $0.30 2,571,120 5,313,240 1,568,357 3,895,543 60,000 1,007,000 384,000 440,000 Insurance of officers and indemnities (a) Insurance of officers During the financial year, intelliHR Holdings Limited paid a premium of $65,400 to insure the Directors and secretary of the Company. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Group. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. (b) Indemnity of auditors intelliHR Holdings Limited has not agreed to indemnify their auditors. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. 2 5 | INTELLIHR ANNUAL REPORT 2018 For personal use only Non-audit services The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group and/or the Group are important. Details of the amounts paid or payable to the auditor (BDO) for audit and non-audit services provided during the year are set out below. The Board of Directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year, the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms: Taxation services BDO Qld Pty Ltd: Tax compliance services Other assurance services BDO Audit Pty Ltd: Investigating accountants report Total remuneration for non-audit services Consolidated 2018 $ 2017 $ 8,580 12,000 20,580 - - - Auditor’s independence declaration A copy of the auditors independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 27. This report is made in accordance with a resolution of Directors. A Bellas Chairman Brisbane 29 August 2018 26 | INTELLIHR ANNUAL REPORT 2018 For personal use only A N N U A L R E P O R T 2 0 1 8 Declaration of Independence By R M Swaby to the Directors of intelliHR Holdings Limited As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. 2. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 27 | INTELLIHR ANNUAL REPORT 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 For personal use only A N N U A L R E P O R T 2 0 1 8 Corporate governance statement intelliHR Holdings Limited and the board are committed to achieving and demonstrating the highest standards of corporate governance. intelliHR Holdings Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2018 corporate governance statement is dated as at 30 June 2018 and reflects the corporate governance practices in place throughout the 2018 financial year. The 2018 corporate governance statement was approved by the board on 29 August 2018. A description of the Group’s current corporate governance practices is set out in the Group’s corporate governance statement which can be viewed at https://intellihr.com.au/ investor-relations/#corporate-governance. 2 8 | INTELLIHR ANNUAL REPORT 2018 For personal use only 29 | INTELLIHR ANNUAL REPORT 2018 For personal use only A N N U A L R E P O R T 2 0 1 8 Financial report INTELLIHR HOLDINGS LIMITED ACN 600 548 516 Financial statements Consolidated Statement of profit or loss and other comprehensive income Consolidated Balance sheet Consolidated Statement of changes in equity Consolidated Statement of cash flows Notes to the consolidated financial statements Directors’ declaration 31 32 33 34 35 65 These financial statements are for intelliHR Holdings Limited. The financial statements are presented in the Australian currency. intelliHR Holdings Limited is a Company limited by shares, incorporated and domiciled in Australia. Its principal place of business is: intelliHR Holdings Limited Level 32, 12 Creek Street Brisbane QLD 4000 All press releases, financial reports and other information are available at our website: www.intellihr.com.au. 30 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2018 Revenue from continuing operations Other income Employee benefits expense Directors remuneration Depreciation and amortisation expense Marketing expense General and administrative expense Share issue expenses relating to IPO Loss before income tax expense Income tax benefit Loss from continuing operations Other comprehensive income for the period, net of tax Total comprehensive income for the period Earnings per share for loss from continuing operations attributable to the ordinary equity holders of the Company: Basic earnings per share Diluted earnings per share Consolidated 2018 $ 199,482 114,019 2017 $ 79,022 1,922 (2,039,931) (719,298) (453,981) (646,786) (903,773) (520,073) (672,951) (268,749) (732,026) (190,646) (200,742) - (4,679,807) (2,274,704) - - (4,679,807) (2,274,704) - - (4,679,807) (2,274,704) Cents Cents (5.34) (5.34) (3.95) (3.95) Notes 3 3 4 5 8 8 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 31 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Consolidated balance sheet - As at 30 June 2018 ASSETS Current assets Cash and cash equivalents Investments Trade and other receivables Total current assets Non-current assets Plant and equipment Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulates losses Total equity Notes Consolidated 2018 $ 2017 $ 9 10 11 12 13 14 15 16 17 1,763,360 1,011,542 3,000,000 462,320 - 88,658 5,225,680 1,100,200 76,031 54,920 2,249,518 1,480,602 2,325,549 1,535,522 7,551,229 2,635,722 612,318 341,330 612,318 341,330 80,356 80,356 9,968 9,968 692,674 351,298 6,858,555 2,284,424 11,915,456 3,751,364 2,164,992 1,075,146 (7,221,893) (2,542,086) 6,858,555 2,284,424 The above consolidated balance sheet should be read in conjunction with the accompanying notes 32 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Consolidated statement of changes in equity For the year ended 30 June 2018 Contributed equity Share based payments reserve Accumulated losses Total $ $ $ $ Balance at 1 July 2016 1,687,168 218,757 (267,382) 1,638,543 Loss for the period Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Share-based payments - - - 2,064,196 - - - - - 856,389 (2,274,704) (2,274,704) - - (2,274,704) (2,274,704) - - 2,064,196 856,389 Balance at 30 June 2017 3,751,364 1,075,146 (2,542,086) 2,284,424 Loss for the period Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners: - - - Contributions of equity, net of transaction costs 8,164,092 - - - - Share-based payments - 1,089,846 (4,679,807) (4,679,807) - - (4,679,807) (4,679,807) - - 