Kyckr Limited
Annual Report 2018

Plain-text annual report

Kyckr Limited Contents 30 June 2018 Corporate directory Executive Chairman's report Directors' report Auditor's independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration Independent auditor's report to the members of Kyckr Limited Shareholder information 2 3 6 21 22 23 24 25 26 56 57 60 1 Kyckr Limited Corporate directory 30 June 2018 Directors Benny Higgins John Van Der Wielen Benjamin Cronin Robert Leslie Albert YL Wong Company secretary Karl Pechmann Notice of annual general meeting The details of the annual general meeting of Kyckr Limited are: Monday, 19 November 2018, 9:00am, at: Level 16 1 Market Street Sydney NSW 2000 Registered office Principal place of business Share register Auditor Level 6, 36 Grosvenor Street Sydney NSW 2000 Level 6, 36 Grosvenor Street Sydney NSW 2000 Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 Nexia Sydney Partnership Level 16, 1 Market Street Sydney NSW 2000 Stock exchange listing Kyckr Limited shares are listed on the Australian Securities Exchange (ASX code: KYK) Business objectives Kyckr Limited has used cash and cash equivalents held at the time of listing and the time since listing to provide technology solutions to help protect against money laundering, fraud and tax evasion, in a way consistent with its stated business objectives. Kyckr aims to provide the pre-eminent automated technology solution to maintain up to date critical company identity information, in place of the traditional error and fraud prone manual people based processes. Corporate Governance Statement The Corporate Governance Statement was approved by the Board of Directors at the same time as the Annual Report and can be found on the 'About us' page at http://www.kyckr.com/ 2 Executive Chairman’s Report Dear shareholders, Financial Overview On behalf of the Board of Kyckr Limited (Kyckr or the Company), it is our pleasure to present the annual report for the year ended 30 June 2018. The annual report includes the revenue contribution of Kyckr Ireland Limited in the prior year for the period of September 2017 to the end of June 2018 (10-month period). To simplify statements below, references to performance are based on 12 months revenue contribution from Kyckr Ireland for comparative information where provided. NEW ENTERPRISE REVENUE 23% OF TOTAL REVENUE FOR FY18 POST BILLED ONLINE SALES GROWTH 16% YEAR ON YEAR Kyckr’s full revenue result of $1.8m was an increase of 3% on the previous full year, with growth represented across our online and enterprise solutions. This includes: • B2C online sales revenue grew 58% to $283k in FY18 whilst post-billed online revenue grew 16% to $737k. • New enterprise revenue grew by $400k compared to the previous year, representing 23% of total revenue for FY18. Following a period of solid growth, revenue has now reduced to a normalised level for Bank of Ireland in FY18. We expect to secure the renewal of this contract in the near future as a result of the success and support from this cornerstone client. The management team was pleased with the strong growth achieved in FY18 for online and post billed revenue and continues to focus on growing revenue organically. We remain optimistic in revenue growth from new enterprise client signings and prospects. We are pleased with the significant in managing complex and prolonged procurement onboarding with several clients and we look to reap the rewards from these accounts in FY19. investments made The loss before income tax for the year ended 30 June 2018 of $3.5 million has been impacted by non-cash share- based payment expenses of $338k. The management team continue to carefully manage the expenses of the Company to ensure costs are targeted appropriately towards revenue generating activities and continued technological improvements. Increased Capabilities Operationally, we expanded our global footprint, with significant new clients and partnerships, new offices established, new resources appointed, and additional - registry capabilities acquired during strengthening our position as a leading global provider for company intelligence. We are grateful to our continued support from investors to support our growth plans. the year Growth Through Blue-Chip Clients This past financial year saw the acquisition of key blue- chip clients such as Kyckr’s first Australian Financial Institution, Bloomberg, IBM, a global payments provider and global US based bank. Increasing adoption of our services globally reflects strong commercial validation of Kyckr’s technology, people and solutions. Bloomberg Bloomberg completed its integration of Kyckr’s technology into Bloomberg’s global network of terminals under a 3 the Collaboration with Norton Rose Fulbright Continuing to work with companies across a wide range of sectors, Kyckr commenced a collaborative relationship with Norton Rose Fulbright Australia (NRF), as legal advisors to market services across Australia. The collaboration focusses on providing clients with specialised end-to-end solutions to meet AML and Counter-Terrorism Financing (CTF) obligations. “Kyckr continues to attract quality investors” Continued Validation From Investors Kyckr continued to attract quality investors throughout the financial year, reinforcing our global positioning within Anti Money Laundering and Know your Customer (KYC) sectors. In October last year, Kyckr announced that it had raised $2 million via an institutional share placement, providing additional funds to capitalise on the significant revenue opportunity presented by the signing of US based clients including Bloomberg and IBM. The offer received strong support from new and existing institutional, sophisticated and professional investors and closed oversubscribed. It also included the addition of 3 very high-quality fund managers experienced in tech investments. In June this year, we announced a successful Placement to institution and sophisticated investors to raise A$5 million (after costs). The proceeds from the Placement will be used towards additional resources (Business Development and Account Management), the continued investment of Kyckr’s products (including the development of Machine Learning Intelligence applications) and general and Artificial working capital purposes. multi-year collaboration agreement, signalling commencement of revenue and cash generation. IBM Kyckr signed a global content agreement with multinational technology company IBM, which will use Kyckr’s services in its customer projects worldwide. This agreement includes integration with the IBM Watson platform used for Artificial Intelligence and performance analytics. Kyckr will earn project-based revenues as IBM utilises the Company’s primary source registry data to assist with customer data cleansing, on-boarding and on- going company monitoring processes. IBM has already identified several of its customers that require Kyckr’s data remediation services. Australian Financial Services Client Kyckr was pleased to sign its first Australian Financial Institution in September, working closely to provide solutions for decreasing risk and saving costs. Global US Bank Kyckr announced that it had signed a 5-year data license agreement with a global US based bank. The agreement provides automated access of Kyckr’s data (API) to their global division in commercial and consumer banking products and services. The bank will now become an enterprise grade client through the new agreement. Global Payments Provider In January, Kyckr signed an agreement to provide KYC onboarding services to a global payments provider. Revenue commenced earlier this year under an agreement with a fixed subscription value. We will be working with the client to help improve KYC compliance obligations and further maximise revenue opportunities. Improved Coverage and New Relationships Data capabilities extended to include Russia, CIS and China Kyckr was able to extend its data capabilities, adding improved access to Russia, the Commonwealth of Independent States (CIS) and China to its current global coverage. A 4-year agreement with Russian corporate information supplier Seldon 2 LLC (Seldon), enabled Kyckr to access high quality intelligence on Russian and CIS companies and individuals. In addition, Kyckr also added a credible source of Chinese company registry data to its capabilities covering all 30 provinces. 4 GDPR: Working Towards Compliance In May, Kyckr made changes to its policies in alignment with its commitment to data privacy. With the General Data Protection Regulation (GDPR) coming into enforcement, we were able to bring increased transparency and honesty around the handling of information and the strict security measures in place to protect our customers. As always, Kyckr remains committed in only ever offering solutions and services that demonstrate compliance within GDPR. Investment in Expertise Kyckr continued its pursuit of strengthening its global team, people and culture. This financial year, we hired expertise to help support our strategic global growth plans: Benny Higgins joins as Executive Chairman In March, I stepped into the role of Executive Chairman of Kyckr. Formerly CEO of Tesco Bank and with over 30 years of financial services and global banking experience, I have been responsible for the strategic guidance and growth of the business. I will remain as Executive Chairman of the Company until the appointment of a European-based CEO and remain on the Board as Non-Executive Chair once a new CEO is appointed. In the short time since commencing, I am pleased to be playing an active role in the management and leadership of Kyckr. Earlier in April, I visited Australia conducting a range of shareholder briefings in Perth, Melbourne and Sydney and will continue to be actively involved in building client relationships with existing and potential clients. David Reid appointed Chief Technology Officer Kyckr appointed David Reid as Chief Technology Officer. David’s career has been focused on growing technology businesses, leading companies from early stage start-ups to highly scalable global businesses that meet the highest demands of customers. David is an entrepreneurial and driven Chief Technology Officer and was a founder of several companies. He is a facilitator and builder of world- class technology management and product development teams, with speciality in both start-up and scaled growth stages. David’s background and experience will be instrumental to the continued development of Kyckr’s solutions and services. plans. This will assist with greater focus in the UK, the US and a redesign and relaunch of the Kyckr website. New Website Experience Earlier this year, Kyckr commenced the process of redesigning its website to provide an improved, richer user experience. Supported by extensive research on our customer journey, the new website will debut an all-new design centred around our client needs and behaviours, helping users navigate our global registry access quickly and easily. Improved functionality allows users and teams to manage their compliance obligations with more confidence than ever before. The new website will also include comprehensive information and content for our customers, prospects, investors and partners to better understand Kyckr’s global positioning in the KYC/AML space. The new Kyckr website will look to provide an informative experience for our users as we continue to grow our brand and market presence. Outlook Kyckr remains