annual report 2020 Consolidated financial statements for the year ended 30 June 2020 LiveTiles Limited • ABN 95 066 139 991 2 LiveTiles Annual Report 2020 3 Contents Company Snapshot Letter from CEO and Chair FY20 Financial and Business Highlights Directors’ Report Remuneration Report Auditor’s Independence Declaration Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Information 4 7 11 15 30 42 43 98 100 106 110 LiveTiles Annual Report 2020Contents 4 Company snapshot LiveTiles Annual Report 2020 LiveTiles Annual Report 2020 Company Snapshot 5 We are LiveTiles LiveTiles is a workplace technology company, creating digital workplace solutions that revolutionise the modern workplace. We deliver ground-breaking enterprise technology products that are modular and highly configurable and are supported by professional expertise. This combination of technology and expertise improves people’s productivity, creativity and connectivity in the workplace. At this very moment, millions of people are doing their best work thanks to LiveTiles. Our vision is to revolutionise the way humans interact with technology, and the way in which technology interacts with humans. To progress towards that vision, our purpose at LiveTiles is to focus on simplifying the complex, by designing solutions that focus on the human experience that gives everyone the ability to thrive. We believe that the world is a better place when people are free to do their best work. With that vision and purpose in mind, we founded LiveTiles and started with a seemingly simple proposition to develop intranet software, and turn a critical but under-developed, under-appreciated and under- invested hub in the technology stack of companies around the world, into something more beautiful and fun to engage with. Company Snapshot Product sales commenced in February 2015 Listed on the Australian Securities Exchange in September 2015 Annualised recurring revenue (ARR) reached $53.8 million as at June 2020 LiveTiles Annual Report 2020 Company Snapshot 6 PRODUCT PORTFOLIO Refreshed product portfolio in July 2020 World-leading intranet software for companies of all sizes to centralise their news, communications, policies and procedures. LiveTiles Intranet for enterprise, is what Wix & Squarespace are for customer websites – the product that lets you build what the users interact with. A dynamic app which is a persistent menu that allows a user to consume information from any source or system, without the need to leave the current application they work from the most. Significantly reduces wasted time and workplace complexity, improves productivity, and maximises the employee experience. Employee mobile communications app. Perfect for dispersed workforces, such as retail, healthcare and government. Quick to implement and easy to deploy. The intelligent workplace toolkit – a suite of modules that enables customers to collect & analyse data from multiple applications for powerful business insights and AI empowered processes. The data from Quantum drives importance business decision making. Since our first paying customer in 2015 our team has been working hard to progress towards our vision and purpose with increasingly personalised experiences for people at work. Recent COVID events have redefined for many of us what work entails, providing additional meaning to our vision and purpose. Our team is hugely energised with the opportunity to help customers, supporting their employees to communicate and collaborate in the new world of remote work and work from home. Since launching LiveTiles with our Page Designer product some five years ago, we have come a long way. The product portfolio has changed significantly since then, through a combination of internal product development and software support services and the acquisitions of Hyperfish in 2018, Wizdom in February 2019 and CYCL in December 2019. As a result, we moved to simplify and realign our products and branding into 4 key categories along with services and solutions. Large and growing addressable market 1092 paying customers Strong emphasis on product innovation and artificial intelligence Close alignment and relationship with Microsoft 7 Letter from the CEO and Chair LiveTiles Annual Report 2020 8 Dear shareholder, On behalf of your Board and the Company, we are pleased to present the annual report for your company for the financial year ended 30 June 2020 (FY20). LiveTiles continues to remain excited about its significant market and growth potential notwithstanding continued challenging operating conditions due to COVID-19. FY20 provided significant challenges due to the global pandemic, but we believe our timely and measured cost controls, product consolidation and other responses have put LiveTiles in a strong position to withstand challenges and capture opportunities in both a COVID and post-COVID environment. In June, we wrote to all shareholders providing an update on our strategy and COVID response. This saw us pivot to pursue a clear objective of continuing to grow, but from a position of neutral operating cash burn as soon as practicably possible. We have outlined an objective of reaching this point during calendar 2020, subject to operating conditions. In FY20 total revenue and other income was $44.5 million, growth of 98% on the prior year, whilst customer cash receipts rose 114% to $41 million. NPAT losses improved by 26% to ($31.6m). Excluding non-cash expenses, the loss before tax was $16.3 million (FY19: $32.1 million). Cash on hand grew 154% to $37.8m aided by our $55m capital raising, with lower operating cash burn particularly in the fourth quarter. In addition to our financial growth, the number of LiveTiles reseller partners that have transacted at least once grew to over 220, up from 178 in the prior year, broadening this valuable growth channel for the Company. Further, the December 2019 acquisition of CYCL provided a highly technically skilled team, fantastic products and new organic growth opportunities. Global market opportunity Our strategy continues to align with Microsoft, and we extended our global market leadership FY20 financial and operating results in intranet software during FY20. We have a clear It has been another year of significant growth in revenue and customers for LiveTiles, which saw annualised recurring revenue (ARR1) reach $53.8 million for the year ended 30 June 2020, a 34% increase (or $13.7 million) on the prior corresponding period. The number of paying customers grew to 1092, a 19% increase on the previous year, with average ARR2 per customer rising by 22% in FY19, as our team focused on the enterprise segment, where organisations with larger numbers of employees are increasingly discovering the value of our digital workplace software. strategy to target the ~400,000 organisations that use the Microsoft Office 365 platform. We estimate this market remains only 1% penetrated in respect to “low-code” intranet software, a category created by LiveTiles only a few years ago. Assuming broad market adoption of low code intranet software, as opposed to the traditional method of custom development, a more expensive and time consuming proposition, we believe this total market to be ~$17 billion annually. In addition to this substantial market adoption opportunity, there are also opportunities to grow recurring revenue through increasing both the proportion of customer employees under subscription and the number of products offered to customers. Notes: 1. LiveTiles defines Annualised Recurring Revenue (ARR) as revenue, normalised on an annual basis, that LiveTiles has a reasonable expectation it will continue to receive from its customers for providing them with products and services. This definition includes committed recurring Subscriptions for products and services and includes service types where there is a demonstrable track record of repeat revenues such as support. It excludes revenue deemed unlikely to be recurring in nature. 2. Average ARR measured in constant currency terms. LiveTiles Annual Report 2020Letter from the CEO and Chair 9 Industry recognition Board renewal In March 2020 we were announced as a leading Subsequent to year end, we were pleased to organisation in the Australian Financial Review announce the appointment of Dr Marc Stigter as (AFR) Fast 100 list as the fastest growing technology independent non-executive director and Chair of company in Australia and the 5th fastest growing the Board of LiveTiles. Dr Stigter is a global expert Company in Australia overall. in creating high value boards and driving strong leadership and performance in organisations. He In May 2020, LiveTiles was highlighted in the is former Shell Country Chairman in the Middle Gartner Cool Vendors report1, one of the most East and has worked for other blue-chip companies sought-after accolades in the tech sector. Gartner across the globe. He is an Honorary Senior Fellow re-emphasised our ability to insulate organisations at the University of Melbourne and an Associate from the troublesome gaps of SharePoint and Office Director at Melbourne Business School. 365, offering no-code building blocks that enabled business users to build their own experiences. As one of Australia’s leading business advisors, Noting how Wizdom has now joined forces with the Dr Stigter specialises in governance, strategy and LiveTiles group, Gartner states that this will improve service for global clients. Gartner goes on to state culture. He has extensive knowledge and experience in the governance of ASX200 boards and has that: “Packaged intranet solutions like LiveTiles are published several books including Boards a key part of delivering a modern user experience. That Dare by Bloomsbury. They often go beyond simple content management and include capabilities such as collaboration, LiveTiles’ non-executive director, David Lemphers, social interaction, application delivery, employee resigned as a director after over two years of highly communications, mobile support and applied artificial valuable service to the LiveTiles Board, following intelligence (AI).” his recent full-time senior executive appointment at Amazon Web Services (AWS). In June 2020, LiveTiles was named a strong performer among the 12 most significant providers in a landmark Intranet Platforms report by Forrester2. It was pleasing We would like to thank David for his incredible effort and contribution to LiveTiles. David assisted LiveTiles for our Company to be named amongst the likes of in establishing a world class software platform that Microsoft and Atlassian. Among our strengths, LiveTiles led us to become Australia’s fastest growing was noted for its “...design and templating capabilities. technology company. Non-developers have the ability to tailor and tune the user interfaces, and users can personalise their preferred communication channels, such as Microsoft Teams or mobile notifications.” During the year LiveTiles was also a founding constituent in the recently launched S&P/ASX All Technology Index, comprised of the largest technology companies listed on the exchange (the ticker is ASX: XTX). Notes: 1. https://www.livetiles.nyc/livetiles-named-in-gartners-cool-vendor-report-2020 2. https://livetilesglobal.com/forrester-wave-report LiveTiles Annual Report 2020Letter from the CEO and Chair 10 Litigation Settlement Outlook On 21st October 2020, we announced that the In light of uncertainty created by the global pandemic, legal proceedings against certain of its subsidiaries the Group has not provided guidance in respect of had been settled. LiveTiles confirms it now has financial year 2021 growth at this time, other than no unresolved litigation against it or any of its to reiterate the core financial objective of achieving subsidiaries or officers. operating cash flow breakeven during calendar 2020, subject to operating conditions. The Group Under the terms of the settlement agreement continues to review additional options to reduce LiveTiles will pay A$8.445 million to the plaintiffs, and cash burn, including short-term revenue and cost the LiveTiles Co-Founders Karl Redenbach and Peter initiatives to support this objective. The Directors Nguyen-Brown will transfer a total of 16,279,070 continue to expect strong long-term growth ordinary shares in the Company to a nominee of the potential for the Group, driven by increased remote plaintiffs (of which 11,931,816 shares will be subject working and demand for digital workplace software to voluntary escrow conditions). to support organisations. The settlement is without any admission of liability by LiveTiles. We are pleased to resolve this matter, We would like to express our gratitude to the ongoing support from our shareholders, customers and to focus all of our attention and energy on the and partners and thank our dedicated staff for their continued growth of LiveTiles. commitment and hard work. We remain focused on our unchanged vision, underpinned by financial stability and building long term value for our shareholders. Karl Redenbach Chief Executive Officer & Co-Founder Dr Marc Stigter Non-Executive Chair LiveTiles Annual Report 2020Letter from the CEO and Chair 11 FY20 Financial and Business Highlights LiveTiles Annual Report 2020 12 Year-on-year annualised recurring revenue growth (A$m) 53.8m Annualised Recurring Revenue (ARR) +34% in FY20 1092 Paying customers +22% ARR per customer in FY20 (constant currency) 154 Employees in the US, UK/Europe and Australia ARR acquired in FY Organic ARR 15.0 15.0 FY 18 Customer number growth Acquired in FY Organic 536 501 35 FY 18 40.1 31.7 8.4 FY 19 919 711 208 FY 19 53.8 49.1 4.7 FY 20 1092 982 110 FY 20 Acquired ARR comprises Wizdom’s ARR as at 31 December 2018 ($8.0 million), Hyperfish’s ARR as at 30 June 2018 ($0.4 million) and CYCL’s ARR as at 30 September 2019 ($4.7 million). Constant currency refers to 31 March ARR levels. LiveTiles Annual Report 2020FY20 Financial and Business Highlights 13 ARR, cash receipts, and accounting revenue over three years (A$m) ARR Cash receipts Accounting revenue 53.8 41.0 41.4 37.8 15.0 6.7 5.7 19.1 18.1 Jun 18 Jun 19 Jun 20 Average annualised recurring revenue per customer up 22% in the 2020 