8,164,092 1,089,846 Balance at 30 June 2018 11,915,456 2,164,992 (7,221,893) 6,858,555 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 33 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Consolidated statement of cash flows For the year ended 30 June 2018 Consolidated Notes 2018 $ 2017 $ Cash flows from operating activities Receipts from customers (GST inclusive) 363,323 111,730 Payments to suppliers and employees (GST inclusive) Interest received (3,271,015) (1,043,041) 52,608 1,350 Net cash outflow from operating activities 19(a) (2,855,084) (929,961) Cash flows from investing activities Payments for development Payments for plant and equipment Proceeds from sale of plant and equipment Research and development tax incentive refund (1,725,838) (837,761) (70,208) (67,127) 850 428,652 2,000 327,811 Net cash outflow from investing activities (1,366,544) (575,077) Cash flows from financing activities Proceeds on issue of shares Payment of capital raising costs and listing expenses 8,570,624 2,064,196 (597,178) - Net cash inflow from financing activities 7,973,446 2,064,196 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year 3,751,818 559,158 1,011,542 452,384 Cash and cash equivalents at the end of the year 19(b) 4,763,360 1,011,542 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 34 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies The consolidated financial statements of intelliHR Holdings Limited (the Company) as at and for the year ended 30 June 2018 comprise the company and its controlled entities (the Group). These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements 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 financial report has been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. As disclosed in the financial report, the Group achieved a net loss of $4,679,807 (2017: $2,274,704) and net operating cash outflows of $2,825,084 (2017: $929,961) for the year ended 30 June 2018. As at 30 June 2018, the Group has cash of $4,763,360 (2017: $1,011,542). The ability of the Group to continue as a going concern is principally dependent upon one or more of the following: • the ability of the Group to raise capital as and when necessary; • the ability to complete successful development and commercialisation of the Group’s software platform. These conditions give rise to material uncertainty which may cast significant doubt over the Group’s ability to continue as a going concern. The Directors believe that the going concern basis of preparation is appropriate due to the proven ability of the Group to raise necessary funding via the issue of shares as evidences by the recent pre-IPO and IPO capital raisings and also the increased revenues now being achieved through software sales. Should the Group be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial report. 35 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) This financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary should the Group be unable to continue as a going concern. The financial statements were authorised for issue by the Directors on 29 August 2018. The Directors have the power to amend and reissue the financial statements. a. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of intelliHR Holdings Limited (‘Company’ or ‘Parent Entity’) as at 30 June 2018 and the results of all subsidiaries for the year then ended. intelliHR Holdings Limited and its subsidiaries together are referred to in these financial statements as the ‘Group’. Subsidiaries are all those entities over which the Group has control. The Group controls 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 affect those returns through its power to direct the activities of the entity. 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. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. 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. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. 36 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) b. Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. 37 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) c. Revenue recognition Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. d. Impairment of assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include considering external sources of information and internal sources of information, including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs of disposal and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. 38 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) e. Development costs Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Capitalised development costs are amortised on a straight-line basis over three years, which given the constant and rapid development of the project, management considers to represent the useful life of the project. f. Plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Plant and equipment - 2 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. g. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for long service leave not expected to be settled within 12 months of the reporting date are measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. 39 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, options or performance rights over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is determined using various valuation methods including Black Scholes, Binomial and the Monte Carlo Simulation method that takes into account the exercise price, the term of the performance right, the impact of dilution, the share price at grant date and expect price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the performance right. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. h. Provisions Provisions are recognised when the Group 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. Provisions are measured at the best estimate of the amounts required to settle the obligation at the end of the reporting period. 40 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) i. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the consolidated statement of cash flows presentation purposes, cash and cash equivalents also includes fixed term deposits, which are shown within investments in current assets on the consolidated balance sheet. j. Trade and other receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1(d) for further discussion on the determination of impairment losses. k. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short- term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. l. Other receivables Other receivables are recognised at amortised cost, less any provision for impairment. m. Current and non-current classification Assets and liabilities are presented in the balance sheet 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 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. 41 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) m. Current and non-current classification (continued) A liability is classified as current when: it is either expected to be settled in 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. n. Issued capital 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. o. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of intelliHR Holdings Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. p. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. 4 2 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) q. Critical accounting estimates and judgements Recognition of Development Costs For the purpose of measurement, AASB 138 allows costs incurred in the development stage to be capitalised if certain requirements are met, including: - - - - - It is technically feasible that the intangible asset will be completed so that it will be available for use; It is the intention to complete the intangible asset and use it; It can be demonstrated that the it is probable that the intangible asset will generate future economic benefits; There are adequate resources to complete the development of the intangible asset; The expenditure attributable to the intangible asset during its development can be measured reliably. As the Group meets all of the above requirements, all costs directly attributable and necessary to create, produce and prepare the asset to be capable of operating in the manner intended, have been capitalised. All costs to maintain the development asset are expensed as incurred. Share based payment transactions The Group 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 by using the Black Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions, including share price volatility, interest rates and vesting periods would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact the profit or loss and equity. 43 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 1 Summary of significant accounting policies (continued) r. New and Amended Accounting Policies Adopted by the Group The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. There has been no material impact on the financial statements by their adoption. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. AASB 9 Financial Instruments AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The Group has reviewed its financial assets and liabilities and does not expect the standard to have any impact other than expanded disclosure requirements and changes in presentation. AASB 15 Revenue from Contracts with Customers The AASB has issued a new standard for the recognition of revenue. This will replace AAB 118 which covers revenue arising from the sale of goods and rendering of services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The Standard permits either a full retrospective or a modified retrospective approach for the adoption. On commencement of revenue generation, management adopted the measurement and recognition principles of AASB 15. The only impact upon adoption of the standard will be in the level of disclosure. AASB 16 Leases AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change. Management has assessed the effects of applying the new standard and as the Group does not have any leases greater than 1 year, there will be no impact. 4 4 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Note 2 - Parent information The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. Balance sheet ASSETS Current assets Cash and cash equivalents Investments Trade and other receivables Total current assets Non-current assets Plant and equipment Intangible assets Trade and other receivables Total non-current assets Total assets LIABILITIES Current liabilities Payables Total current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulates losses Total equity Notes 2018 $ 2017 $ 1,626,730 1,010,486 3,000,000 201,360 - 14,626 4,828,090 1,025,112 76,031 54,920 2,249,518 1,480,602 - 715,664 2,325,549 2,251,186 7,153,639 3,276,298 67,507 67,507 67,507 33,192 33,192 33,192 7,086,132 3,243,106 11,915,456 3,751,364 2,164,992 1,075,146 (6,994,316) (1,583,404) 7,086,132 3,243,106 Statement of Profit or Loss and Other Comprehensive Income Total loss and total comprehensive income (5,410,912) (1,293,936) 4 5 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 2 Parent information (continued) Guarantees intelliHR Holdings Limited has not entered into any guarantees, in the current or previous reporting period, in relation to the debts of its subsidiaries. Contingent liabilities At 30 June 2018, intelliHR Holdings Limited did not have any contingent liabilities (2017: Nil). Contractual commitments At 30 June 2018, intelliHR Holdings Limited did not have any contractual commitments (2017: Nil). Note 3 - Revenue Revenue Sales revenue 2018 $ 2017 $ Software solution sales 199,482 79,022 Other revenue Interest received Other revenue Total other revenue Total revenue Note 4 - Loss for the year 52,608 61,411 114,019 1,350 572 1,922 313,501 80,944 Loss before income tax from continuing operations includes the following specific expenses: Depreciation and amortisation expense Rent expense Superannuation contributions Share based payments expense 2018 $ 903,773 158,897 109,954 880,067 2017 $ 520,073 57,268 52,288 660,434 46 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 5 - Income tax expense This note provides an analysis of the Group’s income tax expense, shows what amounts are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Group’s tax position. 