focussed on providing its customers with solutions that support their ever-increasing challenges to adhere to their KYC/AML obligations. The regulatory industry increasingly complex regulatory requirements, Kyckr will continue to deliver costs savings and risk mitigating solutions through primary source intelligence and Perpetual KYC solutions, streamlining compliance and onboarding obligations. is changing and with In a global market where regulatory technology continues to evolve rapidly, Kyckr’s range of solutions continue to resonate strongly as our coverage increases to over 200 company registries, 120 countries and over 80 million legal entities. On behalf of the Board, I would like to thank all its shareholders, staff and clients for their ongoing loyalty and support. We look forward to another year of exciting innovation, strong results and world-class solutions for our clients and shareholders. Sales and marketing resources support growth initiatives Additional business development and digital marketing resources commenced in support of our strategic growth Benny Higgins Executive Chairman, Kyckr 31 August 2018 5 Kyckr Limited Directors' report 30 June 2018 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity' or 'Group') consisting of Kyckr Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2018. Directors The following persons were directors of Kyckr Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Benny Higgins - Executive Chairman (appointed on 1 March 2018) Mr John Van Der Wielen - Non-Executive Director (resigned as Chairman on 1 March 2018) Mr Benjamin Cronin - Executive Director Mr Robert Leslie - Non-Executive Director (Executive Director up until June 2018) Mr Albert YL Wong - Non-Executive Director David Cassidy - former Chief Executive Officer and Managing Director (resigned as Director and Chief Executive Officer on 31 December 2017 and 31 March 2018 respectively) Mr John Walsh - Non-Executive Director (resigned on 31 December 2017) Mr Patrick Curry - Non-Executive Director (resigned on 31 December 2017) Principal activities The principal activity of the Group during the period consisted of the provision of data and technology solutions to accelerate customer acquisition and protect against money laundering, fraud and tax evasion. Kyckr’s solutions are connected to over 200 regulated primary sources, in over 120 countries, providing real-time company registry information on over an estimated 80 million businesses globally. Kyckr provides automated technology solutions to improve the efficiency and effectiveness of Corporate KYC. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the consolidated entity after providing for income tax amounted to $3,547,445 (30 June 2017: $3,447,237). Refer to the Chairman's and Chief Executive Officer's Report for further detail. Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial year Subsequent to year end, shareholders ratified the issue of securities at the Extraordinary General Meeting held on 6 August 2018. In accordance with the approval by shareholders, the company issued the following securities on 10 August 2018: ● ● ● ● 9,056,271 ordinary shares at a price of $0.14 per share to institutional and sophisticated investors 1,000,000 ordinary shares at a price of $0.14 per share to Benny Higgins, a Director of the company 1,000,000 options exercisable at $0.20 each, expiring 10 August 2022 vesting immediately to Benny Higgins 1,000,000 options exercisable at $0.26, expiring 10 August 2022 vesting on 1 March 2019 to Benny Higgins The total proceeds of the issuance of the above securities amounted to $1,407,878. No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the consolidated entity are included in the Chairman’s and Chief Executive Officer’s Report on pages 3 to 5. The Directors have identified the following business risks which may impact on the future performance of the Group: 6 Kyckr Limited Directors' report 30 June 2018 Competition The Group’s intellectual property rights are not protected by any registered patents in any jurisdiction. This may allow competitors to develop products functionally similar to the Group’s existing products. The existence of competitors with products that are functionally similar to the Group’s existing products could result in loss of customers and falls of revenue, each of which could adversely affect the Group’s business and operating results. Key Personnel Risk The successful execution of the Group’s business model depends on a management team with the necessary talent and experience to integrate and manage the Group’s growth plans. The loss of key management personnel could adversely affect the Group’s business, results of operations or financial conditions and performance. Current and Exchange Rate Fluctuations The financial contribution of the Group will depend on the movement in exchange rates between the Australian Dollar and a number of other foreign currencies. The exchange rate between various currencies may fluctuate substantially and the result of these fluctuations may have an adverse impact on the Group’s operating results and financial position. The Group does not enter into forward exchange contracts to hedge its anticipated purchase and sale commitments denominated in foreign currencies. Environmental regulation The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law. 7 Kyckr Limited Directors' report 30 June 2018 Information on directors Name: Title: Qualifications: Experience and expertise: Mr Benny Higgins (appointed on 1 March 2018) Executive Chairman Benny holds a First Class Honours degree in Mathematics from the University of Glasgow and is a Fellow of the Faculty of Actuaries. He is a Fellow of the Chartered Institute of bankers in Scotland and a Fellow of the Royal Society of Edinburgh. In 2018 he was announced as a Visiting Professor at Strathclyde University and the Edinburgh Business School based in Heriot-Watt University. Benny Higgins has been a prominent international business leader for over thirty years, leading businesses in financial services and retail. Benny began his career at Standard Life in 1983 where he joined as an actuarial student and became a member of the Standard Life Group Executive in 1996. In 1997, he moved to RBS to become Chief Executive of Retail Banking. He was with RBS until 2015, during which time he led the successful integration of NatWest Retail Banking - one of the largest mergers ever undertaken in UK banking. He became Chief Executive Officer of HBOS plc in 2006 before joining Tesco Bank as Chief Executive in 2008. Under Benny’s leadership, Tesco Bank grew to become one of the most established ‘new’ banks in the UK, serving more than 6 million customers and employing over 4,000 people in Edinburgh, Glasgow and Newcastle. In addition to his role at Tesco Bank, Benny was also the Group Strategy Director for Tesco PLC and was a member of the Tesco Executive Committee. Benny retired from Tesco in February 2018. In September 2017, Benny was asked by the Scottish Government to lead a project team to establish the creation of a Scottish National Investment Bank. In June 2018, Benny was announced as the strategic adviser of the Scottish National Investment Bank, leading its formation. Outside of financial services, Benny is Chairman of the National Galleries of Scotland, a Non Executive Director of Glasgow Life, Non Executive Director for the Buccleuch Group and a Prince’s Trust Ambassador. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of the Audit and Risk Management Committee and the Nomination and Remuneration Committee 1,000,000 ordinary shares 2,000,000 options over ordinary shares None Interests in shares: Interests in options: Interests in rights: 8 Kyckr Limited Directors' report 30 June 2018 Name: Title: Qualifications: Experience and expertise: Mr John Van Der Wielen Non-Executive Director MBA FAICD John has over 25 years in insurance, wealth management, private banking and investments including executive positions within several global financial services groups, commencing as Chief Executive Officer and Managing Director of HBF in May 2017. This involved leading a number of acquisitions, integration and restructuring programs and senior executive board membership of listed ASX, FTSE, European and Asian entities. John is experienced in fronting stock markets, liaising with direct investors and meeting analysts on company strategy and performance in many international markets. John was previously CEO of Friends Life UK and International in London and prior to this he was the Managing Director Wealth at ANZ Bank in Sydney. Most recently John has been a Senior Adviser for Blackstone in the financial services arena and an independent non-executive on several boards. He holds an MBA from the University of Western Australia and has studied at London Business School and Oxford University. He is a Fellow of the Australian Institute of Company Directors. None Other current directorships: Former directorships (last 3 years): None Special responsibilities: Chair of the Audit and Risk Management Committee and member of the Nomination and Remuneration Committee 789,404 ordinary shares 2,000,000 options over ordinary shares None Interests in shares: Interests in options: Interests in rights: Name: Title: Experience and expertise: Mr. Benjamin Michael Cronin Executive Director Ben is the founder of Kyckr Ireland Limited (formerly Global Business Register Limited). He fulfils the combined roles of managing all operating activities, personnel and developing prospects and clients. Ben has established relationships with numerous government registers and registrars over the last 10 years. His understanding of the Company register domain is extensive and he has presented at numerous register conferences over the years. Ben was a professional Rugby Union player, playing for Munster and Ireland. Prior to setting up GBR, Ben was a successful property developer including bid management roles on Primary Healthcare Centre Projects and a Co-Location Hospital (Public Private Partnerships) Project. Other current directorships: None Former directorships (last 3 years): None None Special responsibilities: 8,529,129 ordinary shares Interests in shares: None Interests in options: 6,500,000 performance rights over ordinary shares Interests in rights: 9 Kyckr Limited Directors' report 30 June 2018 Name: Title: Qualifications: Experience and expertise: Mr Robert Leslie Non-Executive Director B. Eng. (Electronics) Robert is an electronics engineer by profession and a co- founder of Kyckr Ireland Limited (formerly Global Business Register Limited). Robert has worked internationally for Dell in Japan. Rob is a mentor with Enterprise Ireland’s network, providing support to high potential start-up entrepreneurs. He is also the founder of Sedicii, which has developed an identity platform that allows individuals to prove their identity to organisations without having to share any personal information in the process. Rob is a source of innovation and strategy in technology products. He was recently selected by the World Economic Forum as a Technology Pioneer for 2015 and invited to talk at Davos. Other current directorships: None Former directorships (last 3 years): None None Special responsibilities: 9,619,247 ordinary shares Interests in shares: None Interests in options: 6,500,000 performance rights over ordinary shares Interests in rights: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Interests in rights: Mr Albert YL Wong AM Non-Executive Director B Com. FAICD F Fin Albert has more than 30 years’ experience in stockbroking and investment banking. He has worked for Merrill Lynch in Sydney and was a Member of the Australian Securities Exchange. He has been instrumental in the listing of numerous small cap companies and served on the boards of the same and others over the years. He is a Fellow of the Australian Institute of Company Directors and a fellow of FINSIA. Albert ’s philanthropic endeavours include serving on the UNSW Foundation Board of Directors, Honorary Life Governor and former President for the University of Sydney’s Physics Foundation, Director of the Australian Museum Foundation and serving on the Board of Directors of the Children’s Medical Research Institute and its Foundation. None Immutep Limited (formerly Prima BioMed Limited) Member of Audit and Risk Management Committee and Chair of Nomination and Remuneration Committee 5,130,213 ordinary shares 1,500,000 options over ordinary shares 3,000,000 performance rights over ordinary shares 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Karl Pechmann is a Chartered Accountant and Chartered Company Secretary. He has more than 15 years of diverse business experience across a range of industries including media, labour hire and biotechnology. He commenced his career with KPMG where he gained experience in audit, business advisory and corporate finance roles across a range of clients and industries. He has held senior finance positions at both ASX-listed and multi-national companies, being involved in M&A activity, strategic reviews and performance improvement initiatives. 