financial year1 ($,000) $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 Jun 20 1. Average annualised average revenue per customer at constant foreign currency LiveTiles Annual Report 2020FY20 Financial and Business Highlights 14 Annualised recurring revenue by industry as at 30 June 2020 (constant currency) 33% Services 13% Government 10% Financial Services 9% Retail/Consumer 8% Healthcare 7% Education 7% Industrials 6% Utilities/Telcos 3% Media 2% Not-for-Profit 2% Natural Resources 2% 2% 3% 6% 7% 7% 8% 33% 9% 13% 10% “LiveTiles expects to deliver another year of strong customer and revenue growth in FY21, driven by our continued investment into our products, partners and sales and marketing channels.” Karl Redenbach, Chief Executive Officer & Co-Founder LiveTiles Annual Report 2020FY20 Financial and Business Highlights 15 Directors’ report LiveTiles Annual Report 2020 16 The Directors present their report together with the financial statements of the consolidated group (the Group), being LiveTiles Limited (the Company) and its controlled entities for the year ended 30 June 2020. Directors The names of the directors in office at any time during the financial year and up to the date of this report (unless stated otherwise) are: Cassandra Kelly Non-Executive Chair (resigned 27 September 2019) Karl Redenbach Executive Director and Chief Executive Officer Peter Nguyen-Brown Executive Director and Chief eXperience Officer Andrew McKeon Non-Executive Director David Lemphers Non-Executive Director Dana Rasmussen Non-Executive Director (appointed 27 September 2019) Information on directors Karl Redenbach Executive Director and Chief Executive Officer Appointed 25 August 2015 Experience and qualifications Karl Redenbach co-founded the LiveTiles concept, together with Peter Nguyen-Brown, in 2012. Karl was also a co-founder and the former CEO of the nSynergy Group, a global technology consulting business. Karl was awarded CEO of the year by the Australian Human Resources Institute in December 2014. Karl holds a Bachelor of Laws and a Bachelor of Arts from Monash University and completed the Owner/President Management program at Harvard Business School. Special responsibilities Remuneration Committee Peter Nguyen-Brown Executive Director and Chief eXperience Officer Appointed 25 August 2015 Experience and qualifications Peter Nguyen-Brown has 20 years experience in technology consulting and software development. Peter co-founded the LiveTiles concept, together with Karl Redenbach, in 2012. Peter was formerly Chief Operating Officer and co-founder of the nSynergy Group, a global technology consulting business. Peter holds a Bachelor of Applied Science in Computer Science and Software Engineering from Swinburne University. Special responsibilities None LiveTiles Annual Report 2020Directors’ Report 17 Andrew McKeon Non-Executive Director Appointed 1 April 2017 Experience and qualifications Andrew McKeon has over 25 years of global marketing experience and is currently the Global Chief Creative Officer at Genero, a global video production marketplace. Prior to Genero, Andrew was the Global Accounts and Agencies Lead for Facebook and Instagram, where he managed relationships with Facebook’s largest customers including Amazon, Nike and Apple. Prior to Facebook, Andrew was a creative director at Apple where he helped launch a number of Apple’s most innovative products. Andrew holds a Bachelor of Economics degree from Monash University. Special responsibilities Audit and Risk Committee, Remuneration Committee David Lemphers Non-Executive Director Appointed 1 September 2018 Experience and qualifications David Lemphers has over 20 years of software engineering and technology strategy experience and is currently the CEO of Code Pilot, an AI acceleration platform. David is also a seasoned entrepreneur having completed multiple successful exits. David is currently CTO in Residence at Techstars, a global startup accelerator based out of the US. David’s prior experience includes leading the National Cloud Computing practice for PwC and being a founding member of the Windows Azure team at Microsoft where he spent 5 years as an engineer. David holds a Bachelor of Computer Science from Swinburne University and a Bachelor of Laws from Monash University. Special responsibilities Remuneration Committee Dana Rasmussen Non-Executive Director Appointed 27 September 2019 Experience and qualifications Dana is an accomplished people executive based in San Francisco and is currently the VP People & Culture at Stitch Fix, a leading US technology and ecommerce business. Prior to this role, Dana held senior people function roles at Honor, Flywheel Sports, Banana Republic, L Brands and Yahoo. Dana holds a Bachelor of Science – BS, Business Management, Organisational Behaviour from Babson College and a Business Fellowship at Templeton College, University of Oxford. Special responsibilities None LiveTiles Annual Report 2020Directors’ Report 18 Cassandra Kelly Non-Executive Director Appointed 5 September 2017 and Chair from 22 November 2017, resigned 27 September 2019 Experience and qualifications Cassandra has over 22 years of experience in leadership and executive roles at global organisations, and is the founder of Pottinger, a global advisory firm with expertise in strategy, innovation, financial analysis, M&A advisory and big data analytics. Previously, Cassandra held senior positions at GMAC Commercial Mortgage, Deutsche Bank, HSBC and McKinsey. Cassandra was previously a non-executive director of ASX-listed Flight Centre Travel Group Limited. Cassandra is one of Australia’s top 10 chairs as voted by The Australian in 2017 and is recognised for her significant expertise and leadership as an influential director and Chair. Special responsibilities Remuneration Committee, Audit and Risk Committee (Chair) Directors’ interests in shares and options As at the date of this report, the interest of the directors in the shares (including shares held under the Management Incentive Plan) and options of the Company were: Number of ordinary shares Number of options over ordinary shares Karl Redenbach 110,622,082 Peter Nguyen-Brown 97,872,082 Andrew McKeon 277,778 David Lemphers Dana Rasmussen – – – – – – – LiveTiles Annual Report 2020Directors’ Report 19 Meetings of directors The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows: Directors’ meetings Audit and Risk Committee Remuneration Committee Number eligible to attend Number attended Number eligible to attend Number attended Number eligible to attend Number attended Cassandra Kelly1 Karl Redenbach Peter Nguyen-Brown Andrew McKeon David Lemphers Dana Rasmussen2 1 7 7 7 7 4 1 7 7 7 7 4 3 1 1 4 1 1 3 1 1 4 1 1 1 1 1 1 1 – 1 – 1 1 1 – Notes: 1. Cassandra Kelly resigned as Chair and Non-Executive Director on 27 September 2019 2. Dana Rasmussen was appointed Non-Executive Director on 27 September 2019 Committees and membership During the year, the Company had the following committees: • Audit and Risk Committee; and • Remuneration Committee. On 27 September 2019 the Chair, Cassandra Kelly, resigned from the Board, and Dana Rasmussen joined the Board as non-executive director. Since this date, the roles of the Audit and Risk Committee and Remuneration Committee were assumed by the entire Board. The Company has been without a Chairperson since this date. The Board may appoint a Chairperson in the future and reconstitute these and other Committees as deemed appropriate at the time. Members acting on the committees of the board during the year were: Audit and Risk Committee1 Remuneration Committee Cassandra Kelly (Chair) Cassandra Kelly (Chair) Andrew McKeon Note: Andrew McKeon David Lemphers Karl Redenbach 1. The full Board attended audit committee meetings from February 2020 to consider the interim 2020 financial accounts as only one non-executive director, Andrew McKeon, was on the Committee at that time. LiveTiles Annual Report 2020Directors’ Report 20 Information on Company Secretary Andrew Whitten has held the position as Company Secretary of the Company since 28 April 2015. Andrew is an admitted solicitor with a specialty in Corporate Finance and Securities Law and is a Solicitor Director of Whittens & McKeough. Andrew is currently the company secretary of a number of listed and unlisted companies. He is a responsible officer of a Nominated Adviser to the National Stock Exchange of Australia Limited, and has been involved in a number of corporate and investment transactions including Initial Public Offerings on the ASX and the NSX, corporate reconstructions, reverse mergers and takeovers. Andrew holds a Bachelor of Arts (Economics – UNSW); Master of Laws and Legal Practice (Corporate Finance and Securities Law – UTS); Graduate Diploma in Applied Corporate Governance from the Governance Institute of Australia and is an elected Associate of that institute as well as being a Public Notary. Principal activities The Group’s principal activity during the year was the development and sale of digital workplace software via subscription agreements. LiveTiles is the global leader in intranet and workplace technology software, creating and delivering solutions that drive digital transformation, productivity and employee communications in the modern workplace. LiveTiles’ over 1,000 enterprise customers represent a diverse range of sectors across 30 countries. LiveTiles’ operations span North America, Europe, Asia and Australia. LiveTiles is the global leader in intranet and workplace technology software, creating and delivering solutions that drive digital transformation, productivity and employee communications in the modern workplace. Operating and financial review For the 12 months to 30 June 2020, total revenue and other income was $44,468,483 (2019: $22,485,849), including subscription revenue of $28,980,551 (2019: $16,510,742) and government grant income of $6,313,097 (2019: $3,987,850). The Group’s total revenue includes $8,809,852 (2019: $1,581,140) of services revenue primarily generated by Wizdom A/S, which was acquired on 13 February 2019 and CYCL AG, which was acquired on 3 December 2019. In addition, unearned revenue (a balance within the Statement of Financial Position) was $11,278,396 (2019: $10,147,846). Annualised Recurring Revenue (previously referred to as Annualised Subscription Revenue) grew to $53.8m (2019: $40.1m) as at 30 June 2020, comprising 1,092 paying customers (2019: 919). Annualised Recurring Revenue represents committed, recurring revenue on an annualised basis. LiveTiles Annual Report 2020Directors’ Report 21 LiveTiles recorded a loss after tax of $31,604,441 (2019: $42,765,589) for the year. Included within this loss are non-cash expenses of $10,477,321 (2019: $8,923,564). Excluding non-cash expenses, the loss before tax was $21,263,129 (2019: $34,175,416). The table below summarises the Group’s statement of profit or loss and other comprehensive income for the year, including non-cash expenses: Notes 12 mths ended 30 Jun 20 ($’000) 12 mths ended 30 Jun 19 ($’000) Movement Subscription revenue Services revenue Government grant income Other income Total revenue and other income Total operating expenses Loss before income tax expense, non-cash items and amortisation Amortisation of development costs (a) Loss before income tax expense and non-cash items Non-cash expenses 28,981 16,511 8,810 6,313 364 44,468 (60,815) (16,347) (4,916) (21,263) 1,581 3,988 406 22,486 (54,571) (32,085) (2,090) (34,175) 129% 457% 58% (10)% 98% 11% 49% 135% 38% Amortisation of software IP and customer contracts (b) (5,340) (1,698) Share-based payments – Management Incentive Plan Share-based payments – Long Term Incentive Plan Share-based payments – post combination services for Hyperfish, Inc Share-based payments – post combination services for Wizdom A/S (c) (d) (133) (544) - (228) (226) (4,845) (3,252) (3,872) Unrealised currency gain/(loss) Loss before income tax expense per statutory accounts Income tax expense Loss after income tax expense per statutory accounts Notes: (1,208) (31,740) 1,945 (43,099) 26% 136 333 (31,604) (42,766) 26% (a) Relates to the capitalised development costs which were cash settled during the period (b) Relates to identifiable intangible assets resulting from the acquisitions of Hyperfish, Inc and Wizdom A/S (c) Non-cash contingent payment relating to the acquisition of Hyperfish, Inc., deemed to be a share-based payment (d) Non-cash contingent payment relating to the acquisition of Wizdom A/S, deemed to be a share-based payment The Group’s cash balance as at 30 June 2020 was $37,791,314 (2019: $14,880,920). LiveTiles Annual Report 2020Directors’ Report 22 Highlights Annualised Recurring Revenue1 (ARR) grew by 34% in the 2020 financial year to $53.8m (2019: $40.1m), with $13.7m of ARR added in the 2020 financial year. Excluding the impact of the CYCL acquisition during the 2020 financial year, whereby the Group acquired $4.7m in ARR, significant organic ARR growth of 22% was achieved in the year. On a constant currency basis when compared with 31 March 2020 rates, ARR reached $58.2m as at 30 June 2020. ARR growth was driven by the Group’s internal sales and marketing channels, development of the Group’s partner channel, strategic partnerships, ongoing product innovation and strengthening brand awareness. ARR grew by 34% in the 2020 financial year to $53.8m (2019: $40.1m), with $13.7m of ARR added in the 2020 financial year. Year-on-year annualised recurring revenue growth2 (A$m) ARR acquired in FY Organic ARR 40.1 31.7 8.4 FY 19 15.0 15.0 FY 18 53.8 49.1 4.7 FY 20 Customer numbers continued to grow strongly, with 1,092 paying customers as at 30 June 2020, up from 919 customers as at 30 June 2019. Excluding the impact of the CYCL acquisition, paying customers grew by 34 from 30 June 2019. The Group is continuing to broaden its global base of enterprise customers, driven by LiveTiles’ portfolio of products, its ongoing sales and marketing investments and co-marketing initiatives with Microsoft and other partners. Notes: 1. LiveTiles defines ARR as revenue, normalised on an annual basis, that LiveTiles has a reasonable expectation it will continue to receive from its customers for providing them with products and services. This definition includes committed recurring subscriptions for products and services, and includes service types where there is a demonstrable track record of repeat revenues such as support. It excludes revenue deemed unlikely to be recurring in nature. 