2018 $ 2017 $ (a) Numerical reconciliation of income tax expense to prima facie tax payable Profit/(loss) before income tax expense (4,679,807) (2,274,704) Tax at the Australian tax rate of 27.5% (2017: 27.5%) (1,286,947) (625,544) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-deductible items Tax rate restatement at 27.5% 454,729 310,469 - 4,064 Adjustment to deferred tax assets and liabilities for tax losses and temporary differences not recognised 832,218 311,011 Income tax expense / (benefit) - - (b) Tax losses Unused tax losses for which no deferred tax asset has been recognised 4,251,803 1,345,490 Potential tax benefit @ 27.5% (2017: 27.5%) 1,169,246 370,009 (c) Tax expense (income) recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity: Deferred tax: Share issue costs - - 47 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 5 - Income tax expense (d) Deferred tax assets The balance comprises temporary differences attributable to: Tax losses Employee entitlements Share issue costs Accrued expenses 2018 $ 2017 $ 1,169,246 369,740 88,382 137,297 33,294 33,661 7,890 10,659 Total deferred tax assets 1,428,219 421,950 Set-off of deferred tax liabilities pursuant to set-off provisions (114,193) (51,941) Deferred tax assets not recognised (1,314,026) (370,009) Net deferred tax assets - - (e) Deferred tax liabilities The balance comprises temporary differences attributable to: Development assets Interest receivable Prepayments 36,155 6,104 71,934 37,859 - 14,082 Total deferred tax liabilities 114,193 51,941 Set-off of deferred tax liabilities pursuant to set-off provisions (114,193) (51,941) Net deferred tax liabilities - - Unused losses which have not been recognised as an asset, will only be obtained if: (i) (ii) the Group derives future assessable income of a nature and of an amount sufficient to enable the losses to be realised; the Group continues to comply with the conditions for deductibility imposed by the law; and (iii) no changes in tax legislation adversely affect the Group in realising the losses. 48 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 6 - Key Management Personnel Compensation Refer to the remuneration report contained in the Directors’ report for details of the remuneration paid or payable to each member of the Group’s key management personnel (KMP) for the year ended 30 June 2018. The totals of remuneration paid to KMP of the Group during the year are as follows: Short-term employee benefits Non-monetary benefits Annual and long service leave Post-employment benefits Share-based compensation 2018 $ 533,865 7,033 139,835 50,718 904,964 2017 $ 361,034 6,762 35,077 35,199 822,440 Total KMP compensation 1,636,415 1,260,512 Short-term employee benefits These amounts include fees and benefits paid to the non-executive Directors as well as all salary, paid leave benefits and fringe benefits paid to Executive Directors and employees. Post-employment benefits These amounts are the current-year’s superannuation contributions made during the year. Share-based payments These amounts represent the expense related to the participation of KMP in equity-settled benefit schemes as measured by the fair value of the options, performance rights and shares granted on grant date. Further information in relation to KMP remuneration can be found in the Directors report. Note 7 - Auditor’s Remuneration 2018 $ 2017 $ Remuneration of the auditor for: - Auditing or reviewing the financial report 65,000 40,000 Remuneration for non-audit services - Investigating accountants report 12,000 77,000 - 40,000 49 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 8 - Earnings per share 2018 Cents 2017 Cents (a) Basic earnings per share Total basic earnings per share attributable to the ordinary equity holders of the Company (5.34) (3.95) (b) Diluted earnings per share Total diluted earnings per share attributable to the ordinary equity holders of the Company (5.34) (3.95) (c) Reconciliations of earnings used in calculating earnings per share 2018 $ 2017 $ Basic earnings per share Profit / (loss) attributable to the ordinary equity holders of the Company used in calculating basic earnings per share (4,679,807) (2,274,704) Diluted earnings per share Profit / (loss) attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share (4,679,807) (2,274,704) (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share (e) Information concerning the classification of securities 2018 Number 2017 Number 87,588,492 57,640,509 (i) Options and rights Options on issue during the year are not included in the calculation of diluted earnings per share because they are antidilutive for the year ended 30 June 2018. These options could potentially dilute basic earnings per share in the future. Details relating to options are set out in note 20. 50 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 9 - Cash and cash equivalents Cash at bank and on hand Note 10 - Investments CURRENT Fixed term cash deposits Total investments Note 11 - Trade and other receivables Trade receivables Other receivables Prepayments Total current trade and other receivables Credit risk 2018 $ 2017 $ 1,763,360 1,011,542 1,763,360 1,011,542 Consolidated 2018 $ 3,000,000 3,000,000 2017 $ - - 2018 $ 2017 $ 24,880 51,149 386,291 462,320 12,058 25,394 51,206 88,658 The Group has no significant concentration of credit risk with respect to any counterparties or on a geographical basis. The following table details the Group’s trade and other receivables exposed to credit risk with ageing analysis. Amounts are considered as “past due” when the debt has not been settled, with the terms and conditions agreed between the Group and the customer to the transaction. Receivables that are past due are assessed for impairment. The balance of receivables that remain within initial trade terms are considered to be of high credit quality. 