10 Kyckr Limited Directors' report 30 June 2018 Meetings of directors The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2018, and the number of meetings attended by each director were: Benny Higgins John Van Der Wielen David Cassidy Benjamin Cronin Robert Leslie Albert YL Wong John Walsh Patrick Curry Full Board Attended Held Nomination and Remuneration Committee Attended Held Audit and Risk Management Committee Attended Held 2 10 7 9 11 11 5 7 2 11 7 11 11 11 7 7 - - - - - - - - - - - - - - - - - 1 - - - 1 - 1 - 1 - - - 1 - 1 Held: represents the number of meetings held during the time the director held office. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: ● ● ● ● ● Principles used to determine the nature and amount of remuneration Details of remuneration Service agreements Share-based compensation Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: ● ● ● ● competitiveness and reasonableness acceptability to shareholders performance linkage / alignment of executive compensation transparency The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it should seek to enhance shareholders' interests by: ● ● having economic profit as a core component of plan design focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value attracting and retaining high calibre executives ● Additionally, the reward framework should seek to enhance executives' interests by: ● ● ● rewarding capability and experience reflecting competitive reward for contribution to growth in shareholder wealth providing a clear structure for earning rewards 11 Kyckr Limited Directors' report 30 June 2018 In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. Non-executive directors remuneration Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market. The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive directors are entitled to receive share options and performance rights. ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general meeting. As set out in the IPO Prospectus, total aggregate remuneration available to Non-executive directors was set at $500,000 per annum. Non-executive director fees (Directors' fees and committee fees, inclusive of superannuation) proposed for the year ending 30 June 2019 are summarised as follows: Name John Van Der Wielen Albert Wong Robert Leslie Fees $50,000 $50,000 $50,000 Executive remuneration The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components: ● ● ● ● base pay and non-monetary benefits short-term performance incentives share-based payments other remuneration such as superannuation and long service leave The combination of these comprises the executive's total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remunerations. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive. The short-term incentives ('STI') program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators ('KPI's') being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product management. 12 Kyckr Limited Directors' report 30 June 2018 The long-term incentives ('LTI') include long service leave and share-based payments. On 1 September 2016, 4,000,000 unlisted options were granted to Key Management Personnel. The exercise price of the options of $0.30 was 50% higher than the Initial Public Offering price. The options are exercisable upon meeting certain revenue targets within four years from the date of grant. The contractual life of each option is four years. On 1 September 2016, 20,000,000 performance rights were granted to certain Directors and Key Management Personnel. The performance rights are exercisable at Nil value. The performance rights vest upon meeting the following conditions: ● 50% of the performance rights automatically convert upon the Company achieving a turnover of $5 million or more as set out in the full year or half-yearly financial statements released to the ASX; and ● 50% of the Performance rights automatically convert upon the Company achieving a turnover of $10 million or more as set out in its yearly or half-yearly financial statements released to the ASX. On 30 November 2016, 2,000,000 unlisted options exercisable at $0.30 were granted to senior executives under the Long Term Incentive Plan approved by shareholders at the Annual General Meeting held on 30 November 2016. The exercise price of the options of $0.30 was 22.45% higher than market price of the shares on the date of grant. The vesting of these options is conditional on continued employment until the vesting date, being two years from grant date. The contractual life of each option is four years. The Nomination and Remuneration Committee reviewed the long-term equity-linked performance incentives specifically for executives during the year ended 30 June 2018. Consolidated entity performance and link to remuneration Remuneration for certain individuals is directly linked to the performance of the consolidated entity. A portion of cash bonus and incentive payments are dependent on defined earnings per share targets being met. The remaining portion of the cash bonus and incentive payments are at the discretion of the Nomination and Remuneration Committee. The Nomination and Remuneration Committee is of the opinion that the adoption of performance based compensation will contribute to future improvements in performance and will increase shareholder wealth over the coming years. Use of remuneration consultants During the financial year ended 30 June 2018, the company did not engage remuneration consultants to review its existing remuneration policies and provide recommendations on how to improve both the STI and LTI programs. Voting and comments made at the company's 2017 Annual General Meeting ('AGM') At the 2017 AGM, 84.28% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2017. The company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity consisted of the following directors of Kyckr Limited: ● ● ● ● ● ● ● Benny Higgins (appointed on 1 March 2018) John Van Der Wielen Benjamin Cronin Robert Leslie Albert YL Wong John Walsh (resigned on 31 December 2017) Patrick Curry (resigned on 31 December 2017) And the following persons: ● David Cassidy - former Chief Executive Officer and Managing Director (resigned as Director and Chief Executive Officer on 31 December 2017 and 31 March 2018 respectively) Karl Pechmann - Chief Financial Officer and Company Secretary ● 13 Kyckr Limited Directors' report 30 June 2018 2018 Non-Executive Directors: J Van Der Wielen A Wong J Walsh* P Curry* Executive Directors: B Higgins* R Leslie B Cronin Other Key Management Personnel: D Cassidy* K Pechmann Short-term benefits Post- employment benefits Long-term benefits Share- based payments Cash salary and fees $ Cash bonus $ Non- monetary $ Super- annuation $ Long service leave $ Equity- settled $ Total $ 38,052 38,052 16,667 16,667 76,537 99,949 230,769 225,025 202,825 944,543 - - - - - - - - - - - - - - - - - - - - 3,615 3,615 - - - - - - - - - - - - 51,038 149,795 - 10,690 92,705 191,462 16,667 27,357 - - - 76,537 99,949 230,769 20,425 19,237 46,892 (1,080) 2,502 1,422 (124,350) 49,932 120,020 274,496 137,105 1,129,962 * represents remuneration from the date of appointment and/or up to the date of resignation Short-term benefits Post- employment benefits Long-term benefits Share- based payments Cash salary and fees $ Cash bonus $ Non- monetary $ Super- annuation $ Long service leave $ Equity- settled $ Total $ 51,370 38,052 46,667 33,333 269,260 180,037 152,106 179,324 950,149 - - - - - - - - - - - - - - - - - - 4,880 3,615 - - - - - - 226,380 282,554 - 89,489 282,630 324,221 46,667 122,822 23,750 - - 1,080 - - 282,554 - - 576,644 180,037 152,106 15,689 47,934 710 342,642 1,790 1,027,896 2,027,769 146,919 2017 Non-Executive Directors: J Van Der Wielen* A Wong J Walsh P Curry* Executive Directors: D Cassidy B Cronin R Leslie Other Key Management Personnel: K Pechmann * represents remuneration from the date of appointment 14 Kyckr Limited Directors' report 30 June 2018 The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Non-Executive Directors: J Van Der Wielen A Wong J Walsh P Curry Executive Directors: B Higgins B Cronin R Leslie Other Key Management Personnel: D Cassidy K Pechmann Fixed remuneration 2017 2018 At risk - STI At risk - LTI 2018 2017 2018 2017 45% 22% 100% 61% 100% 100% 100% 20% 13% 100% 27% - 100% 100% 203% 82% 51% 57% - - - - - - - - - - - - - - - - - - 55% 78% - 39% - - - 80% 87% - 73% - - - (103%) 18% 49% 43% Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Title: Details: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Benny Higgins Executive Chairman The agreement is in the process of being finalised. Benny receives £65,000 per annum for his duties as Chairman and receives a supplement of £5,000 per month for additional duties undertaken as Executive Chairman until the appointment of the Chief Executive Officer. Benjamin Cronin Head of Regulatory Development 6 September 2016 No fixed term Ben receives a base salary of €150,000 and is eligible to participate in the long term incentive plans of the consolidated entity. Ben may terminate his employment contract by giving 3 months’ notice in writing. The company can terminate his contract by giving 3 months' notice in writing and providing 12 months' pay. Karl Pechmann Chief Financial Officer and Company Secretary 6 September 2016 No fixed term Karl receives a base salary of $210,000 plus superannuation and is eligible to participate in the long term incentive plans of the consolidated entity. Karl may terminate his employment contract by giving 3 months’ notice in writing. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Issue of shares There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2018. 