2. Acquired ARR is defined as the ARR of the acquired businesses on the date of acquisition. Any ARR growth generated by acquired businesses post-acquisition date is considered to be organic growth. LiveTiles Annual Report 2020Directors’ Report ARR by region at 30 June 2020 23 26% Americas 55% EMEA 19% APAC 26% 19% 55% Annualised recurring revenue by industry as at 30 June 2020 (constant currency) 33% Services 13% Government 10% Financial Services 9% Retail/Consumer 8% Healthcare 7% Education 7% Industrials 6% Utilities/Telcos 3% Media 2% Not-for-Profit 2% Natural Resources 2% 2% 3% 6% 7% 7% 8% 33% 9% 13% 10% LiveTiles Annual Report 2020Directors’ Report 24 Average ARR per customer continued to trend higher in the 2020 financial year, up 13% in the 12 months to 30 June 2020, driven by ongoing growth in the Group’s enterprise customer base, product cross-selling and bundling and increased penetration of existing customers. Average ARR per customer for the 2020 financial year ($AUD) $50,000 $40,000 $30,000 $20,000 $10,000 Jun 17 Jun 18 Jun 19 Jun 20 Full year cash receipts rose 114% on the prior year to $41.0m. At 30 June 2020, the Group had a cash balance of $37,791,314 (2019: $14,880,920). Receipts from customers (exclusive of GST) Historical Analysis (A$m) 45.0 35.0 25.0 m $ A 15.0 5.0 Jun 18 Jun 19 Jun 20 LiveTiles Annual Report 2020Directors’ Report 25 Normalised operating cash flow, excluding Research & Development (R&D) and other government grants, tax incentives and non-recurring expenses, improved by $10.0m from a deficit of $8.8m for the quarter ending March 2020 to positive cash flows of $1.2m for the quarter ending June 2020. Normalised operating cash flow improvements during the 2020 financial year (A$m) (unaudited1) 1.2 (8.1) Sep 19 (6.4) Dec 19 (8.8) Mar 20 Jun 20 1. Calculated using net cash from/(used in) operating activities included in quarterly ASX announcement 4C, dated 29 October 2019, 30 January 2020, 29 April 2020 and 29 July 2020 respectively. Calculated as the value of disclosure 1.9 less 1.7 government grants and tax incentives and 1.8 non-recurring staff costs. Significant activities during the financial year Capital Raising • Microsoft inviting and investing in LiveTiles to participate in an exclusive COVID-19 Teams Support program to help schools, community colleges leverage the power of Teams to On 19 September 2019, LiveTiles completed a capital support remote learning; raise of $50,000,000 (before costs) via a placement of shares to institutional and other sophisticated investors to continue to execute its stated growth strategy and for general working capital purposes. On 16 October 2019, LiveTiles raised a further $4,999,999 via a Share Purchase Plan. Partner channel In addition to the Group’s direct sales channel, • LiveTiles and Microsoft collaborating on the creation of a product called “the Teams Game” to gamify the experience of how to plan and create a Microsoft Teams environment, including joint sessions with multiple enterprise Microsoft clients; • LiveTiles briefing Microsoft’s Customer Success Managers on Microsoft Teams adoption and collaboration programs; LiveTiles sells its software through partners to help scale and broaden the Group’s reach. The number of • Artificial Intelligence for Social Impact: Microsoft and LiveTiles collaborating on engagements with transacting partners grew to 223 as at 30 June 2020 prominent global charities around how their (up 25% since 30 June 2019). employees can connect and collaborate; Microsoft relationship • Joint customer engagements with multiple clients including Deakin University and Flinders LiveTiles’ strategic relationship with Microsoft University; and continues to develop and deepen, with multiple initiatives contributing to growth and customer outcomes during the financial year, including: • Technology alignment with exclusive access into Microsoft R&D “Dev Kitchens” for Microsoft SharePoint, Teams and Artificial Intelligence Engineering groups. LiveTiles Annual Report 2020Directors’ Report 26 Forrester Research Wizdom Integration In June 2020, LiveTiles was named one of the Wizdom Intranet has now become a key component strongest performers in the Forrester Wave: Intranet of one of the Group’s four core product pillars; LiveTiles Platforms Q2, 2020 report. Forrester Research is Intranet. The integration of Wizdom’s operations into a major global technology research firm, advising LiveTiles global operations was completed during organisations on technology purchasing strategy. the period, with Wizdom A/S now trading as LiveTiles EMEA. The report concluded that, “LiveTiles continues to build a global presence and rich set of digital Wizdom’s team was fully integrated as part of a employee experience tools via its services know- global restructure in April 2020. This restructure how and focused acquisitions. Its strategy is to predominately covered the product development, build a comprehensive set of intelligent workplace support and professional services teams, allowing capabilities with the intranet as a foundation on operations to be further consolidated with which to grow. The vendor has a clear focus on significantly reduced duplication. serving large global enterprises and will make investments to extend its platform breadth as well as establish a presence in key markets”. Acquisition of CYCL On 3 December 2019, LiveTiles completed its acquisition of CYCL AG, a leading Microsoft aligned digital workplace software business headquartered in In addition to the cost savings to be derived from the restructure, the Group continues to globalise procurement and expects to realise additional cost benefits from the consolidation of subscription and other commercial arrangements. Strategic alliance partnerships Basel, Switzerland. Its software provides users with During the 2020 financial year LiveTiles continued the tools needed to drive employee engagement, to broaden its portfolio of strategic alliance collaboration, and compliance. partnerships, which typically provide: The acquisition of CYCL will enable LiveTiles to deliver new capabilities in relation to a mobile-focused cloud • LiveTiles and its customers with access to market leading specialist technology that combines well SaaS offering as part of its intelligent workplace with the LiveTiles portfolio of digital workplace platform. In addition, LiveTiles’ leading AI capabilities software products; and provide a significant cross-sell opportunity to CYCL’s growing customer base across Europe. • Additional channels for the sale and use of both LiveTiles and alliance partner products. The amount payable for the acquisition of CYCL comprised upfront consideration of 42.6 million LiveTiles shares (issued on 3 December 2019) and a cash payment of $6.4 million. In addition, up to $13.2 million in cash and LiveTiles shares may be issued to the former owners of CYCL AG subject to the satisfaction of performance targets as at 31 December 2020 and 31 December 2021 (refer to the Company’s ASX announcement dated 20 November 2019 and Note 23 of the attached financial statements for further details). During the year LiveTiles initiated and commenced partnerships with companies including: • Canva: In February 2020, LiveTiles announced that it will integrate Canva into its product offerings and allow LiveTiles’ end users with access to Canva’s graphic design tools without having to leave LiveTiles platform. Following this integration opportunities for further collaboration will be explored. LiveTiles Annual Report 2020Directors’ Report 27 • Linius: In April 2020, LiveTiles announced that it will integrate Linius technology into its product LiveTiles Quantum: The intelligent workplace toolkit – a suite of modules that enables customers offerings which will provide LiveTiles users the to connect their data from multiple applications ability to extract unique, personalized videos for powerful business insights and AI from previously recorded meetings. Following empowered processes. the integration both companies will jointly pursue sales and marketing initiatives. In addition to the changes in product naming • Go1.com: In August 2019, LiveTiles announced that its product suite would be integrated with Go1’s learning marketplace to provide an enhanced employee experience, including targeting learning solutions based on the employees profile (powered by LiveTiles’ Intelligent Directory). • UiPath: In July 2019, LiveTiles announced that it had entered into a strategic alliance partnership with UiPath to investigate potential conventions, a new pricing structure has been implemented to offer multi-product discounts and to encourage greater cross-selling. LiveTiles Everywhere, LiveTiles Reach & LiveTiles Quantum sales are expected to increase due to pricing concessions now available when bundled with a LiveTiles Intranet option. The Group has widely marketed the new product architecture and expects sales performance to benefit strongly in financial 2021 and into the future as a result of these changes. for development of a joint RPA and Artificial Impact of COVID-19 Intelligence (AI) solution with respective technologies. In addition, the partnership will leverage respective sales channels and perform joint sales and marketing initiatives. Product portfolio During the 2020 financial year the global business and economic environment has been significantly impacted as a result of the COVID-19 virus and related lockdowns. Consumer and business spending has been negatively impacted and businesses have been forced to significantly alter their activities In July 2020, the Group launched a refined brand with travel and physical collaboration interrupted architecture, simplifying and realigning its product – causing an abrupt and immediate shift to greater portfolio consolidating products into a simpler levels of digital collaboration. value proposition for customers. A summary of this rebranding is below: LiveTiles has experienced several significant implications, as follows: LiveTiles Intranet: World-leading intranet software for companies of all sizes to centralise their news, • Disrupted sales activity in the short term: communications, policies, and procedures. Although sales pipeline and opportunities remain LiveTiles Everywhere: A digital assistant for the workplace. This ubiquitous digital panel assists strong, global sales activity was subdued for the quarter. This was predominantly driven by changes to procurement and capital expenditure workers by giving them constant access to critical policies amongst the Group’s global customer information and applications. base, with large value of the Group’s sales pipeline deferring purchasing decisions. As a goodwill LiveTiles Reach: Employee mobile communications app software that can be extended across the entire measure during a time of crisis, LiveTiles offered prospective customers a number of its products organisation, including the frontline workforce and on a six-month free trial basis. It is expected that third parties. a number of these customers will convert to paid arrangements in future. LiveTiles Annual Report 2020Directors’ Report 28 • Heightened sales potential in the medium to long term: Given one of the most significant impacts of the COVID-19 pandemic on businesses has been the shift to remote and digital working, LiveTiles expects that the this will drive increased adoption of digital workplace software and that LiveTiles is well positioned to be a major beneficiary of this shift. Significant events since the end of the financial year There have been no significant events affecting the Group since the end of the financial year. Environmental regulation and performance • Global restructure and decrease in headcount: In response to these environmental changes the The Directors are not aware of any significant environmental issues affecting the Group or its Group implemented a restructure in April 2020, compliance with relevant environmental agencies specifically the Group moved to end development or regulatory authorities. operations in the United States, scale down development and professional service functions in Denmark, centralise marketing functions to Dividends Australia and to streamline hierarchy of the sales and operations teams. Headcount globally No dividends were paid or declared since the start of the financial year. No recommendation for payment reduced by 25% as a result of the new structure. of dividends has been made. • Lower operating expenditure: In addition to these cost savings, global operating expenses have Share options decreased significantly as a result of the reduction in travel and entertainment activities and due to the cancellation of conferences, which historically have represented large marketing spends. It is expected that these reductions are temporary as travel activity has recommenced in certain markets, notably Europe. During the financial year, no options were exercised. As at the date of this report and as at the reporting date, there were 10,032,650 options on issue (2019: 4,611,000). Refer to note 24 of the financial statements for details on options issued during the financial year. LiveTiles continued to grow its recurring revenue during the year and significantly reduced its operating Significant changes in state of affairs expenses from Q4 financial year 2020. In Q4 financial year 2020, excluding the impact of non-recurring restructuring costs, the Group delivered positive operating cash flows. LiveTiles has stated that it does not expect to deliver an operating cash positive result in Q1 financial year 2021, but that it continues to target reaching positive operating cash flows during calendar 2020, subject to operating conditions. Other than as outlined in the Operating and financial review of the Directors’ Report, there were no significant changes in the state of affairs of the