51 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 11 - Trade and other receivables (continued) Past Due but Not Impaired (Days Overdue) Gross Amount $ < 30 $ 31 – 60 $ 61 – 90 $ > 90 $ 2018 Trade receivables 24,880 13,757 2,078 Other receivables 51,149 - - Total 2017 Trade receivables Other receivables Total 76,029 13,757 2,078 12,058 25,394 37,452 - - - - - - - - - - - - Within initial trade terms $ 9,045 51,149 60,194 12,058 25,394 37,452 - - - - - - Note 12 - Plant and equipment Plant and equipment At cost Accumulated depreciation Total property, plant and equipment Movements in Carrying Amounts Plant and equipment Balance at 1 July Additions Disposals Depreciation expense Balance at 30 June 52 Consolidated 2018 $ 2017 $ 134,877 (58,846) 65,699 (10,779) 76,031 54,920 54,920 71,188 (1,340) (48,737) - 67,128 (1,428) (10,779) 76,031 54,920 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 13 - Intangible assets Development costs Cost Accumulated amortisation Movements in Carrying Amounts Balance at 1 July Additions – internally developed Research and development tax incentive Amortisation charge Balance at 30 June Note 14 - Trade and other payables Unsecured liabilities: Trade payables Other payables Provision for annual leave Note 15 - Provisions Employee benefits (Non-current) 2018 $ 2017 $ 3,736,009 2,112,057 (1,486,491) (631,455) 2,249,518 1,480,602 1,480,602 1,277,518 1,991,193 1,040,191 (367,241) (327,811) (855,036) (509,296) 2,249,518 1,480,602 2018 $ 2017 $ 25,309 345,975 241,034 612,318 64,339 164,555 112,436 341,330 2018 $ 2017 $ 80,356 9,968 53 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 16 - Contributed equity (a) Share capital Fully paid ordinary shares (b) Ordinary share capital 2018 Shares 2017 Shares 2018 $ 2017 $ 103,895,094 65,354,580 11,915,456 3,751,364 Date Details Note Number of Shares Issue Price $ 1 July 2016 Balance October 2016 Share split 1:10 December 2016 Placement shares Share issue costs 30 June 2017 Balance October 2017 Exercise of options Exercise of options Exercise of options Exercise of options January 2018 IPO shares Conversion of Class A shares Exercise of options Exercise of options February 2018 Exercise of options Exercise of options April 2018 Exercise of options Exercise of options Share issue costs (e) (f) (g) (g) (g) (g) (h) (d) (g) (g) (g) (g) (g) (g) 4,979,858 44,818,722 1,687,168 - 15,556,000 $0.135 2,100,060 - 65,354,580 2,035,624 13,000 78,648 $0.01 $0.02 $0.04 3,051,000 $0.004 15,000,000 18,337,744 4,166 4,000 4,166 4,000 4,166 4,000 - $0.30 $0.22 $0.01 $0.02 $0.01 $0.02 $0.01 $0.02 (35,864) 3,751,364 20,356 260 3,146 12,204 4,500,000 3,860,527 42 80 42 80 42 80 (232,767) 11,915,456 30 June 2018 Balance 103,895,094 (c) Class A shares Date Details 1 July 2017 Balance Number of Shares Issue Price - $ - November 2017 Placement shares 18,337,744 $0.22 4,034,304 Share issue costs January 2018 Conversion to ordinary shares 30 June 2018 Balance - (18,337,744) - (173,777) (3,860,527) - 54 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 16 - Contributed equity (continued) (d) Issue of Class A shares 18,337,744 Class A shares were issued to sophisticated investors at an issue price of $0.22 per Class A share. The Class A shares had the same rights as ordinary shares, however, in the event of an initial public offer of shares in the Company, the Class A shares would convert to ordinary shares, if the IPO issue price is $0.275 or higher, on a one-for-one basis immediately on the admission of the Company to the official list of the ASX. (e) Share split Share subdivision on a 1 for 10 basis. (f) Issue to sophisticated investors The issue of 15,556,000 fully paid ordinary shares to sophisticated investors at an issue price of $0.135 cash. (g) Exercise of options The issue of fully paid ordinary shares on the exercise of options. (h) Shares issued under prospectus The issue of 15,000,000 ordinary shares at an issue price of $0.30 per share to raise $4,500,000 cash before expenses of the Offer. All ordinary shares issued pursuant to the Prospectus were issued as fully paid. Transaction costs of $423,413 were incurred as a result of listing the Company, of which $232,767 were directly attributable to capital raising and the remainder of $190,646 has been expensed. (i) Capital Management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Company includes equity attributable to equity holders, comprising of issued capital, reserves and accumulated losses. In order to maintain or adjust the capital structure, the Company may issue new shares, sell assets to reduce debt or adjust the level of activities undertaken by the company. The Group monitors capital on the basis of cash flow requirements for operational, and exploration and evaluation expenditure. The Group will continue to use capital market issues and joint venture participant funding contributions to satisfy anticipated funding requirements. The Group has no externally imposed capital requirements. The Group’s strategy for capital risk management is unchanged from prior years. 55 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 17 - Reserves 2018 $ 2017 $ Share-based payment reserve 2,164,992 1,075,146 Movements: Balance 1 July 2017 Share based payments expensed Share based payments capitalised FY2018 STI’s to be settled in shares Balance 30 June 2018 1,075,146 218,757 664,899 660,434 209,779 215,168 195,955 - 2,164,992 1,075,146 The share-based payment reserve records items recognised as expenses on valuation of director, employee and contractor options. Note 18 - Operating segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (Chief Operating Decision Makers) in assessing performance and determining the allocation of resources. The Group is managed primarily on an operational basis. Operating segments are determined on the basis of financial information reported to the Board. Management currently identifies the Group as having only one operating segment, being the development of a cloud-based people management platform in Australia. All asses and revenue are derived from the one geographical location, being Australia. All significant operating decisions are based upon analysis of the Group as one segment. The financial results from the segment are equivalent to the financial statements of the Group as a whole. The entity has four customers from which it generates greater than 10% of its revenue. Revenue from these customers was $51,356, $30,645, $27,585 and $20,370 respectively for the year ended 30 June 2018 (2017: three customers $28,994, $11,450 and $15,023). 