15 Kyckr Limited Directors' report 30 June 2018 Options The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Name Number of options granted Grant date Vesting date Exercisable date Exercise price at grant date Fair value per option J Van Der Wielen* P Curry* P Curry* 1,000,000 30/11/2016 333,333 30/11/2016 55,556 30/11/2016 01/11/2017 01/11/2017 31/12/2017 01/11/2017 01/11/2017 31/12/2017 $0.30 $0.30 $0.30 $0.14 $0.14 $0.14 * Options expire on 30 November 2020 Options granted carry no dividend or voting rights. All options were granted over unissued fully paid ordinary shares in the company. Options vest based on the provision of service over the vesting period whereby the executive becomes beneficially entitled to the option on vesting date. Options are exercisable by the holder as from the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant date. There are no amounts paid or payable by the recipient in relation to the granting of such options other than on their potential exercise. The number of options over ordinary shares granted to and vested in directors and other key management personnel as part of compensation during the year ended 30 June 2018 are set out below: Name J Van Der Wielen D Cassidy A Wong P Curry K Pechmann Number of options granted during the year 2018 Number of options granted during the year 2017 Number of options vested during the year 2018 Number of options vested during the year 2017 - - - - - 2,000,000 1,500,000 1,500,000 1,000,000 1,000,000 1,000,000 - - 388,889 - 1,000,000 1,500,000 1,500,000 333,333 1,000,000 Performance rights The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Name D Cassidy B Cronin R Leslie A Wong K Pechmann Number of rights granted Grant date Expiry date 3,000,000 1/09/2016 6,500,000 1/09/2016 6,500,000 1/09/2016 3,000,000 1/09/2016 1,000,000 1/09/2016 01/09/2020 01/09/2020 01/09/2020 01/09/2020 01/09/2020 Fair value per right at grant date $0.20 $0.20 $0.20 $0.20 $0.20 * All performance rights can vest and become exercisable between 1 September 2016 and 1 September 2020 upon achieving the performance criteria. Performance rights granted carry no dividend or voting rights. The number of performance rights over ordinary shares granted to, vested and forfeited by directors and other key management personnel as part of compensation during the year ended 30 June 2018 are set out below: 16 Kyckr Limited Directors' report 30 June 2018 D Cassidy B Cronin R Leslie A Wong K Pechmann Number of rights granted during the year 2018 Number of rights granted during the year 2017 Number of rights forfeited during the year 2018 Number of rights forfeited during the year 2017 - - - - - 3,000,000 6,500,000 6,500,000 3,000,000 1,000,000 (3,000,000) - - - - - - - - - No rights vested during the years ended 30 Jun 2018 and 30 June 2017. Additional disclosures relating to key management personnel Shareholding The number of shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Ordinary shares J Van Der Wielen A Wong D Cassidy B Cronin R Leslie J Walsh K Pechmann Balance at the start of the year Received as part of remuneration Additions Disposals/ other* 734,404 4,930,213 4,930,212 8,519,129 9,619,247 300,000 150,000 29,183,205 - - - - - - - - 55,000 200,000 - - - - 1,812 256,812 - - (4,930,212) - - (300,000) - (5,230,212) Balance at the end of the year 789,404 5,130,213 - 8,519,129 9,619,247 - 151,812 24,209,805 * Disposals/other may represent no longer being designated as a KMP, not necessarily a disposal of holding. Option holding The number of options over ordinary shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Options over ordinary shares J Van Der Wielen D Cassidy A Wong P Curry K Pechmann Balance at the start of the year 2,000,000 1,500,000 1,500,000 1,000,000 1,000,000 7,000,000 Granted Exercised - - - - - - Expired/ forfeited/ other* Balance at the end of the year - - - - - - - (1,500,000) - (1,000,000) - (2,500,000) 2,000,000 - 1,500,000 - 1,000,000 4,500,000 * Expire/forfeited/other may represent no longer being designated as a KMP, it does not necessarily represent options that have expired or have been forfeited. 17 Kyckr Limited Directors' report 30 June 2018 Performance rights holding The number of performance rights over ordinary shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Performance rights over ordinary shares D Cassidy A Wong B Cronin R Leslie K Pechmann Balance at the start of the year 3,000,000 3,000,000 6,500,000 6,500,000 1,000,000 20,000,000 Granted Vested - - - - - - Expired/ forfeited/ other Balance at the end of the year - - - - - - (3,000,000) - - - - (3,000,000) - 3,000,000 6,500,000 6,500,000 1,000,000 17,000,000 Other transactions with key management personnel and their related parties During the financial year, expenses for consulting services from Boomerang Capital Pty Ltd (director-related entity of Albert Wong and David Cassidy) of $nil (2017: $45,000) were incurred. All transactions were made on normal commercial terms and conditions and were at market rates. During the financial year, expenses for investor relations services from Barton Place Pty Ltd (director-related entity of Albert Wong) of $25,002 (2017: $91,670) were incurred. All transactions were made on normal commercial terms and conditions and were at market rates. This concludes the remuneration report, which has been audited. Shares under option Unissued ordinary shares of Kyckr Limited under option at the date of this report are as follows: Grant date 01/09/2016 01/09/2016 30/11/2016 30/11/2016 02/01/2018 Expiry date 01/09/2020 01/09/2020 30/11/2020 30/11/2020 02/01/2022 Exercise price Number under option $0.20 $0.30 $0.30 $0.30 $0.30 4,000,000 4,000,000 2,722,222 2,000,000 2,000,000 14,722,222 No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the company or of any other body corporate. Shares under performance rights Unissued ordinary shares of Kyckr Limited under performance rights at the date of this report are as follows: Grant date 01/09/2016 Expiry date 01/09/2020 Number under rights 17,000,000 No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in any share issue of the company or of any other body corporate. Shares issued on the exercise of options There were no ordinary shares of Kyckr Limited issued on the exercise of options during the year ended 30 June 2018 and up to the date of this report. 18 Kyckr Limited Directors' report 30 June 2018 Shares issued on the exercise of performance rights There were no ordinary shares of Kyckr Limited issued on the exercise of performance rights during the year ended 30 June 2018 and up to the date of this report. Indemnity and insurance of officers The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. 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. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 24 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 24 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: ● all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. ● Officers of the company who are former partners of Nexia Sydney Partnership There are no officers of the company who are former partners of Nexia Sydney Partnership. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. Auditor Nexia Sydney Partnership continues in office in accordance with section 327 of the Corporations Act 2001. 19 Kyckr Limited Directors' report 30 June 2018 This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ Benny Higgins Chairman 31 August 2018 Sydney ___________________________ John Van Der Wielen Director 20 To the Board of Directors of Kyckr Limited Auditor’s Independence Declaration under section 307C of the Corporations Act 2001 As lead audit partner for the audit of the financial statements of Kyckr Limited for the financial year ended 30 June 2018, I declare that to the best of my knowledge and belief, there have been no contraventions of: (a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) any applicable code of professional conduct in relation to the audit. Yours sincerely Nexia Sydney Partnership Lester Wills Partner Date: 31 August 2018 21 Kyckr Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2018 Revenue Other income Expenses Direct costs and consumables used Employee benefits expense Share-based payments expense Depreciation and amortisation expense Consultancy and professional fees Occupancy expenses Travel expenses Net foreign exchange loss Acquisition expenses IPO and listing related expenses Other expenses Finance costs Loss before income tax expense Income tax expense Consolidated Note 2018 $ 2017 $ 5 6 7 7 7 27 7 8 1,767,020 1,381,728 516,643 27,328 (670,633) (2,999,223) (337,763) (56,738) (517,014) (134,509) (298,907) (7,943) - (232,541) (538,515) (37,322) (451,932) (1,784,696) (1,108,730) (49,784) (506,424) (89,390) (302,600) - (240,524) (99,264) (197,944) (25,005) (3,547,445) (3,447,237) - - Loss after income tax expense for the year attributable to the owners of Kyckr Limited (3,547,445) (3,447,237) Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax Total comprehensive income for the year attributable to the owners of Kyckr Limited Basic earnings per share Diluted earnings per share 32,816 (26,091) 32,816 (26,091) (3,514,629) (3,473,328) Cents Cents 32 32 (3.24) (3.24) (3.92) (3.92) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 22 Kyckr Limited Statement of financial position As at 30 June 2018 Assets Current assets Cash and cash equivalents Trade and other receivables Other Total current assets Non-current assets Property, plant and equipment Intangibles Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Provisions Contingent consideration Deferred revenue Total current liabilities Non-current liabilities Contingent consideration Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Consolidated Note 2018 $ 2017 $ 9 10 11 12 13 14 15 16 17 4,575,703 366,612 124,141 5,066,456 2,670,859 180,686 116,127 2,967,672 56,670 12,565,203 12,621,873 26,259 12,321,017 12,347,276 17,688,329 15,314,948 831,299 14,843 2,080,000 69,800 2,995,942 410,926 26,080 - 32,164 469,170 - - 2,556,322 2,556,322 2,995,942 3,025,492 14,692,387 12,289,456 18 19 20,477,340 1,941,537 (7,726,490) 14,897,543 1,570,958 (4,179,045) 14,692,387 12,289,456 The above statement of financial position should be read in conjunction with the accompanying notes 23 Kyckr Limited Statement of changes in equity For the year ended 30 June 2018 Consolidated Balance at 1 July 2016 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 18) Share-based payments (note 33) Issued capital $ Reserves $ Accumulated losses $ Total equity $ 1,402,966 - (731,808) 671,158 - - - - (26,091) (3,447,237) - (3,447,237) (26,091) (26,091) (3,447,237) (3,473,328) 13,494,577 - 488,319 1,108,730 - - 13,982,896 1,108,730 Balance at 30 June 2017 14,897,543 1,570,958 (4,179,045) 12,289,456 Consolidated Balance at 1 July 2017 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 18) Share-based payments (note 33) Issued capital $ Reserves $ Accumulated losses $ Total equity $ 14,897,543 1,570,958 (4,179,045) 12,289,456 - - - - 32,816 (3,547,445) - (3,547,445) 32,816 32,816 (3,547,445) (3,514,629) 5,579,797 - - 337,763 - - 5,579,797 337,763 Balance at 30 June 2018 20,477,340 1,941,537 (7,726,490) 14,692,387 The above statement of changes in equity should be read in conjunction with the accompanying notes 24 Kyckr Limited Statement of cash flows For the year ended 30 June 2018 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Consolidated Note 2018 $ 2017 $ 1,725,581 (5,108,652) 1,587,854 (3,580,343) (3,383,071) 42,611 (1,992,489) 25,653 Net cash used in operating activities 30 (3,340,460) (1,966,836) Cash flows from investing activities Cash flow from purchase of subsidiary, net of cash acquired Payment for expenses relating to acquisitions Payments for property, plant and equipment Payments for intangibles Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Cancellation of shares IPO transaction costs Share issue transaction costs Repayment of borrowings Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents 27 12 13 18 18 - - (45,728) (281,239) 50,525 (240,524) (19,045) (5,074) (326,967) (214,118) 5,945,441 - - (365,644) - 5,192,437 (591) (99,264) (317,458) (190,254) 5,579,797 4,584,870 1,912,370 2,670,859 (7,526) 2,403,916 266,943 - Cash and cash equivalents at the end of the financial year 9 4,575,703 2,670,859 The above statement of cash flows should be read in conjunction with the accompanying notes 25 Kyckr Limited Notes to the financial statements 30 June 2018 Note 1. General information The financial statements cover Kyckr Limited as a consolidated entity consisting of Kyckr Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Kyckr Limited's functional and presentation currency. Kyckr Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 6, 36 Grosvenor Street Sydney NSW 2000 A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 31 August 2018. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 26. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kyckr Limited ('company' or 'parent entity') as at 30 June 2018 and the results of all subsidiaries for the year then ended. Kyckr Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'. 26 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity 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 consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity 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 consolidated entity. 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. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation The financial statements are presented in Australian dollars, which is Kyckr Limited's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Revenue recognition Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Rendering of services Revenue from long term contracts is recognised in accordance with the stage of completion of the contract with the revenue and portion of profit recognised in each accounting period being the amounts which reflects the work performed in that period. 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. 27 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. 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. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. 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. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days. 28 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Other receivables are recognised at amortised cost, less any provision for impairment. Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of the acquisition and subsequent reclassification to other categories is restricted. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the asset is derecognised or impaired. Impairment of financial assets The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions due to economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable data indicating that there is a measurable decrease in estimated future cash flows. The amount of the impairment allowance for loans and receivables carried at amortised cost is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. If there is a reversal of impairment, the reversal cannot exceed the amortised cost that would have been recognised had the impairment not been made and is reversed to profit or loss. Property, plant and equipment Property, 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: Computer equipment 2-5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. 29 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits. Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability. Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership at the end of the lease term. Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the term of the lease. Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Computer software and development Significant costs associated with computer software and development are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5 years. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. 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. 30 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. 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 wholly 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 annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at 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. Liabilities for employee entitlements which have vested in the employee at reporting date are recognised as current liabilities notwithstanding that they are not expected to be settled within 12 months of reporting date as the consolidated entity does not have an unconditional right to defer settlement. Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options 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 independently determined using either the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. 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. 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 consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity 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. 31 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. 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. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. 32 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Kyckr 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. 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 statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the 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. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2018. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below. 33 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) AASB 9 Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely comprise principal and interest. All other financial instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The consolidated entity will adopt this standard from 1 July 2018. It is not expected to significantly impact the financial statements. AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this standard from 1 July 2018. It is not expected to significantly impact the financial statements on the basis that most of the consolidated entity's revenue is recognised as the customer simultaneously receives and consumes the benefits provided as the entity performs, and this is consistent with AASB 15 requirements. AASB 16 Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The consolidated entity will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the consolidated entity. 34 Kyckr Limited Notes to the financial statements 30 June 2018 Note 2. Significant accounting policies (continued) IASB revised Conceptual Framework for Financial Reporting The revised Conceptual Framework has been issued by the International Accounting Standards Board ('IASB'), but the Australian equivalent has yet to be published. The revised framework is applicable for annual reporting periods beginning on or after 1 January 2020 and the application of the new definition and recognition criteria may result in future amendments to several accounting standards. Furthermore, entities who rely on the conceptual framework in determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting Standards may need to revisit such policies. The consolidated entity will apply the revised conceptual framework from 1 July 2020 and is yet to assess its impact. Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Share-based payment transactions The consolidated entity 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 either the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Fair value measurement hierarchy The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Goodwill and other indefinite life intangible assets The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. 35 Kyckr Limited Notes to the financial statements 30 June 2018 Note 3. Critical accounting judgements, estimates and assumptions (continued) Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Income tax The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Employee benefits provision As discussed in note 2, the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Business combinations As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. Note 4. Operating segments The Group operates in one operating segment, being the provision of Know Your Business customer ('KYB') services. The operating segment identified is based on the internal reports that are reviewed and used by the Directors of the Board (who are identified as the Chief Operating Decision Maker (‘CODM’) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The CODM reviews earnings before interest, tax, depreciation and amortisation ('EBITDA'). EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit under AAS adjusted for non- specific non-cash and significant items. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on at least a monthly basis. Major customers During the year ended 30 June 2018 approximately 29% (2017: 49%) of the consolidated entity's external revenue was derived from sales to 2 customers (2017: 1 customer). 36 Kyckr Limited Notes to the financial statements 30 June 2018 Note 4. Operating segments (continued) Geographical information Australia Ireland Sales to external customers Geographical non-current assets 2018 $ 2017 $ 2018 $ 2017 $ - 1,724,409 - 1,356,075 12,255,891 365,982 12,253,596 93,680 1,724,409 1,356,075 12,621,873 12,347,276 The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets, post-employment benefits assets and rights under insurance contracts. A reconciliation of the loss after income tax expense to EBITDA is as follows: Loss after tax add: Depreciation and amortisation Less: interest revenue add: finance costs EBITDA Note 5. Revenue Sales revenue Sales of services Other revenue Interest Revenue Note 6. Other income Net foreign exchange gain Net fair value gain on financial liability (refer to note 16) Other income 37 Consolidated 2018 $ 2017 $ (3,547,445) 56,738 (42,611) 37,322 (3,447,237) 49,784 (25,653) 25,005 (3,495,996) (3,398,101) Consolidated 2018 $ 2017 $ 1,724,409 1,356,075 42,611 25,653 1,767,020 1,381,728 Consolidated 2018 $ 2017 $ 2,999 513,644 27,328 - 516,643 27,328 Kyckr Limited Notes to the financial statements 30 June 2018 Note 7. Expenses Loss before income tax includes the following specific expenses: Depreciation Computer equipment Amortisation Computer software and development Total depreciation and amortisation Finance costs Exchange (gains)/ losses on foreign currency borrowings Unwinding of the discount on contingent consideration (refer to note 16) Finance costs expensed Net foreign exchange loss Net foreign exchange loss Rental expense relating to operating leases Minimum lease payments Share-based payments expense Share-based payments expense Employee benefits expense Employee benefits expense excluding superannuation Defined contribution superannuation expense Total employee benefits expense Note 8. Income tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Loss before income tax expense Tax at the statutory