Group during the financial year. LiveTiles Annual Report 2020Directors’ Report 29 Likely developments and expected results Non-audit services Details of the amounts paid or payable to the In light of uncertainty created by the global pandemic, Company’s auditors for non-audit services provided the Group has not provided guidance in respect of during the financial year are outlined in Note 6 to financial year 2021 growth at this time, other than the financial statements. to reiterate the core financial objective of achieving operating cash flow breakeven point during calendar The directors are satisfied that the provision of 2020, subject to operating conditions. Further, the non-audit services during the financial year, by Directors reiterate their expectation that operating the auditors (or by another person or firm on the cash flow breakeven will not be achieved during auditors’ behalf), is compatible with the general the first quarter. The Group continues to review standard of independence for auditors imposed additional options to reduce cash burn, including by the Corporations Act 2001. short-term revenue and cost initiatives to support this objective. The Directors continue to expect The directors are of the opinion that the services as strong long-term growth potential for the Group, disclosed in Note 6 to the financial statements do driven by increased remote working and demand for digital workplace software to support organisations. not compromise the external auditors’ independence requirements of the Corporations Act 2001 for the following reasons: Indemnification and insurance of officers and directors • all non-audit services have been reviewed and approved to ensure that they do not impact the Under the Company’s constitution, to the extent integrity and objectivity of the auditors; and permitted by law and subject to the provisions of the Corporations Act 2001, the Company indemnifies every Director, executive officer and secretary of the Company against any liability incurred by that person as an officer of the Company. The Company has insured its Directors, executive officers and the Company Secretary for the 2020 financial year. Under the Company’s directors’ and officers’ liability insurance policy, the Company cannot release to any third party or otherwise publish details of the nature of • 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. the liabilities insured by the policy or the amount of the Auditor’s independence declaration premium. Accordingly, the Company relies on section 300(9) of the Corporations Act 2001 to exempt it from the requirements to disclose the nature of the liability insured against and the premium amount of the policy. A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 41. Indemnification of auditors The Company’s auditor, BDO Audit Pty Ltd, has not been indemnified under any circumstance. LiveTiles Annual Report 2020Directors’ Report 30 Remuneration Report LiveTiles Annual Report 2020 31 1 Introduction This Remuneration Report for the year ended 30 June 2020 outlines the remuneration arrangements of LiveTiles Limited and its controlled entities in accordance with the requirements of the Corporations Act 2001 (Cth), as amended (the Act) and its regulations. This information has been audited as required by the Act. This Remuneration Report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. The following individuals were classified as KMP of the Group during the financial year ended 30 June 2020. Unless otherwise indicated, the individuals were KMP for the entire financial year. Senior Executives Karl Redenbach Chief Executive Officer and Executive Director Peter Nguyen-Brown Chief eXperience Officer and Executive Director Rowan Wilkie Chief Financial Officer Non-Executive Directors Andrew McKeon Non-Executive Director David Lemphers Non-Executive Director Dana Rasmussen Non-Executive Director (appointed 27 September 2019) Cassandra Kelly Non-Executive Chair (resigned 27 September 2019) There were no other changes to KMP after the reporting date and before the date the financial report was authorised for issue. 2 Remuneration governance On 27 September 2019 the Chair, Cassandra Kelly, resigned from the Board, and Dana Rasmussen joined the Board as non-executive director. Since this date, the role of the Remuneration Committee were assumed by the entire Board. The Board is responsible for reviewing and approving remuneration arrangements for the executive directors and reviewing remuneration arrangements for executives reporting to the CEO. Executive directors are not present during board meetings when their remuneration arrangements are reviewed by the non-executive directors. The Board also reviews the remuneration arrangements for the non-executive directors of the Board, including fees, travel and other benefits. LiveTiles Annual Report 2020Remuneration Report 32 Non-director members, including members of management, may attend all or part of Board meetings where Remuneration issues are discussed. Further information on Remuneration can be seen in the Corporate Governance Statement on the Company’s website at www.livetilesglobal.com/company/investors. 3 Executive remuneration arrangements Remuneration principles The Group’s approach to executive remuneration is based on the following objectives: • Ensuring the Company’s remuneration structures are equitable and aligned with long-term interests of the Company and its shareholders; • Attracting and retaining skilled executives; and • Structuring short and long-term incentives that are challenging and linked to the creation of sustainable shareholder returns. Remuneration structure The following table outlines how the Group’s executive remuneration structure aligns remuneration with performance. Component Description Purpose Link to performance Who participates? Fixed remuneration Base salary package including statutory superannuation contributions where applicable. Paid in cash. Short term incentives (STI) Long term incentives (LTI) Shares issued under Management Incentive Plan (MIP) To provide competitive fixed remuneration determined with reference to role, experience and market. Rewards executives for their contribution to achievement of Group outcomes. Rewards executives for their contribution to the creation of shareholder value over the longer term. Individual performance is considered during the annual remuneration review. All executives. Executives and other key employees who have an impact on the Group’s performance. Executives and other key employees. Discretionary bonus linked to specific financial and non- financial targets. Shares issued under the MIP to executives who are key management personnel have been structured such that executives are remunerated only when the Company’s share price exceeds the vesting price. See section 7 of the Remuneration Report for further details of the Management Incentive Plan. LiveTiles Annual Report 2020Remuneration Report 33 Company performance A key underlying principle of the Group’s executive remuneration framework is that remuneration levels should be linked to Group performance. Due to the Group’s strategy of investing in growth to drive recurring revenues and future profitability, it has not been appropriate, to date, to assess the Group’s performance on the basis of profitability. The Group’s key financial measures of performance are summarised in the table below: 30 June 2020 30 June 2019 30 June 2018 30 June 2017 30 June 2016 Annualised Recurring Revenue1 $53.8m $40.1m $15.0m $4.0m $1.0m Cash balance Share price Loss before income tax expense and non- recurring and non-cash items $37.8m $14.9m $17.8m $3.5m $8.1m $0.23 $0.44 $0.48 $0.23 $0.22 $(21.3)m $(34.2)m $(20.8)m $(6.2)m $(4.9)m Dividends Note: nil nil nil nil nil 1. LiveTiles defines ARR as revenue, normalised on an annual basis, that LiveTiles has a reasonable expectation it will continue to receive from its customers for providing them with products and services. This definition includes committed recurring subscriptions for products and services, and includes service types where there is a demonstrable track record of repeat revenues such as support. It excludes revenue deemed unlikely to be recurring in nature. The Group’s key financial measure of performance over the longer term is the increase in annualised recurring revenue and share price appreciation. Annualised recurring revenue has increased to $53.8m at 30 June 2020 from $40.1 million at 30 June 2019. Since re-listing on the ASX on 17 September 2015, the Company’s share price has appreciated from the re-listing price of $0.15 to $0.23 as at 30 June 2020. Shareholder alignment is driven by the structure of the Management Incentive Plan, where share price appreciation drives value for executives through the Plan (refer to section 7 of the Remuneration Report). 4 Executive contracts Remuneration arrangements for executives are formalised in employment agreements. The table below sets out the key terms and conditions of the employment contracts of the CEO and senior executives. All contracts are for unlimited duration. LiveTiles Annual Report 2020Remuneration Report 34 Base salary Superannuation Bonus Notice period Karl Redenbach, CEO and Executive Director1 N/A US$440,000 plus US$150,000 cost of living adjustment Peter Nguyen-Brown, CXO and Executive Director2 $500,000 Statutory minimum Rowan Wilkie, CFO3 $375,000 Statutory minimum Discretionary cash bonus capped at 100% of base salary, subject to meeting ARR and other performance targets. Discretionary cash bonus capped at 100% of base salary, subject to meeting ARR and other performance targets. Discretionary cash bonus capped at 50% of base salary, subject to meeting performance targets. 6 months 4 weeks 3 months Notes: 1. The Remuneration Committee approved a base salary increase for Karl Redenbach US$350,000 to US$440,000 effective from 1 July 2019 2. The Remuneration Committee approved a base salary increase for Peter Nguyen-Brown A$400,000 to A$500,000 effective from 1 July 2019 3. The Executive Directors approved a base salary increase for Rowan Wilkie from A$310,000 to A$375,000 effective from 1 January 2020 Unpaid deferred salaries have been accrued in the statement of financial position as at 30 June 2020. Long term incentives for KMP are discussed in section 7 of the Remuneration Report. In the case of each of the executive above, the Company may terminate the employment agreement without notice for misconduct or material breach of contract. 5 Executive remuneration details Details of the remuneration paid to KMP executives for the year are set out below. COVID-19 impact During the 2020 financial year, the Group temporarily reduced director, executive and employee salaries by 20% as a result of expected impact of COVID-19 on the business and the wider economic environment. The reduction was in effect from 10 April to 26 June 2020 and was applied to salaries only. Fixed remuneration and Long-Term Incentive (LTI) The Board sought an independent review of executive director remuneration, which was reviewed during financial year 2019 with salary increases for executive directors implemented effective 1 July 2019 and laid out in the 2019 remuneration report. Since the date of the 2019 remuneration report the Executive Directors have not received an increase to their base salary. Further, no KMP were awarded additional LTI in financial year 2020. The CEO and CXO, respectively, remain the single largest shareholders in the Group, providing strong alignment with shareholder interests. LiveTiles Annual Report 2020Remuneration Report 35 Short-Term Incentive (STI) In respect of Executive Director STI paid for financial year 2020, targets related to ARR growth, consistent with prior financial years. ARR has been selected by the Board as a primary measure for performance since LiveTiles listed on ASX in 2015, as this is a broadly accepted measure of revenue and growth performance for pre-profitability Software as a Service (SaaS) comparable companies in light of their recurring nature and intrinsic recurring cash flow value to shareholders. STI payments to KMP fell by 57% from $1.6m in FY19 to $0.7m in financial year 2020. The Group achieved 90% of the Group’s FY20 ARR target, however the Executive Directors received approximately 50% of remuneration ‘at target’ in financial year 2020. The lower payment is a result of the Board adding additional metrics to Executive Director STI scorecards during the financial year. The Company’s annual performance management cycle is due to complete during September. The Board is in the process of finalising its updated KMP remuneration framework as the Group’s strategic objectives evolved during the financial year as a result of the COVID-19 pandemic. These changes are also being implemented as a result of investor and proxy firm feedback to add additional performance metrics beyond ARR to the Company’s remuneration framework. These objectives now encompass cash burn efficiency, growth in recurring revenues and other qualitative metrics aligned to strategy. The Board will update investors on these metrics at the Company’s Annual General Meeting in November 2020. CFO targets relate to the external audit, global taxation framework, implementation of supporting business systems, strategic planning, transformation and operations support. $ r a e y l a i c n a n i F $ s e e f d n a y r a l a S $ 2 s u n o b h s a c I T S d n a e v a e l l a u n n A e v a e l e c i v r e s g n o l $ s t n e m e l t i t n e t n e m y o l p m e $ s t fi e n e b - t s o P d e s a b e r a h S $ 1 s t n e m y a p e c n a m r o f r e P $ d e t a l e r $ l a t o T Karl Redenbach 2020 853,199 298,860 2019 699,189 839,026 – – – – 16,952 1,169,011 27% 130,582 1,668,797 58% Peter Nguyen-Brown Rowan Wilkie2 Matthew Brown3 Total Notes: 2020 477,652 220,000 48,835 21,003 5,651 773,141 29% 2019 400,000 660,000 57,315 20,531 43,528 1,181,374 60% 2020 325,739 30,000 28,050 21,003 76,384 481,176 22% 2019 51,667 2020 – – – 4,596 3,422 8,103 67,788 12% – – – – – 2019 316,667 110,000 24,292 17,110 6,028 474,097 24% 2020 1,656,590 548,860 76,885 42,006 98,987 2,423,328 27% 2019 1,467,522 1,609,026 86,203 41,063 188,241 3,392,056 53% 1. Represents shares issued under the Management Incentive Plan, as approved by the Company’s shareholders on 3 July 2015 (refer to section 7 of the Remuneration Report and Note 24 of the financial statements). 