56 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 19 - Cash flow information (a) Reconciliation of profit / (loss) after income tax to net cash inflow from operating activities Profit / (loss) for the period (4,679,807) (2,274,704) 2018 $ 2017 $ Adjustments for Share based payments Share issue expenses Depreciation and amortisation Profit on sale of plant and equipment Research and development tax incentive Change in operating assets and liabilities: 880,067 660,434 190,646 903,773 (490) (61,411) - 520,073 (572) - (Increase)/decrease in trade and other receivables (373,663) (29,727) Increase in other assets Increase in trade and other payables Increase / (decrease) in provisions - 142,391 143,410 (6,630) 131,101 70,064 Net cash inflow (outflow) from operating activities (2,855,084) (929,961) (b) Cash and cash equivalents shown in the cashflow statement comprises the following: Cash and cash equivalents Investments Net cash inflow (outflow) from operating activities Note 9 10 Consolidated 2018 $ 2017 $ 1,763,360 1,011,542 3,000,000 - 4,763,360 1,011,542 (c) Non-cash financing and investing activities There were no non-cash financing and investing activities during FY 2018. (d) Net debt reconciliation The Group does not have any debt on its balance sheet and therefore no net debt reconciliation has been provided. 57 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 20 - Share-based payments OPTIONS The intelliHR Holdings Limited Employee Option Plan is designed to provide long-term incentives for employees to deliver long-term shareholder returns. Under the plan, participants are granted options which only vest if certain performance standards are met. Participation in the plan is at the board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Options are granted under the plan for no consideration and carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. Set out below are summaries of options granted under the plan: Number Weighted Average Exercise Price Options outstanding as at 1 July 2016 Granted Forfeited Expired Options outstanding as at 30 June 2017 Granted Forfeited Exercised Expired 3,051,000 16,539,066 (222,222) - 19,367,844 1,440,000 (84,000) (5,202,770) - Options outstanding as at 30 June 2018 15,521,074 $0.004 $0.058 $0.025 - $0.050 $0.10 $0.04 $0.007 - $0.07 58 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 20 - Share-based payments (continued) No options expired during the periods covered by the above table. Share options outstanding at the end of the year have the following expiry date and exercise prices: Date options granted Expiry date Exercise price Share options 30 June 2018 Share options 30 June 2017 02/05/2016 20/04/2026 $0.004 - 3,051,000 23/11/2016 01/12/2021 16/12/2016 01/12/2021 05/01/2017 01/12/2021 23/11/2016 01/12/2021 01/04/2017 31/03/2022 11/08/2017 11/08/2022 27/02/2018 14/02/2023 $0.01 $0.01 $0.04 $0.20 $0.04 $0.02 $0.32 Weighted average remaining contractual life of options outstanding at end of period 2,575,286 2,621,112 6,006,888 8,009,184 1,568,357 1,647,005 3,895,543 3,895,543 60,000 144,000 1,031,000 384,000 - - 15,521,074 19,367,844 3.5 years 5.12 years Details of options issued during the financial year are as follows: a. On 11 August 2017, 1,056,000 share options were granted to employees under the IntelliHR Holdings Limited Employee Option Plan to take up ordinary shares. All options issued are exercisable at $0.02 and expire on 11 August 2022. The options vest as follows: Number 39,000 39,000 39,000 147,000 66,000 66,000 66,000 66,000 Vesting date 30/09/2019 31/12/2019 31/03/2020 30/06/2020 30/09/2020 31/12/2020 31/03/2021 30/06/2021 Number 66,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000 Vesting date 30/09/2017 31/12/2017 31/03/2018 30/06/2018 30/09/2018 31/12/2018 31/03/2019 30/06/2019 59 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 20 - Share-based payments (continued) The options hold no voting or dividend rights and are not transferable. The fair value of these options was $217,642. This value was calculated using the Black-Scholes-Merton option pricing model applying the following inputs: Number of options Exercise price Grant date Expiry date Volatility Dividend yield Risk-free interest rate Fair value at grant date 1,056,000 $0.02 11/08/2017 11/08/2022 107.47% 0% 3.20% Ranging from $0.2002 to $0.2094 b. On 27 February 2018, 384,000 share options were granted to employees under the IntelliHR Holdings Limited Employee Option Plan to take up ordinary shares. All options issued are exercisable at $0.32 and expire on 14 February 2023. The options vest as follows: Vesting date 30/09/2018 31/12/2018 31/03/2019 30/06/2019 30/09/2019 31/12/2019 31/03/2020 Number Vesting date 96,000 24,000 24,000 24,000 24,000 24,000 24,000 30/06/2020 30/09/2020 31/12/2020 31/03/2021 30/06/2021 30/09/2021 Number 24,000 24,000 24,000 24,000 24,000 24,000 60 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 20 - Share-based payments (continued) The options hold no voting or dividend rights and are not transferable. The fair value of these options was $100,097. This value was calculated using the Black-Scholes-Merton option pricing model applying the following inputs: Number of options Exercise price Grant date Expiry date Volatility Dividend yield Risk-free interest rate Fair value at grant date 384,000 $0.32 14/02/2018 14/02/2023 108.57% 0% 3.20% Ranging from $0.2463 to $0.2773 61 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 