tax rate of 27.5% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Non-deductible expenses Non-assessable income Capital deductions Current year tax losses not recognised Difference in overseas tax rates Income tax expense 38 Consolidated 2018 $ 2017 $ 16,361 6,409 40,377 43,375 56,738 49,784 - 37,322 (5,606) 30,611 37,322 25,005 4,944 23 130,970 87,229 337,763 1,108,730 2,942,401 56,822 1,736,762 47,934 2,999,223 1,784,696 Consolidated 2018 $ 2017 $ (3,547,445) (3,447,237) (975,547) (947,990) 103,812 (141,252) (100,552) (1,113,539) 798,850 314,689 338,690 - (122,029) (731,329) 610,945 120,384 - - Kyckr Limited Notes to the financial statements 30 June 2018 Note 8. Income tax expense (continued) Deferred tax assets not recognised Deferred tax assets not recognised comprises temporary differences attributable to: Carried forward tax losses benefit Temporary differences Total deferred tax assets not recognised Consolidated 2018 $ 2017 $ 1,905,895 43,003 1,077,377 51,984 1,948,898 1,129,361 The above potential tax benefit, which includes tax losses and temporary differences has not been recognised in the statement of financial position as recovery of this benefit is not probable. There is no expiration date for the tax losses carried forward. The estimated amount of cumulative tax losses at 30 June 2018 was $9,794,107 (2017: $5,432,460). Utilisation of these tax losses is dependent on the Company satisfying certain tests at the time the losses are recouped. Note 9. Current assets - cash and cash equivalents Cash at bank Note 10. Current assets - trade and other receivables Trade receivables Less: Provision for impairment of receivables Other receivables GST receivable Consolidated 2018 $ 2017 $ 4,575,703 2,670,859 Consolidated 2018 $ 2017 $ 329,289 (8,512) 320,777 15,428 30,407 133,204 (1,486) 131,718 33,638 15,330 366,612 180,686 Impairment of receivables The consolidated entity has recognised a loss of $7,026 (2017: a gain of $24,924) in profit or loss in respect of impairment of receivables for the year ended 30 June 2018. The ageing of the impaired receivables provided for above are as follows: 0 to 3 months overdue 3 to 6 months overdue 39 Consolidated 2018 $ 2017 $ 8,512 - 527 959 8,512 1,486 Kyckr Limited Notes to the financial statements 30 June 2018 Note 10. Current assets - trade and other receivables (continued) Opening balance Additional provisions recognised Additions through business combinations Unused amounts reversed Closing balance Consolidated 2018 $ 2017 $ 1,486 7,026 - - - - 26,410 (24,924) 8,512 1,486 Past due but not impaired Customers with balances past due but without provision for impairment of receivables amount to $196,956 as at 30 June 2018 ($32,348 as at 30 June 2017). The consolidated entity did not consider there to be a credit risk on the aggregate balances after reviewing the credit terms of customers based on recent collection practices. The ageing of the past due but not impaired receivables are as follows: Consolidated 2018 $ 2017 $ 196,956 32,348 Consolidated 2018 $ 2017 $ 108,378 15,763 101,268 14,859 124,141 116,127 Consolidated 2018 $ 2017 $ 79,440 (22,770) 32,668 (6,409) 56,670 26,259 0 to 3 months overdue Note 11. Current assets - other Prepayments Security deposits Note 12. Non-current assets - property, plant and equipment Computer equipment - at cost Less: Accumulated depreciation 40 Kyckr Limited Notes to the financial statements 30 June 2018 Note 12. Non-current assets - property, plant and equipment (continued) Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2016 Additions Additions through business combinations (note 27) Exchange differences Depreciation expense Balance at 30 June 2017 Additions Exchange differences Depreciation expense Balance at 30 June 2018 Note 13. Non-current assets - intangibles Goodwill - at cost Computer software and development - at cost Less: Accumulated amortisation Computer equipment $ Total $ - 19,045 13,767 (144) (6,409) 26,259 45,728 1,044 (16,361) - 19,045 13,767 (144) (6,409) 26,259 45,728 1,044 (16,361) 56,670 56,670 Consolidated 2018 $ 2017 $ 12,250,079 12,250,079 398,876 (83,752) 315,124 114,313 (43,375) 70,938 12,565,203 12,321,017 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2016 Additions Additions through business combinations (note 27) Amortisation expense Balance at 30 June 2017 Additions Exchange differences Amortisation expense Balance at 30 June 2018 41 Computer software and development $ Total $ - 5,074 109,239 (43,375) 70,938 281,239 3,324 (40,377) - 5,074 12,359,318 (43,375) 12,321,017 281,239 3,324 (40,377) Goodwill $ - - 12,250,079 - 12,250,079 - - - 12,250,079 315,124 12,565,203 Kyckr Limited Notes to the financial statements 30 June 2018 Note 13. Non-current assets - intangibles (continued) Impairment testing For the purpose of impairment testing, goodwill is allocated to the one cash generating unit ('CGU'), Kyckr Ireland Limited. Key assumptions used for value-in-use calculations: The Group tests whether goodwill has suffered any impairment on at least an annual basis. The recoverable amount of a CGU is determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by the Board of Directors covering a two year period. Estimated growth rates and other reasonable assumptions are utilised to further calculate cash flows out to five years from balance date. Cash flows beyond the five year period are extrapolated into perpetuity using estimated terminal growth rates shown below. The following table sets out the key assumptions used for value-in-use calculations: ● Two to five year growth rates 30% (2017: 30%) ● Long term growth rate 5% (2017: 5%) ● Weighted average cost of capital 15% (2017: 15%) No impairment charge: Based on the value-in-use calculation methodology and assumptions stated above, the carrying amount the CGU at balance date does not exceed its recoverable amount. Impact of possible changes in assumptions: A reasonable possible change in the key assumptions above would not cause the carrying value of the CGU to exceed its recoverable amount. Note 14. Current liabilities - trade and other payables Trade payables Accrued expenses Other payables Refer to note 21 for further information on financial instruments. Note 15. Current liabilities - provisions Annual leave Long service leave Note 16. Current liabilities - contingent consideration Contingent consideration 42 Consolidated 2018 $ 2017 $ 517,913 262,427 50,959 189,690 161,468 59,768 831,299 410,926 Consolidated 2018 $ 2017 $ 11,630 3,213 24,290 1,790 14,843 26,080 Consolidated 2018 $ 2017 $ 2,080,000 - Kyckr Limited Notes to the financial statements 30 June 2018 Note 16. Current liabilities - contingent consideration (continued) Contingent consideration Contingent consideration relates to the acquisition of Kyckr Ireland Limited on 1 September 2016 and represents 13,000,000 Performance Shares that were issued which will convert to fully paid ordinary shares on a one-for-one basis upon meeting the following vesting conditions: ● ● 50% of the Performance Shares automatically convert upon the Company achieving a turnover of $5 million or more as set out in the full year or half-yearly financial statements released to the ASX; and 50% of the Performance Shares automatically convert upon the Company achieving a turnover of $10 million or more as set out in its yearly or half-yearly financial statements released to the ASX. The Performance Shares expire four years from the date of acquisition in the event that the above vesting conditions are not met. As the contingent consideration vests no earlier than two years from the date of issue, the amount has been discounted by the two-year government bond rate of 1.46% p.a. The finance costs incurred during the period with respect to the unwinding of the discount was $37,322 (2017: $30,611) and is included in finance costs, which in addition to a fair value movement of $513,644 (2017: $nil) gives a balance at 30 June 2018 of $2,080,000 (2017: $2,556,322). Refer to note 29 for further information on the acquisition of Kyckr Ireland Limited. Note 17. Non-current liabilities - contingent consideration Contingent consideration Refer to note 21 for further information on financial instruments. Refer to note 16 for further information on contingent consideration. Note 18. Equity - issued capital Consolidated 2018 $ 2017 $ - 2,556,322 Consolidated 2018 Shares 2017 Shares 2018 $ 2017 $ Ordinary shares - fully paid 140,908,619 100,962,186 20,477,340 14,897,543 Movements in ordinary share capital Details Date Shares Issue price $ Balance Share cancellation Shares issued on acquisition of Kyckr Ireland Limited 1 September 2016 Shares issued at IPO 7 September 2016 Shares issued on acquisition of Kyckr Ireland Limited 23 November 2016 less share issue costs (net of taxation)* 1 July 2016 1 July 2016 Balance Share placement Share placement less share issue costs (net of taxation) 30 June 2017 17 October 2017 27 June 2018 34,615,385 (5,912,885) 45,278,873 25,962,186 1,018,627 - 100,962,186 11,764,710 28,181,723 - Balance 30 June 2018 140,908,619 $0.10 $0.20 $0.20 $0.20 $0.00 $0.17 $0.14 $0.00 1,402,966 (591) 9,055,775 5,192,437 203,725 (956,769) 14,897,543 2,000,000 3,945,441 (365,644) 20,477,340 43 Kyckr Limited Notes to the financial statements 30 June 2018 Note 18. Equity - issued capital (continued) *included in share issue costs is $488,319 of share-based payments granted to the brokers in exchange for services provided in connection with the IPO. Note 19. Equity - reserves Foreign currency reserve Share-based payments reserve Consolidated 2018 $ 2017 $ 6,725 1,934,812 (26,091) 1,597,049 1,941,537 1,570,958 Foreign currency reserve The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2016 Foreign currency translation Share-based payments Balance at 30 June 2017 Foreign currency translation Share-based payments Balance at 30 June 2018 Note 20. Equity - dividends Foreign currency $ Share-based payments $ Total $ - (26,091) - (26,091) 32,816 - - - 1,597,049 1,597,049 - 337,763 - (26,091) 1,597,049 1,570,958 32,816 337,763 6,725 1,934,812 1,941,537 There were no dividends paid, recommended or declared during the current or previous financial year. Note 21. Financial instruments Financial risk management objectives The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity may use derivative financial instruments such as forward foreign exchange contracts to hedge certain risk exposures, however as at 30 June 2018 and 30 June 2017 there were no derivative financial instruments in place. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk. 44 Kyckr Limited Notes to the financial statements 30 June 2018 Note 21. Financial instruments (continued) Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies and evaluates financial risks within the consolidated entity's operating units. Finance reports to the Board on a monthly basis. Market risk Foreign currency risk The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The consolidated entity's foreign exchange risk is managed to ensure sufficient funds are available to meet foreign denominated financial commitments in a timely and cost-effective manner. The consolidated entity will continually monitor this risk and consider entering into forward foreign exchange, foreign currency swap and foreign currency option contracts if appropriate. Creditors and debtors as at 30 June 2018 were reviewed to assess currency risk at year end. The value of transactions denominated in a currency other than the functional currency of the respective subsidiary was insignificant and therefore the risk was determined as not being significant. At 30 June 2018, the carrying value of foreign currency denominated cash and cash equivalents are as follows: Consolidated US dollars Euros Pound Sterling Assets Liabilities 2018 $ 2017 $ 2018 $ 2017 $ 5,719 229,171 6,596 - 1,361,320 113,433 241,486 1,474,753 - - - - - - - - The consolidated entity had cash denominated in foreign currencies of $241,486 as at 30 June 2018 (30 June 2017: $1,474,753). Based on this exposure, had the Australian dollar weakened by 10%/strengthened by 10% (30 June 2017: weakened by 10%/strengthened by 10%) against these foreign currencies with all other variables held constant, the consolidated entity's profit after tax for the year would have been $24,149 higher/$24,149 lower (30 June 2017: $147,475 higher/$147,475 lower). The percentage change is the expected overall volatility of the significant currencies, based on management's assessment of reasonable possible fluctuations. Price risk The consolidated entity is not exposed to any significant price risk. Interest rate risk The consolidated entity is not exposed to any interest rate risk. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity has no significant credit risk exposure and the maximum exposure at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral. 45 Kyckr Limited Notes to the financial statements 30 June 2018 Note 21. Financial instruments (continued) Liquidity risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Remaining contractual maturities The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated - 2018 Non-derivatives Non-interest bearing Trade payables Other payables Contingent consideration Total non-derivatives Consolidated - 2017 Non-derivatives Non-interest bearing Trade payables Other payables Contingent consideration Total non-derivatives Weighted average interest rate 1 year or less % $ Between 1 and 2 years $ Between 2 and 5 years Over 5 years $ $ Remaining contractual maturities $ - - - 517,913 50,959 2,080,000 2,648,872 - - - - - - - - - - - - 517,913 50,959 2,080,000 2,648,872 Weighted average interest rate 1 year or less % $ Between 1 and 2 years $ Between 2 and 5 years Over 5 years $ $ Remaining contractual maturities $ - - - 189,690 59,768 - 249,458 - - 2,600,000 2,600,000 - - - - - - - - 189,690 59,768 2,600,000 2,849,458 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. 46 Kyckr Limited Notes to the financial statements 30 June 2018 Note 22. Fair value measurement Fair value hierarchy The following tables detail the consolidated entity's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability Consolidated - 2018 Liabilities Contingent consideration Total liabilities Consolidated - 2017 Liabilities Contingent consideration Total liabilities Level 1 $ Level 2 $ Level 3 $ Total $ Level 1 $ - - - - Level 2 $ - - - - 2,080,000 2,080,000 2,080,000 2,080,000 Level 3 $ Total $ 2,556,322 2,556,322 2,556,322 2,556,322 There were no transfers between levels during the financial year. The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-term nature. The fair value of the contingent consideration is estimated using a discounted cash flow model and is based on the probability of meeting all of the vesting conditions under the terms of the Kyckr (Ireland) Share Purchase Agreement. Valuation techniques for fair value measurements categorised within level 2 and level 3 The fair value of the contingent consideration is estimated based on a probability of meeting all of the vesting conditions relating to these shares under the terms of the Share Purchase Agreement. Level 3 assets and liabilities Movements in level 3 assets and liabilities during the current and previous financial year are set out below: Consolidated Balance at 1 July 2016 Additions Unwinding of the discount* Balance at 30 June 2017 Losses recognised in profit or loss Unwinding of the discount* Balance at 30 June 2018 Contingent consideration $ Total $ - 2,525,711 30,611 - 2,525,711 30,611 2,556,322 (513,644) 37,322 2,556,322 (513,644) 37,322 2,080,000 2,080,000 * Included as part of finance costs in the Statement of profit or loss and other comprehensive income 47 Kyckr Limited Notes to the financial statements 30 June 2018 Note 22. Fair value measurement (continued) The level 3 assets and liabilities unobservable inputs and sensitivity are as follows: Description Unobservable inputs Range (weighted average) Sensitivity Contingent consideration Discount rate 1.46% 0.25% change would increase/decrease fair value by $1,070 Note 23. Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments Note 24. Remuneration of auditors Consolidated 2018 $ 2017 $ 944,543 46,892 1,422 137,105 950,149 47,934 1,790 1,027,896 1,129,962 2,027,769 During the financial year the following fees were paid or payable for services provided by Nexia Sydney Partnership, the auditor of the company: Audit services - Nexia Sydney Partnership Audit or review of the financial statements Other services - Nexia Sydney Partnership Income tax advisory services Note 25. Related party transactions Parent entity Kyckr Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 28. Consolidated 2018 $ 2017 $ 35,000 35,000 - 4,500 35,000 39,500 Key management personnel Disclosures relating to key management personnel are set out in note 23 and the remuneration report included in the directors' report. 48 Kyckr Limited Notes to the financial statements 30 June 2018 Note 25. Related party transactions (continued) Transactions with related parties The following transactions occurred with related parties: Payment for goods and services: Payment for services from director related entity Payment for services from Director related entity comprise of: Consolidated 2018 $ 2017 $ 27,502 136,670 ● ● expenses for consulting services from Boomerang Capital Pty Ltd (director-related entity of Albert Wong and David Cassidy) of $nil (2017: $45,000); and expenses for investor relations services from Barton Place Pty Ltd (director-related entity of Albert Wong) of $25,002 (2017: $91,670). All transactions were made on normal commercial terms and conditions and were at market rates. Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Note 26. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Loss after income tax Total comprehensive income Parent 2018 $ 2017 $ (1,286,404) (2,644,672) (1,286,404) (2,644,672) 49 Kyckr Limited Notes to the financial statements 30 June 2018 Note 26. Parent entity information (continued) Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Share-based payments reserve Accumulated losses Total equity Parent 2018 $ 2017 $ 8,286,833 4,039,385 20,077,856 15,828,113 2,328,588 153,679 2,328,588 2,710,001 20,477,340 1,934,812 (4,662,884) 14,897,543 1,597,049 (3,376,480) 17,749,268 13,118,112 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2018 and 30 June 2017. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except for the following: ● ● ● Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Investments in associates are accounted for at cost, less any impairment, in the parent entity. Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. 50 Kyckr Limited Notes to the financial statements 30 June 2018 Note 27. Business combinations Acquisition of Kyckr Ireland Limited (formerly Global Business Register Limited) (Prior year) On 1 September 2016, the Company acquired 97.59% of the issued share capital and voting rights of Kyckr Ireland Limited (formerly Global Business Register Limited), a Company based in Ireland, followed by the remaining 2.41% of the issued share capital and voting rights on 23 November 2016. The objective of the acquisition is to invest in business development and technical resources in order to realise the Company’s KYC technology solutions. The goodwill of $12,250,079, can be attributed to the synergies expected to be derived from the combination and the value of the workforce and industry relationships of Kyckr Ireland Limited. Goodwill is not deductible for tax purposes. The values identified in relation to the acquisition of Kyckr Ireland Limited are final as at 30 June 2018. Details of the acquisition are as follows: Cash and cash equivalents Trade receivables Plant and equipment Intangible assets Trade and other payables Deferred revenue Borrowings Net liabilities acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Kyckr Limited shares issued to vendor Contingent consideration Acquisition costs expensed to profit or loss Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: cash and cash equivalents Less: shares issued by company as part of consideration Less: contingent consideration Net cash received Fair value $ 50,525 291,680 13,767 109,239 (253,009) (145,570) (531,500) (464,868) 12,250,079 11,785,211 9,259,500 2,525,711 11,785,211 240,524 11,785,211 (50,525) (9,259,500) (2,525,711) (50,525) 46,297,500 fully paid ordinary shares were issued to the vendors of Kyckr Ireland Limited in consideration for the acquisition. Refer to note 16 for further information on contingent consideration. 51 Kyckr Limited Notes to the financial statements 30 June 2018 Note 28. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance with the accounting policy described in note 2: Name Principal place of business / Country of incorporation Ownership interest 2017 2018 % % Kyckr Ireland Limited Ireland 100.00% 100.00% Note 29. Events after the reporting period Subsequent to year end, shareholders ratified the issue of securities at the Extraordinary General Meeting held on 6 August 2018. In accordance with the approval by shareholders, the company issued the following securities on 10 August 2018: ● ● ● ● 9,056,271 ordinary shares at a price of $0.14 per share to institutional and sophisticated investors 1,000,000 ordinary shares at a price of $0.14 per share to Benny Higgins, a Director of the company 1,000,000 options exercisable at $0.20 each, expiring 10 August 2022 vesting immediately to Benny Higgins 1,000,000 options exercisable at $0.26, expiring 10 August 2022 vesting on 1 March 2019 to Benny Higgins The total proceeds of the issuance of the above securities amounted to $1,407,878. No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. Note 30. Reconciliation of loss after income tax to net cash used in operating activities Loss after income tax expense for the year (3,547,445) (3,447,237) Consolidated 2018 $ 2017 $ Adjustments for: Depreciation and amortisation Share-based payments Foreign exchange differences IPO transaction costs Costs associated with acquisitions Non-cash finance costs Fair value gain on contingent consideration Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Decrease/(increase) in prepayments Increase/(decrease) in trade and other payables Increase/(decrease) in employee benefits Net cash used in operating activities 56,738 337,763 35,974 - - 37,322 (513,644) 49,784 1,108,730 (25,947) 99,264 240,524 30,611 - (186,830) (7,110) 458,009 (11,237) 115,806 80,076 (244,527) 26,080 (3,340,460) (1,966,836) 52 Kyckr Limited Notes to the financial statements 30 June 2018 Note 31. Changes in liabilities arising from financing activities Consolidated Balance at 1 July 2016 Net cash used in financing activities Changes through business combinations (note 27) Other changes Balance at 30 June 2017 Balance at 30 June 2018 Note 32. Earnings per share Borrowings $ Total $ - (190,254) 531,500 (341,246) - (190,254) 531,500 (341,246) - - - - Consolidated 2018 $ 2017 $ Loss after income tax attributable to the owners of Kyckr Limited (3,547,445) (3,447,237) Weighted average number of ordinary shares used in calculating basic earnings per share 109,445,229 87,847,758 Weighted average number of ordinary shares used in calculating diluted earnings per share 109,445,229 87,847,758 Number Number Basic earnings per share Diluted earnings per share Cents Cents (3.24) (3.24) (3.92) (3.92) For the purpose calculating the diluted earnings per share the calculation has excluded the number of options as the effect would be anti-dilutive. 