2. Cash bonuses for Mr Redenbach and Mr Nguyen-Brown were approved by independent Directors relating to ARR growth targets set for the 2020 financial year. Cash bonus for Mr Wilkie was unrelated to growth targets. 3. Matthew Brown resigned as CFO and Executive Director on 30 April 2019. LiveTiles Annual Report 2020Remuneration Report 36 6 Non-executive director fee arrangements The Board seeks to set the fees for non-executive directors at a level which provides the Company with the ability to attract and retain directors of a high calibre, whilst incurring a cost which is acceptable to shareholders. Under the Company’s constitution and the ASX listing rules, the maximum aggregate amount of fees that can be paid to non-executive directors shall be determined from time to time by a general meeting of shareholders. The current aggregate fee pool for the non-executive directors is $500,000. Each non-executive director receives a fee for being a director of the Company. In addition, a non-executive director may be paid fees or other amounts as the Board determines where a non-executive director performs special duties or otherwise performs services outside the scope of the ordinary duties of a director. Non-executive directors are also entitled to be reimbursed for reasonable expenses incurred in performing their duties as directors. Non-executive letters of appointment are in place with Dana Rasmussen, Andrew McKeon and David Lemphers. For the year ended 30 June 2020, Mr McKeon was entitled to remuneration of $100,000 per annum (including superannuation) (2019: $100,000). For the year ended 30 June 2020, Mr Lemphers was entitled to remuneration of $100,000 per annum (including superannuation) (2019: $100,000). For the period from 27 September 2019 to 30 June 2020, Ms Rasmussen was entitled to remuneration of $100,000 per annum (including superannuation). For the period from 1 July 2019 to 27 September 2019, Ms Kelly was entitled to remuneration of $135,000 per annum (including superannuation) (2018: $135,000). Ms Kelly resigned as Non-Executive Director on 27 September 2019. Deferred directors’ fees have been accrued in the statement of financial position as at 30 June 2020. The table below outlines remuneration paid to non-executive directors for the year. During the 2020 financial year, the Board of Directors, along with executives and employees, temporarily reduced their salaries by 20% as a result of the impact of COVID-19. The reduction was in effect from 10 April to 26 June 2020. LiveTiles Annual Report 2020Remuneration Report 37 e v i t u c e x e - n o N r o t c e r i d Andrew McKeon David Lemphers Dana Rasmussen1 Cassandra Kelly2 Total Notes: $ r a e y l a i c n a n i F $ s e e F 2020 95,000 2019 110,000 2020 95,000 2019 83,333 2020 70,000 2019 – 2020 33,750 2019 152,500 2020 293,750 2019 345,833 1. Dana Rasmussen was appointed as Non-Executive Director on 27 September 2019. 2. Cassandra Kelly resigned as Non-Executive Director on 27 September 2019. $ s u n o b h s a C n o i t a n m r e T i $ s t fi e n e b t n e m y o l p m e $ s t fi e n e b - t s o P 2 P I M – s t n e m y a p d e s a b e r a h S $ r e h t O – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – $ l a t o T 95,000 110,000 95,000 83,333 70,000 – 33,750 152,500 293,750 345,833 – – – – – – – – – – 7 Equity instruments held by key management personnel Options held by key management personnel during the year There were no options held by key management personnel at 30 June 2020 (2019: nil). Management Incentive Plan The purpose of the Management Incentive Plan (MIP) is to assist in the reward, retention and motivation of eligible directors and management and to align the interests of these persons more closely with the interests of the Company’s shareholders. Shares issued under the MIP to executives who are key management personnel have been structured such that executives are remunerated only when the Company’s share price exceeds the vesting price. The issue price of shares issued under the MIP is funded by a non-recourse interest free loan from the Company. The issue price and loan value is set with reference to the closing share price on the date prior to issue. Vesting of shares issued under the MIP is subject to the satisfaction or waiver of vesting conditions determined by the Board. Subject to the MIP rules, any unvested shares lapse immediately and are forfeited if the relevant vesting conditions are not satisfied within the applicable vesting period. Once vested, shares issued under the MIP are treated in the same way as all other ordinary shares, subject to the full repayment of any outstanding loan by the relevant executive. LiveTiles Annual Report 2020Remuneration Report 38 The Board has the sole discretion to determine the directors and employees who are eligible to participate in the MIP and the terms upon which shares are issued under the MIP, including the issue price, loan amount and vesting conditions. The following tranches of shares have been issued to key management personnel under the MIP: Tranche A Tranche B Tranche C Tranche M Tranche N Tranche O Number of shares 15,000,000 10,000,000 10,000,000 266,667 266,667 266,667 Date issued 25/08/2015 25/08/2015 25/08/2015 06/05/2019 06/05/2019 06/05/2019 Vesting date 24/08/2017 24/08/2018 24/08/2019 05/05/2020 05/05/2021 05/05/2022 Expiry date 24/08/2021 24/08/2021 24/08/2021 06/05/2025 06/05/2025 06/05/2025 Vesting price Fair value per share at grant date $0.25 $0.06 $0.35 $0.06 $0.45 $0.06 $0.57 $0.17 $0.57 $0.17 $0.57 $0.17 Note: under a takeover scenario, the legal framework for both options and MIPS allows for Board discretion to disallow or allow unvested securities to vest. Shareholdings of KMP The following table outlines the ordinary shares held by key management personnel (excluding shares held under the Management Incentive Plan). Balance at 1 July 2019 Granted as remuneration Options exercised Net change other Balance at 30 June 2020 Senior Executives Karl Redenbach 91,122,082 Peter Nguyen-Brown 91,122,082 Rowan Wilkie Non-executive directors Cassandra Kelly – – Andrew McKeon 277,778 David Lemphers Dana Rasmussen – – – – – – – – – – – – – – – – – – – – – – – 91,122,082 91,122,082 – – 277,778 – – LiveTiles Annual Report 2020Remuneration Report 39 The following table represents shares issued to key management personnel under the Management Incentive Plan, as approved by the Company’s shareholders on 3 July 2015 (as described in section 7 above). Balance at 1 July 2019 Issued during the year Exercised during the year Net change other Balance at 30 June 2020 Fair value at 30 June 2020 Senior Executives Karl Redenbach 19,500,000 Peter Nguyen-Brown 6,750,000 Rowan Wilkie 800,001 Non-executive directors Cassandra Kelly Andrew McKeon David Lemphers Dana Rasmussen Loans to KMP – – – – – – – – – – – – – – – – – – – – – – – – – 19,500,000 $1,170,000 6,750,000 $405,000 800,001 $136,000 – – – – The following non-recourse loans have been provided by the Company to key management personnel under the MIP (as approved by shareholders at a general meeting on 3 July 2015). The non-recourse loans are interest-free and the proceeds are used to subscribe for shares in the Company under the MIP. The non-recourse loans are treated as off-balance sheet due to the inherent uncertainty that they will crystallise. Under the terms of the MIP, there is no obligation to settle the loan, which is dependent on the satisfaction of the vesting conditions and the recipient’s option to exercise. The shares remain restricted until funds are received in settlement of the prescribed loan balance, providing the Company security over the receivable. Balance at 1 July 2019 Loans issued Loans repaid Balance at 30 June 2020 Senior Executives Karl Redenbach $2,925,000 Peter Nguyen-Brown $1,012,500 Rowan Wilkie $456,000 Non-executive directors Cassandra Kelly Andrew McKeon David Lemphers Dana Rasmussen – – – – – – – – – – – – – – – – – $2,925,000 $1,012,500 $456,000 – – – – LiveTiles Annual Report 2020Remuneration Report 40 The following loans have been provided to key management personnel by the Company. Balance at 1 July 2019 Loans increase Interest accrued Loans repaid Balance at 30 June 2020 Senior Executives Karl Redenbach $113,171 $203,102 $32,418 Peter Nguyen-Brown $113,171 $203,102 $32,418 Rowan Wilkie Non-executive directors Cassandra Kelly Andrew McKeon David Lemphers Dana Rasmussen – – – – – – – – – – – – – – – – – – – – – – $348,691 $348,691 – – – – – The loans in the above table, first raised in April 2019, have been provided to the co-founders to assist with their defence of litigation brought against them, as advised to ASX on 1 June 2018. While the Group has engaged its own lawyers to represent the four Group entities named in the litigation, instructed by the independent non-executive directors, the loans above solely relate to legal advice sought by co-founders. The loans have been provided at arm’s length with a total capped amount of $475,000 per person. Interest charged at 15% per annum and is capitalised annually. There have been no write-downs of balances owed during the period. No provision is held in relation to the collection of these balances. The loan is repayable, including interest, 180 days after the later of 1) the case is settled, 2) findings determined against the defendants or 3) receipt of cost assessors certificate but no later than 31 December 2022. The independent non-executive directors, supported by legal counsel, continue to monitor the case on behalf of the Group and the governance of these loans. LiveTiles Annual Report 2020Remuneration Report 41 8 Other transactions with KMP There were no other transactions with key management personnel. 9 Shareholder adoption of Remuneration Report At the Group’s most recent Annual General Meeting held on 26 November 2019, shareholders voted to adopt the 2019 Remuneration Report. End of Remuneration Report which has been audited. This report is made in accordance with the resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Karl Redenbach Executive Director 27 August 2020 Melbourne LiveTiles Annual Report 2020Remuneration Report 42 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia DECLARATION OF INDEPENDENCE BY GARETH FEW TO THE DIRECTORS OF LIVETILES LIMITED As lead auditor of LiveTiles Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of LiveTiles Limited and the entities it controlled during the period. Gareth Few Director BDO Audit Pty Ltd Sydney 27 August 2020 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. LiveTiles Annual Report 2020Auditor’s Independence Declaration 43 Consolidated Financial Statements LiveTiles Annual Report 2020 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 44 Revenue Other income Expenses Employee benefits expense Contractors Marketing expense Travel and entertainment expense Professional fees Rent and other office costs Information technology costs Other expenses Depreciation expense Amortisation charge of intangibles Share based payments expense Unrealised currency gain / (loss) Lease-related finance costs Loss before income tax Income tax expense Net loss for the year Other comprehensive income: Note 2020 $ 2019 $ 3 3 37,790,403 18,091,882 6,678,080 4,393,967 44,468,483 22,485,849 5 (32,359,825) (23,229,637) (8,569,830) (16,546,673) (3,041,599) (3,492,437) (2,537,367) (3,718,675) (3,212,118) (1,980,990) (2,362,924) (2,340,742) (2,714,242) (880,302) (4,425,711) (2,258,233) (1,166,772) (123,494) (10,256,971) (3,788,432) (3,928,656) (9,169,722) (1,207,703) 1,944,508 (425,215) – (76,208,933) (65,584,829) (31,740,450) (43,098,980) 12 24 4 136,009 333,391 (31,604,441) (42,765,589) Items that will be reclassified subsequently to profit or loss when specific conditions are met: Exchange differences on translating foreign operations, net of tax 572,706 (827,619) Items that will not be reclassified subsequently to profit or loss: Actuarial gain on remeasurement of defined benefit pension schemes, net of tax 445,608 – Other comprehensive income for the year 1,018,314 (827,619) Total comprehensive income for the year (30,586,127) (43,593,208) Earnings per share for loss attributable to the owners of LiveTiles Limited Basic earnings per share (cents) Diluted earnings per share (cents) 8 8 (4.00) (4.00) (7.75) (7.75) The accompanying notes form part of these financial statements. LiveTiles Annual Report 2020Consolidated Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 Note 2020 $ 2019 $ 45 Current Assets Cash and cash equivalents Trade and other receivables Other current assets TOTAL CURRENT ASSETS Non-Current Assets Property, plant and equipment Deferred tax asset Right-of-use assets Intangible assets Other non-current assets TOTAL NON-CURRENT ASSETS Total Assets Current Liabilities Trade and other payables Income tax payable Lease liabilities Employee benefits provision Provisions for business combinations Other current liabilities TOTAL CURRENT LIABILITIES Non-Current Liabilities Employee benefits provision Deferred tax liability Lease Liabilities Provisions for business combinations Pension liabilities Other non-current liabilities TOTAL NON-CURRENT LIABILITIES Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity The accompanying notes form part of these financial statements. 