21 - Events after the reporting date No matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the company, the results of those operations or the state of affairs of the company in future financial years. Note 22 - Related party transactions Related Parties The Group’s main related parties are as follows: a. Entities exercising control over the Group The company does not have an ultimate controlling entity. b. Key management personnel Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity is considered key management personnel. For details of disclosures relating to key management personnel, refer to Note 6. c. Other related parties Other related parties include close family members of key management personnel and entities that are controlled or jointly controlled by those key management personnel, individually or collectively with their close family members. d. Transactions with related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred with related parties: 2018 $ 2017 $ Purchase of goods and services Other related parties: A company of which R Bromage is a director provided administration services, office facilities and recruiting services during the year under normal commercial terms and conditions. 262,886 300,853 Note 23 - Contingent liabilities The Group does not have any contingent liabilities as at 30 June 2018. 62 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 24 - Commitments The Group does not have any commitments as at 30 June 2018. Note 25 - Financial risk management The Group’s 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 139: Financial Instruments: Recognition and Measurement as detailed in the accounting policies to these financial statements, are as follows: Financial assets Cash and cash equivalents Trade and other receivables Total financial assets Financial liabilities Trade and other payables Total financial liabilities Note 2018 $ 2017 $ 4,763,360 1,011,542 76,029 37,542 4,839,389 1,048,994 371,284 371,284 228,894 228,894 The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Credit risk Credit risk is managed on a Group basis. Credit risk arises primarily from cash and cash equivalents and deposits with banks and financial institutions. For bank and financial institutions, only independently rated parties with a minimum rating of ‘AA’ are accepted. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available). 63 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Notes to the financial statements for the year ended 30 June 2018 Note 25 - Financial risk management (continued) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to meet obligations when due. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows. No finance facilities were available to the Group at the end of the reporting period. All financial assets and financial liabilities mature within one year. Market risk Market risk is the risk that the change in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The Group is not exposed to market risks other than interest rate risk. Cash flow and fair value interest rate risk As the Group has interest-bearing cash assets, the Group’s income and operating cash flows are exposed to changes in market interest rates. The Group manages its exposure to changes in interest rates by using fixed term deposits. At 30 June 2018, if interest rates had changed by -/+ 100 basis points from the year-end rates with all other variables held constant, post-tax profit / (loss) for the year would have been $47,634 (2017: $10,115) lower/higher, as a result of higher/lower interest income from cash and cash equivalents. Fair Value The carrying value of all financial assets and financial liabilities approximate their fair value, due to their short term nature. 6 4 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only A N N U A L R E P O R T 2 0 1 8 Directors’ declaration In the Directors’ opinion: (a) the financial statements and notes set out on pages 30 to 64 are in accordance with the Corporations Act 2001, including: (I) (ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the financial year ended on that date, and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. A Bellas Chairman Brisbane, 29 August 2018 65 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only A N N U A L R E P O R T 2 0 1 8 Independent auditor’s report To the members of intelliHR Holdings Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of intelliHR Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated balance sheet as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) (ii) Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year ended on that date; and Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 66 | INTELLIHR ANNUAL REPORT 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 For personal use only Material uncertainty related to going concern We draw attention to Note 1 in the financial report which describes the events and/ or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. 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. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Capitalisation of Development Costs Key audit matter How the matter was addressed in our audit The Group capitalises costs incurred in the development of its software, as disclosed in note 13. These costs are then amortised over the estimated useful life of the asset. The capitalisation of development costs was a key audit matter due to the significance of the balance and the judgement involved in assessing whether the criteria set out in AASB 138 Intangible Assets required for capitalisation of such costs have been met and the useful life of the asset is reasonable. The Group’s judgements include whether the costs capitalised, including payroll costs, were directly attributable to development projects, rather than related to research or maintenance operations. Our work on capitalised development costs was focused on the Group’s process in determining the projects which should be capitalised and the determination of the appropriate