53 Kyckr Limited Notes to the financial statements 30 June 2018 Note 33. Share-based payments The following options and performance rights were issued during the years ended 30 June 2018 and 30 June 2017: ● On 1 September 2016, 4,000,000 unlisted options were granted to brokers associated with the Initial Public Offering ('IPO') of the company. The exercise price of the options of $0.20 was equal to the IPO price. The contractual life of each option is four years. On 1 September 2016, 4,000,000 unlisted options were granted to Key Management Personnel. The exercise price of the options of $0.30 was 50% higher than the Initial Public Offering price. The options are exercisable upon meeting certain revenue targets within four years from the date of grant. The contractual life of each option is four years. On 1 September 2016, 20,000,000 performance rights were granted to certain Directors and Key Management Personnel. The performance rights are exercisable at Nil value. 50% of the performance rights automatically convert upon the Company achieving a turnover of $5 million or more as set out in the full year or half-yearly financial statements released to the ASX; and 5% of the Performance rights automatically convert upon the Company achieving a turnover of $10 million or more as set out in its yearly or half-yearly financial statements released to the ASX. The contractual life of each performance right is four years. On 30 November 2016, 2,000,000 unlisted options exercisable at $0.30 were granted to senior executives under the Long Term Incentive Plan approved by shareholders at the Annual General Meeting held on 30 November 2016. The exercise price of the options of $0.30 was 22.45% higher than market price of the shares on the date of grant. The vesting of these options is conditional on continued employment until the vesting date, being two years from grant date. The contractual life of each option is four years. On 30 November 2016, 3,000,000 unlisted options exercisable at $0.30 were granted to non-executive directors as approved by shareholders at the Annual General Meeting held on 30 November 2016. The exercise price of the options of $0.30 was 22.45% higher than market price of the shares on the date of grant. On 2 January 2018, 2,000,000 unlisted options exercisable at $0.30 were granted to senior executives under the Long Term Incentive Plan approved by shareholders at the Annual General Meeting held on 30 November 2016. The exercise price of the options of $0.30 was 42.86% higher than the market price of the shares on the date of grant. The vesting of these options is conditional on continued employment until the vesting date, being 1 November 2019. ● ● ● ● ● Set out below are summaries of options granted under the plan: 2018 Grant date Expiry date 02/01/2018 30/11/2016 30/11/2016 01/09/2016 01/09/2016 02/01/2022 30/11/2020 30/11/2020 01/09/2020 01/09/2020 Exercise price $0.30 $0.30 $0.30 $0.30 $0.20 Balance at the start of the year - 3,000,000 2,000,000 4,000,000 4,000,000 13,000,000 Granted Exercised 2,000,000 - - - - 2,000,000 Expired/ forfeited/ other Balance at the end of the year - - - - - - - (277,778) - - - (277,778) 2,000,000 2,722,222 2,000,000 4,000,000 4,000,000 14,722,222 Weighted average exercise price $0.27 $0.30 $0.00 $0.30 $0.27 2017 Grant date Expiry date 30/11/2016 30/11/2016 01/09/2016 01/09/2016 30/11/2020 30/11/2020 01/09/2020 01/09/2020 Exercise price Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year $0.30 $0.30 $0.30 $0.20 - - - - - 3,000,000 2,000,000 4,000,000 4,000,000 13,000,000 - - - - - - - - - - 3,000,000 2,000,000 4,000,000 4,000,000 13,000,000 Weighted average exercise price $0.00 $0.27 $0.00 $0.00 $0.27 54 Kyckr Limited Notes to the financial statements 30 June 2018 Note 33. Share-based payments (continued) Set out below are the options exercisable at the end of the financial year: Grant date Expiry date 30/11/2016 01/09/2016 30/11/2020 01/09/2020 2018 Number 2017 Number 2,722,222 4,000,000 1,333,333 4,000,000 6,722,222 5,333,333 The weighted average share price during the financial year was $0.19. The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.44 years (2017: 3.27 years). Set out below are summaries of performance rights granted under the plan: 2018 Grant date Expiry date Exercise price 01/09/2016 01/09/2020 $0.00 Balance at the start of the year 7,000,000 7,000,000 - - Granted Exercised Expired/ forfeited/ other Balance at the end of the year 2017 Grant date Expiry date Exercise price Balance at the start of the year Granted Exercised 01/09/2016 01/09/2020 $0.00 - - 7,000,000 7,000,000 No performance rights are exercisable at the end of the year. - - - - Expired/ forfeited/ other - - - - 7,000,000 7,000,000 Balance at the end of the year 7,000,000 7,000,000 The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 2.18 years (2017: 3.18 years). For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Expiry date Share price at grant date Exercise price Expected volatility Dividend yield Risk-free interest rate Fair value at grant date 02/01/2018 02/01/2022 $0.21 $0.30 84.71% - 2.35% $0.12 55 Kyckr Limited Directors' declaration 30 June 2018 In the directors' opinion: ● ● ● ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 to the financial statements; the attached financial statements and notes give 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 there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ Benny Higgins Chairman 31 August 2018 Sydney ___________________________ John Van Der Wielen Director 56 Independent Auditor’s Report to the Members of Kyckr Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Kyckr Limited (the Company and its subsidiaries (the Group)), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the ‘auditor’s responsibilities for the audit of the financial report’ section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 57 Key audit matter How our audit addressed the key audit matter Recoverability of goodwill Our procedures included, amongst others: Refer to note 13  We evaluated management’s process for developing the cash The carrying value of the Group’s intangible assets included goodwill of $12,250,079 arising from the acquisition of Kyckr Ireland in the prior year. The assessment of recoverability of the goodwill required a significant degree of management judgement given the short trading history of the Group and the inherent uncertainties in the key assumptions used in the assessment of future cash flows in particular revenues, earnings before interest and the discount rate. flow forecasts;  We tested the mathematical accuracy of the underlying ‘value- in-use’ calculations;  We assessed and challenged the appropriateness of the inputs into management’s calculations as follows: - Comparing and calculating revenue and expense cash flows with historical performance and new business avenues announced to the market; - Comparing the forecasted cash flows estimated in prior periods to financial performance during the current financial year; - Comparing growth rates with the performance of other IT start-ups; - Recalculating the discount rate using the most current risk free rates, market alpha, beta and risk premium estimates;  We performed sensitivity calculations for changes to the key inputs to management’s model;  We compared the net assets of the Group to the Group’s market capitalisation at year-end. Other information The directors are responsible for the other information. The other information comprises the information in Kyckr Limited’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 the other information we are required to report that fact. We have nothing to report in this regard. Directors’ responsibility 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. 58 In preparing the financial report, the directors are responsible for assessing the Group’s ability 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 have no realistic alternative but to do so. Auditor’s responsibility 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 Australian Auditing and Assurance Standards Board website at: www.auasb.gov.au/auditors_files/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 11 to 18 of the directors’ Report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Kyckr 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. Nexia Sydney Partnership Lester Wills Partner Dated: 31 August 2018 Sydney 59 Kyckr Limited Shareholder information 30 June 2018 The shareholder information set out below was applicable as at 27 August 2018. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: HSBC Custody Nominees (Australia) Limited Mr Robert Leslie Mr Benjamin Cronin J P Morgan Nominees Australia Limited Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited - A/C 2 Mr David Cassidy National Nominees Limited Mr John Murray Mr Richard Wood Kajo Investments Pty Limited Mr Robert Leslie & Mr Benjamin Cronin (Gbr Emp Stock Opt A/C) Globalsign NV/SA Barton Place Pty Limited (The Albert Wong Family A/C) Global Business Register Asia Pacific Pte Ltd Barton Place Holdings Pty Limited (Barton Place Holdings S/F ) Primdonn Nominees Pty Limited (Primdonn Super Fund A/C) UBS Nominees Pty Ltd CS Fourth Nominees Pty Limited (HSBC Cust Nom AU Ltd 11 A/C) Mr Peter Howells 60 Number of holders of options and rights over ordinary shares Number of holders of ordinary shares 16 226 216 465 133 1,056 14 - - - - 11 11 - Ordinary shares Number held % of total shares issued 12,712,562 9,619,247 8,519,129 7,441,953 7,439,590 5,761,006 4,930,212 4,719,202 7,230,703 4,230,703 3,492,794 3,395,428 3,055,885 2,485,256 2,482,872 2,444,956 2,142,857 1,775,714 1,764,130 1,500,000 8.42 6.37 5.64 4.93 4.93 3.82 3.27 3.13 4.79 2.80 2.31 2.25 2.02 1.65 1.64 1.62 1.42 1.18 1.17 0.99 97,144,199 64.35 Kyckr Limited Shareholder information 30 June 2018 Unquoted equity securities Options over ordinary shares issued Performance rights over ordinary shares The following persons hold 20% or more of unquoted equity securities: Number on issue Number of holders 14,722,222 20,000,000 9 5 Name Mr Robert Leslie Mr Benjamin Cronin Class Performance rights over ordinary shares Performance rights over ordinary shares Number held 6,500,000 6,500,000 Substantial holders Substantial holders in the company are set out below: HSBC Custody Nominees (Australia) Limited Mr Robert Leslie Mr Benjamin Cronin Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares Number held 12,712,562 9,619,247 8,519,129 % of total shares issued 8.42 6.37 5.64 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. There are no other classes of equity securities. Restricted securities Class Ordinary Shares Options over ordinary shares Performance rights over ordinary shares Expiry date 7 September 2018 7 September 2018 7 September 2018 Number of shares 35,486,298 7,000,000 19,000,000 61,486,298 61 

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