9 10 4 11 12 10 13 4 14 16 17 15 16 4 14 17 18 15 37,791,314 14,880,920 8,521,493 12,198,027 980,256 1,036,328 47,293,063 28,115,275 977,860 291,833 3,562,990 617,554 – – 81,054,324 45,164,127 1,018,883 505,535 86,905,890 46,287,216 134,198,953 74,402,491 7,443,718 7,013,651 1,324,238 406,872 904,700 – 2,258,095 644,610 3,069,981 10,062,323 12,388,804 11,767,540 27,389,536 29,894,996 140,094 83,133 2,967,791 3,192,972 3,427,179 8,988,671 6,812,051 – – – 776,377 387,992 23,112,163 3,664,097 50,501,699 33,559,093 83,697,254 40,843,398 20 21 202,831,116 122,972,591 2,235,610 7,073,919 (121,369,472) (89,203,112) 83,697,254 40,843,398 LiveTiles Annual Report 2020Consolidated Financial Statements 46 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 Note Issued capital $ Reserves $ Accumulated losses $ Total equity $ Balance at 1 July 2018 61,649,135 1,659,384 (46,307,422) 17,001,097 Loss for the year Other comprehensive income for the year, net of tax Impact of the application of AASB 9 on retained earnings at 1 July 2018 Total comprehensive income for the year – – – – – (42,765,589) (42,765,589) (827,619) – (827,619) – (130,101) (130,101) (827,619) (42,895,690) (43,723,309) Transactions with owners, in their capacity as owners Contributions of equity 20(a)(b)(d) 42,300,013 Transaction costs (2,483,898) – – Shares issued for Hyperfish earn out Shares issued for Wizdom A/S MIP shares exercised Share based payment expense 20(c) 20(e) 20(f) 24 2,786,828 (2,672,568) 17,828,013 – 892,500 (255,000) – 9,169,722 Total transactions with owners 61,323,456 6,242,154 – – – – – – 42,300,013 (2,483,898) 114,260 17,828,013 637,500 9,169,722 67,565,610 Balance at 30 June 2019 122,972,591 7,073,919 (89,203,112) 40,843,398 Impact of the application of AASB 16 on retained earnings at 1 July 2019 – – (561,919) (561,919) Balance at 1 July 2019 122,972,591 7,073,919 (89,765,031) 40,281,479 Loss for the year Other comprehensive income for the year, net of tax Remeasurements of the defined benefit asset, net of tax Total comprehensive income for the year – – – – – (31,604,441) (31,604,441) 572,706 445,608 – – 572,706 445,608 1,018,314 (31,604,441) (30,586,127) Transactions with owners, in their capacity as owners Contributions of equity 20(h)(i) 54,999,999 Transaction costs (3,629,017) Shares issued for CYCL AG 20(j), 23 12,568,747 – – – Shares issued for earn outs 20(g)(k) 15,918,796 (9,785,279) Share based payment expense 24 – 3,928,656 Total transactions with owners 79,858,525 (5,856,623) – – – – – – 54,999,999 (3,629,017) 12,568,747 6,133,517 3,928,656 74,001,902 Balance at 30 June 2020 202,831,116 2,235,610 (121,369,472) 83,697,254 The accompanying notes form part of these financial statements. LiveTiles Annual Report 2020Consolidated Financial Statements 47 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 Cash flows from operating activities Receipts from customers (inclusive of GST) 40,968,708 19,124,567 Payments to suppliers and employees (inclusive of GST) (61,240,424) (53,554,488) Note 2020 $ 2019 $ Total Interest received Interest and other finance costs paid Government grants received Income tax paid (20,271,716) (34,429,921) 170,574 (425,241) 11,511,545 (235,618) 194,264 (291) 1,402,366 (240,847) Net cash used in operating activities 25 (9,250,456) (33,074,429) Cash flows from investing activities Payments for development costs Payments for plant and equipment Net cash acquired as part of acquisition of subsidiaries 23 Payments for acquisition of subsidiaries Loans to related parties Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Proceeds from exercise of options Repayment of lease liability Net cash from financing activities Net increase / (decrease) in cash held Cash and cash equivalents at beginning of financial year Effects of exchange rate changes on cash and cash equivalents (4,916,009) (2,090,082) (219,816) (422,380) (285,286) 2,319,875 (10,647,148) (10,375,127) (400,933) (226,342) (16,606,286) (10,656,962) 20 54,999,999 42,300,014 (3,629,017) (2,502,077) – 637,500 (878,755) – 50,492,227 40,435,437 24,635,485 14,880,920 (1,725,091) (3,295,954) 17,848,223 328,651 Cash and cash equivalents at end of financial year 37,791,314 14,880,920 The accompanying notes form part of these financial statements. LiveTiles Annual Report 2020Consolidated Financial Statements 48 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 These consolidated financial statements and notes The assets, liabilities and results of all subsidiaries represent LiveTiles Limited and its Controlled Entities are consolidated into the financial statements of the (the “Consolidated Group” or “Group”). Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is The financial statements were authorised for issue discontinued from the date that control ceases. on 27 August 2020 by the directors of the Company. NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit or losses resulting from intra-group transactions are eliminated in full. Accounting policies of subsidiaries have been These general purpose financial statements have changed and adjustments made where necessary been prepared in accordance with the Corporations to ensure uniformity of the accounting policies Act 2001, Australian Accounting Standards and adopted by the Group. Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting b. Fair value of assets and liabilities Standards Board. The Group is a for-profit entity The Group measures some of its assets and liabilities for financial reporting purposes under Australian at fair value on either a recurring or non-recurring Accounting Standards. Material accounting policies basis, depending on the requirements of the adopted in the preparation of these financial applicable Accounting Standard. statements are presented below and have been consistently applied unless stated otherwise. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability Except for cash flow information, the financial in an orderly (i.e. unforced) transaction between statements have been prepared on an accruals independent, knowledgeable, and willing market basis and are based on historical costs, modified, participants at the measurement date. where applicable, by the measurement at fair value of selected non-current assets, financial assets As fair value is a market-based measure, the closest and financial liabilities. a. Principles of consolidation equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The consolidated financial statements incorporate The fair values of assets and liabilities that are not all of the assets, liabilities and results of the parent traded in an active market are determined using entity (LiveTiles Limited) and all of the subsidiaries. one or more valuation techniques. These valuation Subsidiaries are entities the parent controls. The techniques maximise, to the extent possible, the parent controls an entity when it is exposed to, or use of observable market data. has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 19. LiveTiles Annual Report 2020Consolidated Financial Statements 49 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) To the extent possible, market information is extracted from either the principal market for the Right-of-use assets Right-of-use assets are initially recognised at cost, asset or liability (i.e. the market with the greatest comprising the amount of the initial measurement volume and level of activity for the asset or liability) of the lease liability, any lease payments made at or or, in the absence of such a market, the most before the commencement date of the lease, less advantageous market available to the entity at the any lease incentives received, any initial direct costs end of the reporting period (i.e. the market that incurred by the Group, and an estimate of costs to be maximises the receipts from the sale of the asset incurred by the Group in dismantling and removing or minimises the payments made to transfer the the underlying asset, restoring the site on which it liability, after taking into account transaction costs is located or restoring the underlying asset to the and transport costs). condition required by the terms and conditions For non-financial assets, the fair value measurement of the lease. also takes into account a market participant’s ability Subsequent to initial recognition, right-of-use assets to use the asset in its highest and best use or to sell are measured at cost (adjusted for any remeasurement it to another market participant that would use the of the associated lease liability), less accumulated asset in its highest and best use. depreciation and any accumulated impairment loss. The fair value of liabilities and the entity’s own Right-of-use assets are depreciated over the shorter equity instruments (excluding those related to share of the lease term and the estimated useful life of based payment arrangements) may be valued, where the underlying asset, consistent with the estimated there is no observable market price in relation to the consumption of the economic benefits embodied in transfer of such financial instruments, by reference the underlying asset. to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are Lease liabilities Lease liabilities are initially recognised at the present adopted and, where significant, are detailed in the value of the future lease payments (i.e., the lease respective note to the financial statements. payments that are unpaid at the commencement date c. Finance costs of the lease). These lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, or otherwise using the Finance costs are expensed in the period in Group’s incremental borrowing rate. which they are incurred except if they relate to a qualifying asset. d. Leases Subsequent to initial recognition, lease liabilities are measured at the present value of the remaining lease payments (i.e., the lease payments that are unpaid at the reporting date). Interest expense At the commencement date of a lease (other than on lease liabilities is recognised in profit or loss leases of 12-months or less and leases of low value (presented as a component of finance costs). Lease assets), the Group recognises: liabilities are remeasured to reflect changes to lease • a right-of-use asset representing its right modifications not accounted for as separate leases. terms, changes to lease payments and any lease to use the underlying asset; and • a lease liability representing its obligation to make lease payments. LiveTiles Annual Report 2020Consolidated Financial Statements 50 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Payments related to short-term leases or leases of Deferred tax assets are recognised for deductible low-value asset not included in the measurement of temporary differences & unused tax losses only if it is lease liabilities are recognised as an expense when probable that future taxable amounts will be available incurred. Short-term leases are leases with a lease to utilise those temporary differences and losses. term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture. The carrying amount of recognised and unrecognised e. Impairment of assets 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 At the end of each reporting period, the Group taxable profits will be available for the carrying assesses whether there is any indication that amount to be recovered. Previously unrecognised an asset may be impaired. The assessment will deferred tax assets are recognised to the extent that include the consideration of external and internal it is probable that there are future taxable profits sources of information. If such an indication exists, available to recover the asset. an impairment test is carried out on the asset by comparing the recoverable amount of the asset, Deferred tax assets and liabilities are offset only being the higher of the asset’s fair value less where there is a legally enforceable right to offset costs of disposal and value in use, to the asset’s current tax assets against current tax liabilities and carrying amount. Any excess of the asset’s carrying deferred tax assets against deferred tax liabilities; amount over its recoverable amount is recognised and they relate to the same taxable authority on immediately in profit or loss. either the same taxable entity or different taxable Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates LiveTiles Limited (the ‘head entity’) and its wholly- the recoverable amount of the cash-generating unit owned Australian subsidiaries have formed an entities which intend to settle simultaneously. to which the asset belongs. income tax consolidated group under the tax consolidation regime. The head entity and each Impairment testing is performed annually for subsidiary in the tax consolidated group continue intangible assets with indefinite lives and intangible to account for their own current and deferred tax assets not yet available for use. f. Income tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. The income tax expense or benefit for the period is the tax payable on that period’s taxable income In addition to its own current and deferred tax based on the applicable income tax rate for each amounts, the head entity also recognises the current jurisdiction, adjusted by the changes in deferred tax liabilities (or assets) and the deferred tax assets tax assets and liabilities attributable to temporary arising from unused tax losses and unused tax differences, unused tax losses and the adjustment credits assumed from each subsidiary in the tax recognised for prior periods, where applicable. consolidated group. 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. LiveTiles Annual Report 2020Consolidated Financial Statements 51 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Assets or liabilities arising under tax funding h. Research and development agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. g. Business combinations Business combinations occur where an acquirer obtains control over one or more businesses. Research costs are expensed in the period in which they are incurred. Development costs are only capitalised when it is probable that the project will be a success, the Group will use or sell the asset, the Group has sufficient resources and intent to complete the asset and the development costs can be measured reliably. If one or more of these criteria are not met, development costs are expensed in the period in which they are incurred. Capitalised development costs are amortised on a straight-line basis over the period of their expected pattern of consumption, up to 5 years. A business combination will be accounted for from i. Foreign currency transactions the date that control is attained whereby fair value and balances of the identifiable assets acquired and liabilities assumed is recognised (with limited exceptions). The consideration transferred the acquisition including any contingent consideration is generally measured at fair value. Where the fair value of the consideration is greater than the fair value of the identifiable assets and liabilities, goodwill is recognised. Goodwill is tested annually for impairment. Where fair value of the consideration is less than fair value of the identifiable assets and liabilities, a gain on a bargain purchase is recognised in the Income Statement. Transaction costs are expensed as incurred unless except if they relate to the issue of debt or equity securities. Contingent consideration is classified as a financial liability. Subsequent changes in the fair value of the contingent consideration are recognised in the Income Statement. Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional currency. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year- end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss. LiveTiles Annual Report 2020Consolidated Financial Statements 52 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Exchange differences arising on the translation of non-monetary items are recognised directly in Other long-term employee benefits The liability for annual leave and long service leave other comprehensive income to the extent that not expected to be settled within 12 months of the underlying gain or loss is recognised in other the reporting date are measured as the present comprehensive income; otherwise the exchange value of expected future payments to be made in difference is recognised in profit or loss. respect of services provided by employees up to the Group companies The financial results and position of foreign reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures operations, whose functional currency is different and periods of service. Expected future payments from the Group’s presentation currency, are are discounted using market yields at the reporting translated as follows: date on corporate bond rates with terms to maturity and currency that match, as closely as possible, the • assets and liabilities are translated at exchange estimated future cash outflows. rates prevailing at the end of the reporting period; • income and expenses are translated at average exchange rates for the period; and • retained earnings are translated at the exchange rates prevailing at the date of the transaction. Defined contribution pension benefits All employees of the Group who are based in Australia and Denmark receive defined contribution pension entitlements, for which the Group pays the fixed pension guarantee contribution (currently between 6% and 9.5% of the employee’s average ordinary Exchange differences arising on translation of salary) to the employee’s pension fund of choice. foreign operations with functional currencies other All contributions in respect of employees’ defined than Australian dollars are recognised in other contribution entitlements are recognised as an comprehensive income and included in the foreign expense in the period in which they are incurred. currency translation reserve in the statement of financial position. The cumulative amount of these differences is reclassified into profit or loss in the Defined benefit pension benefits All employees of the Group who are based in period in which the operation is disposed of. Switzerland, as required by Swiss law, become j. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including members of the Groups defined benefit pension plans. The plans are co-funded by the Group with equal co-contributions required by the employees ranging from 4%-10% of the employee’s salary. Contributions in respect of employees’ defined non-monetary benefits, annual leave and long contribution entitlements are recognised as an service leave expected to be settled within 12 expense in the period in which they are incurred. months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. k. Defined benefit pension obligations Upon retirement, members of the Group’s defined benefit pension plans are entitled to either receive a lump sum payment to the value of their accumulated retirement balance, or receive an ongoing annual annuity calculated as a percentage (conversion rate) of their accumulated balance. LiveTiles Annual Report 2020Consolidated Financial Statements 53 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Assets and obligations of the fund are valued in An additional expense is recognised, over the accordance with an actuarial valuation, using the remaining vesting period, for any modification that projected unit credit method. Under this method, increases the total fair value of the share based where the fair value of plan assets differs from the compensation benefit as at the date of modification. projected benefit obligation of a pension plan must be recorded on the Consolidated Balance Sheet as If the non-vesting condition is within the control an asset, in the case of an overfunded plan, or as a of the Group or employee, the failure to satisfy liability, in the case of an underfunded plan. the condition is treated as a cancellation. If the condition is not within the control of the Group The gains or losses and prior service costs or credits or employee and is not satisfied during the vesting that arise but are not recognised as components of period, any remaining expense for the award is pension cost are recorded as a component of other recognised over the remaining vesting period, comprehensive income. The service costs related to unless the award is forfeited. defined benefits are included in operating income. The other components of net benefit cost are If equity settled awards are cancelled, it is treated presented in the consolidated profit and loss as if it has vested on the date of cancellation, and separately from the service cost component any remaining expense is recognised immediately. and outside operating income. l. Share based payments If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Equity settled share based compensation benefits are provided to employees and related parties. Equity m. Provisions settled transactions are awards of shares, or options Provisions are recognised when the Group has over shares, that are provided to employees and a present (legal or constructive) obligation as a suppliers in exchange for the rendering of services. result of a past event, it is probable the Group will be required to settle the obligation, and a The cost of equity-settled transactions are measured reliable estimate can be made of the amount of the at fair value on grant date. Fair value is independently obligation. The amount recognised as a provision determined using the Black-Scholes option pricing is the best estimate of the consideration required model that takes into account the exercise price, the to settle the present obligation at the reporting term of the option, the impact of dilution, the share date, taking into account the risks and uncertainties price at grant date and expected price volatility of surrounding the obligation. 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 n. Cash and cash equivalents determine whether the Group receives the services Cash and cash equivalents includes cash on hand, that entitle the employees to receive payment. No deposits held at call with financial institutions, other account is taken of any other vesting conditions. short-term, highly liquid investments with original If equity settled awards are modified, as a minimum convertible to known amounts of cash and which are an expense is recognised as if the modification has subject to an insignificant risk of changes in value. maturities of three months or less that are readily not been made. LiveTiles Annual Report 2020Consolidated Financial Statements 54 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) o. Revenue and other income Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Software subscription revenue Subscription revenue is recognised when the Group’s performance obligations are satisfied. For annual subscription licences, revenue is recognised evenly over the subscription period for which the customer has paid. For perpetual licences, where an upfront payment is made in addition to annual support fees, revenue related to the up front payment is recognised evenly over the estimated lifetime of the customer contract. Where a customer pays their subscription in advance, that amount is recorded as a liability on the balance sheet until the Group provides the purchased software for that period. Services revenue Revenue from services are recognised by reference to the stage of completion. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. Research and development grant income Research and development grant income is recognised when the Group is entitled to the research and development grant. The amount is treated as other income in the period in which the research and development costs were incurred. Grant income Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs it is compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis. Interest income Interest income 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. p. Financial instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. LiveTiles Annual Report 2020Consolidated Financial Statements 55 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Classification and subsequent measurement Financial assets that meet the following conditions Impairment At the end of each reporting period, the Group are measured subsequently at amortised cost: assesses whether there is objective evidence that • Held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI): • The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; a financial instrument has been impaired. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. q. Goods and Services Tax (GST), Value Added Tax (VAT) and other consumption taxes Revenues, expenses and assets are recognised net of the amount of GST or VAT, except where the amount of GST or VAT incurred is not recoverable from the local tax office. Receivables and payables are stated inclusive • The contractual terms of the financial asset give of the amount of GST or VAT receivable or payable. rise on specified dates to cash flows that are solely The net amount of GST or VAT recoverable from, payments of principal and interest on the principal or payable to, the local tax office is included with amount outstanding. other receivables or payables in the statement of financial position. By default, all other financial assets are measured subsequently at fair value through profit or Cash flows are presented on a gross basis. The loss (FVTPL). GST or VAT components of cash flows arising from investing or financing activities which are As at the reporting date, the Group’s financial assets recoverable from, or payable to, the local tax office consisted of cash and cash equivalents and trade and are presented as operating cash flows included in other receivables which are measured at amortised receipts from customers or payments to suppliers. cost in accordance with the above accounting policy. Non-derivative financial liabilities are initially measured at fair value and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised. As at the reporting date, the Group`s financial liabilities consisted of trade and other payables and borrowings which are measured at amortised cost in accordance with the above accounting policy. LiveTiles Annual Report 2020Consolidated Financial Statements 56 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) r. 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 normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting Customer contracts and relationships Customer contracts and relationships acquired as part of a business combination is recognised separately from goodwill. The customer contracts and relationships are carried at fair value at the date of acquisition less accumulated amortisation and impairment losses. Customer contracts and relationship assets are amortised over the period in which the benefits are expected to be obtained. period; or the asset is cash or cash equivalent unless t. Earnings per share 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 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. s. Intangible assets Goodwill Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. The Group tests goodwill annually or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Intellectual property Intellectual property acquired as part of a business combination is recognised separately from goodwill. The intellectual property assets are carried at fair value at the date of acquisition less accumulated amortisation and impairment losses. Intellectual property assets are amortised over the period in which the benefits are expected to be obtained. Basic earnings per share is calculated by dividing the profit or loss attributable to the owners of LiveTiles Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the financial period. 