allocation of overhead and payroll costs to be capitalised in accordance with AASB 138. Our audit procedures included the following: • • • • Assessed the nature of a sample of projects against the requirements of AASB 138 to determine if they were capital in nature, including an assessment of whether capitalised costs related to the development phase of the project and the generation of probable future economic benefits On a sample basis, vouched the payroll costs capitalised to supporting payroll records and assessed the procedures applied by the Group to appropriately record and allocate staff costs to capitalised development expenditure On a sample basis, vouched overhead costs capitalised to supporting documentation and assessed the procedures applied by the Group to appropriately allocate overhead costs to capitalised development expenditure Assessing the adequacy of disclosures in the financial statements. 67 | INTELLIHR ANNUAL REPORT 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 For personal use only Impairment of Capitalised Development Costs Key audit matter How the matter was addressed in our audit Development costs make up a significant portion of the Group’s non-current assets. AASB 136 Impairment of Assets requires that finite intangible assets be tested for impairment whenever there is an indication that the intangible assets may be impaired and this assessment requires judgement. The assessment as to whether there are any indicators of impairment requires the consideration of both internal and external sources of information. Other information We assessed the factors that the Group considered regarding impairment of capitalised development costs and whether any indicators of impairment existed. Our audit procedures considered the following: • • • • • Significant changes in the extent or manner in which the associated software is used Potential or actual redundancy or disposal of developed software Forecast cash flows associated with the capitalised development costs Significant changes in the market in which the assets are used Evaluating the Group’s assessment of the useful life of the software development assets. This included comparing to external market 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 2018, 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. 6 8 | INTELLIHR ANNUAL REPORT 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 For personal use only 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 at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 14 to 24 of the directors’ report for the year ended 30 June 2018. In our opinion, the Remuneration Report of intelliHR Holdings Limited, for the year ended 30 June 2018, 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 Pty Ltd R M Swaby Director Brisbane, 29 August 2018 69 | INTELLIHR ANNUAL REPORT 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 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 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, other than for the acts or omissions of financial services licensees. DECLARATION OF INDEPENDENCE BY R M SWABY TO THE DIRECTORS OF iNTELLIHR HOLDINGS LIMITED As lead auditor of intelliHR Holdings Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of intelliHR Holdings Limited and the entities it controlled during the period. R M Swaby Director BDO Audit Pty Ltd Brisbane, 29 August 2018 For personal use only A N N U A L R E P O R T 2 0 1 8 Shareholder information The shareholder information set out below was applicable as at 15 August 2018. A - Distribution of equity securities Analysis of numbers of equity security holders by size of holding: Class of equity security Ordinary shares 1 - 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 3 63 79 463 159 767 There were no holders of less than a marketable parcel of ordinary shares. 70 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only B - Equity security holders Twenty largest quoted equity security holders The names of the twenty largest holders of quoted equity securities are listed below: Name Robert Jon Bromage Jeremy Fong Intercontinental Pty Limited K R Khatri (Dental) Pty Ltd JD Investments Holdings Pty Ltd Chatterton Pty Ltd Wendy Laura Hopsick Kokoris Superannuation Pty Ltd Marilyn Bromage Scott Wiseman AG & M Bellas Super Fund Pty Ltd J J N A Super Pty Ltd 04NRG Pty Ltd Herbaut Helen Dianne Pryor Jimlori Pty Limited Mr Richard Hopsick & Mrs Wendy Hopsick Dr David Ritchie & Dr Gillian Ritchie Immanuel Developments Pty Ltd Kylie Jean Skillender Donald Anderson & Beverley Anderson Total Ordinary shares Number held % of issued shares 21,029,475 3,378,945 2,945,150 2,760,150 2,075,690 2,013,744 1,931,371 1,851,000 1,838,951 1,592,203 1,383,678 1,335,050 1,316,183 1,316,183 1,250,000 1,121,010 1,000,000 1,000,000 800,000 789,710 52,728,493 20.10 3.23 2.82 2.64 1.98 1.92 1.84 1.77 1.76 1.52 1.32 1.28 1.26 1.26 1.19 1.09 0.96 0.96 0.76 0.75 50.39 7 1 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only Unquoted equity securities Options over ordinary shares Performance rights 15,239,260 367,347 37 1 Number of issue Number of holders Holders of more than 20% of unquoted share options on issue Robert Bromage Jeremy Fong Number held % of total on issue 3,895,543 3,329,524 25.56 21.85 Holders of more than 20% of unquoted performance rights on issue Paul Trappett 367,347 100 Number held % of total on issue Restricted equity securities Ordinary shares Ordinary shares Number of issue Release date 4,853,703 41,861,734 3 November 2018 23 January 2018 C - Substantial holders Substantial holders in the company are set out below: Ordinary shares Robert Jon Bromage D - Voting rights Number held Percentage 21,029,475 20.10 The voting rights attaching to each class of equity securities are set out below: Ordinary shares: On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Performance rights: No voting rights Share options: No voting rights (a) (b) (c) 72 | INTELLIHR ANNUAL REPORT 2018FINANCIAL REPORTFor personal use only www.intellihr.com.au For personal use only