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. u. Critical accounting estimates and judgements 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. LiveTiles Annual Report 2020Consolidated Financial Statements 57 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The judgements, estimates and assumptions that have a significant risk of causing a material v. Performance based payments for acquired entities The Group measures performance based payments adjustment to the carrying amounts of assets and (earn-out payments) for acquired entities estimating liabilities (refer to the respective notes) within the the probability of the targets being met and using an next financial year are discussed below. appropriate discount rate to reflect payment periods. v. Key estimates vi. Valuation of goodwill and other intangible assets In determining the recoverable value of goodwill and i. Share-based payment transactions The Group measures the cost of equity-settled other intangible assets the Group makes estimates pertaining to the future cash flows of each of the transactions with employees by reference to the fair Cash Generating Units (CGUs). Refer to Note 12 value of the equity instruments at the date at which for details of current year assumptions. they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms vii. Capitalisation of development costs and useful and conditions upon which the instruments were granted. The accounting estimates and assumptions life of intangible assets The Group has made judgements when assessing relating to equity-settled share-based payments would whether internal development projects meet the have no impact on the carrying amounts of assets and criteria to be capitalised, and measuring the costs liabilities within the next annual reporting period but and useful life attributed to such projects. may impact profit or loss and equity. On acquisition, specific intangible assets are recognised separately from goodwill and then ii. Recovery of deferred tax assets Deferred tax assets are recognised for deductible amortised over their useful lives. The capitalisation of these assets and related amortisation charges are temporary differences only if the Group considers it is based on judgements about the value and useful life probable that future taxable amounts will be available of such items. Amortisation methods, useful lives and to utilise those temporary differences and losses. residual values are reviewed at each reporting date iii. Research and development grant receivable The Group measures the research and development grant income and receivable taking into account the time spent by employees on eligible research and development activities. The research and development grant receivable is recognised as the and adjusted if appropriate. Refer to Note 12 for details of current year assumptions. w. New or amended Accounting Standards and Interpretations adopted Group considers it probable that the amount will The Company has adopted all of the new, revised or be recovered in full through a future claim. amended Accounting Standards and Interpretations iv. Government grant income The Group measures government grant income issued by the Australian Accounting Standards Board and the International Financial Reporting Interpretations Committee that are relevant to its over the period necessary to match the income operations and effective for the year commencing with the costs that they are intended to compensate. 1 July 2020. The impact on the financial statements The accounting estimates and assumptions relating to of the Group has been discussed below. the recognition of government grant income include the project duration, value and forecast expenditure over the life of the project. LiveTiles Annual Report 2020Consolidated Financial Statements 58 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) AASB 16 Leases The Group has adopted AASB 16 retrospectively Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant from 1 July 2019, but has not restated comparatives rate on the balance outstanding and are reduced for for the 2019 reporting period, as permitted under lease payments made. the specific transitional provisions in the standard. The reclassifications and the adjustments arising from On adoption of AASB 16, the Group recognised lease the new leasing standards are therefore recognised liabilities in relation to leases which had previously been in the opening balance sheet on 1 July 2019. classified as ‘operating leases’ under the principles of AASB117 Leases. These liabilities were measured at Until the current financial year, leases of property, the present value of the remaining lease payments, plant and equipment were classified as either discounted using the Group’s incremental borrowing finance or operating leases. Payments made under rate as of 1 July 2019. The weighted average Group’s operating leases (net of any incentives received incremental borrowing rate applied to the lease from the lessor) were charged to profit or loss on liabilities on 1 July 2019 was 9.337%. a straight-line basis over the period of the lease. Payments associated with short-term leases From 1 July 2019, Lease liabilities are measured and leases of low-value assets are recognised on at the present value of the remaining contractual a straight-line basis as an expense in profit or loss. payments due to the lessor over the lease term, with Short-term leases are leases with a lease term of the discount rate determined by reference to Group’s 12 months or less. Low-value assets comprise incremental borrowing rate on commencement IT-equipment and small items of office furniture. of the lease. Operating lease commitments disclosed as at 30 June 2019 7,265,683 Discounted using the lessee’s incremental borrowing rate of at the date of initial application (1,812,304) Short-term leases recognised on a straight-line basis as expense Adjustments as a result of a different treatment of extension and termination options Lease liability recognised as at 1 July 2019 Of which are: Current lease liabilities Non-current lease liabilities (935,960) – 4,508,419 681,294 3,827,125 LiveTiles Annual Report 2020Consolidated Financial Statements 59 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The associated right-of-use assets for property In applying AASB 16 for the first time, the Group leases were measured on a retrospective basis as has used the following practical expedients permitted if the new rules had always been applied. Right of by the standard: use assets are initially measured at the amount of the lease liability, reduced for any lease incentives • the use of a single discount rate to a portfolio received, and increased for: of leases with reasonably similar characteristics; • lease payments made at or before commencement of the lease; and • initial direct costs incurred. Right-of-use assets are depreciated on a straight-line • reliance on previous assessments on whether leases are onerous; • the accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases; and basis over the remaining term of the lease. Other right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount • the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as The Group has also elected not to reassess at 30 June 2019. whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered When the Group revises its estimate of the term into before the transition date the Group relied of any lease, it adjusts the carrying amount of the on its assessment made applying AASB 117 and lease liability to reflect the payments to make over Interpretation 4 Determining whether the revised term, which are discounted at the same an Arrangement contains a lease. discount rate that applied on lease commencement. An equivalent adjustment is made to the carrying The adoption of this new standard resulted in value of the right-of-use asset, with the revised increased operating expenses of $103,014 for carrying amount being depreciated over the the current financial year. remaining (revised) lease term. The recognised right-of-use assets relate to the following types of assets: AASB Interpretation 23 The Group has adopted AASB Interpretation 23 Uncertainty over Income Tax Treatments from 1 July 2019. AASB Interpretation 23 outlines the Consolidated Group requirements around accounting for uncertain tax 30 June 2020 $ 1 July 2019 $ positions. The Group has concluded that it is probable that the tax authorities will accept the current method 3,490,226 3,821,214 of calculating the Group’s current tax liability which is 72,764 – 3,562,990 3,821,214 calculated in accordance with AASB 112. Properties Equipment Total LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 60 x. New accounting standards and interpretations not yet adopted The Directors have reviewed all of the new and revised accounting standards and interpretations issued by the Australian Accounting Standards Board for annual reporting periods beginning or after 1 July 2019. It has been determined that there is no impact, material or otherwise, of any other new or revised accounting standards and interpretations other than those outlined in the new and amended standards adopted by the group outlined above. y. Going concern For the year ended 30 June 2020, the Group made a loss of $31,604,441 (2019: $42,765,589) and had net cash flows used in operating activities of $9,250,456 (2019: $33,074,429). Operating cash outflows during the current financial year include non-recurring restructuring costs and redundancy payments. Operating cash outflows include professional fees incurred in connection with the acquisition of CYCL AG. Further cost savings are expected to realised in future periods as a result of reduced headcount and other cost synergies realised from restructuring completed during the period. A $50,000,000 share placement announced by the Group on 19 September 2019. Net proceeds from the share placement of $46,370,983 were received on 23 September 2019. With a further $4,999,999 raised on 18 October 2019 through a Share Purchase Plan. At 30 June 2020, the Group had a cash balance of $37,791,314 (2019: $14,880,920). The Directors are of the opinion that the Group will be able to continue as a going concern taking into account, cash on hand, reduced operating cash outflows, expected growth in customer receipts and the ongoing management of cash operating expenses. LiveTiles Annual Report 2020Consolidated Financial Statements 61 NOTE 2: PARENT INFORMATION The following information has been extracted from the records of the parent, LiveTiles Limited. Statement of Financial Position 2020 $ 2019 $ Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Equity Issued capital 15,749,777 6,846,058 74,720,696 42,466,012 90,470,473 49,312,070 (3,460,552) (10,285,180) (8,988,671) – (12,449,223) (10,285,180) 528,146,339 448,437,814 Accumulated losses and reserves (450,125,088) (409,260,924) Total Equity 78,021,251 39,176,890 Statement of Profit or Loss and Other Comprehensive Income Total loss Total comprehensive income (40,864,164) (42,855,527) (40,864,164) (42,855,527) In the 2020 financial year, included within the parent entity loss of $40,864,164 is a provision against intercompany receivables from and investments in other entities within the Group of $30,022,940. In the 2019 financial year, included within the parent entity loss of $42,855,527 is a provision against intercompany receivables from and investments in other entities within the Group of $32,575,339. Equity balances of the parent include those relating to Modun Resources Limited, which were eliminated upon consolidation of the Group following the completion of the reverse acquisition on 25 August 2015. All intercompany balances within the Group are eliminated upon consolidation. LiveTiles Annual Report 2020Consolidated Financial Statements 62 NOTE 3: REVENUE AND OTHER INCOME Note 2020 $ 2019 $ Revenue: – Software subscription revenue – Services revenue Total revenue Other income: – Interest income 28,980,551 16,510,742 8,809,852 1,581,140 37,790,403 18,091,882 240,701 201,651 – Research and development grant income 9 4,524,280 3,504,621 – Other grant income – Other income Total other income 1,788,817 124,282 483,229 204,466 6,678,080 4,393,967 Total revenue and other income 44,468,483 22,485,849 LiveTiles Annual Report 2020Consolidated Financial Statements 63 2020 $ 2019 $ (1,297,627) (160,672) 1,433,636 136,009 494,062 333,391 (31,740,540) (43,098,980) 8,728,624 11,852,220 NOTE 4: INCOME TAX a. The components of tax expense comprise: Current tax Deferred tax Total b. The prima facie tax expense on loss from ordinary activities before income tax is reconciled to income tax as follows: Net loss before tax Prima facie tax benefit on loss from ordinary activities before income tax at 27.5% (2019: 27.5%) Adjust for: Tax effect of variance in overseas tax rates Withholding tax expense (1,246,031) (1,295,840) (744,731) (160,672) (739,982) 637,230 Tax effect of non-deductible research and development expenditure (2,563,091) Tax effect of other permanent differences 164,798 Current year losses not recognised (5,086,087) (11,004,736) De-recognition of deferred tax balances Income tax benefit attributable to entity 1,433,636 136,009 494,062 333,391 The Group qualifies for the small business company tax rate of 27.5%. c. Deferred tax asset relates to the following: Carry forward losses for Wizdom A/S Total deferred tax asset d. Deferred tax liability relates to the following: 291,833 291,833 – – Intangible assets on acquisition of Hyperfish, Inc (198,363) (264,000) Intangible assets on acquisition of Wizdom A/S (2,154,320) (2,928,972) Intangible assets on acquisition of CYCL AG Defined benefit pension liabilities of CYCL AG (1,689,738) 1,074,630 – – Total deferred tax liability (2,967,791) (3,192,972) e. Net tax effect of carried forward losses not brought to account 49,567,470 10,529,179 f. Income tax payable 1,324,238 406,872 The income tax payable reflects income tax payable and withholding tax payable at the end of the reporting period. LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 5: EMPLOYEE BENEFIT EXPENSE Employee benefit expense Wages and salaries – staff Wages and salaries – Directors Commission and bonus expense Payroll tax and other on costs Employee insurance costs Pension and superannuation expense Annual leave and long service leave expense Other employee benefits expense Total employee benefit expense NOTE 6: AUDITOR’S REMUNERATION Remuneration of the auditor for: (a) Auditors of the Group – BDO and related network firms: Audit and review of the financial statements Other assurance services Total remuneration for audit and other assurance services (b) Other auditors and their related network firms: Audit and review of the financial statements Other assurance services Taxation services Total remuneration of network firms of other auditors 64 2020 $ 2019 $ 22,192,127 15,010,613 1,569,198 1,900,241 2,569,869 2,743,205 1,768,009 1,267,069 1,232,939 1,210,016 1,672,913 144,754 994,317 825,138 342,092 146,962 32,359,825 23,229,637 2020 $ 2019 $ 214,200 12,000 226,200 57,851 18,221 76,072 11,637 87,709 148,700 52,200 200,900 – – – – – NOTE 7: DIVIDENDS LiveTiles Limited has not paid or proposed to pay any dividends for the year ended 30 June 2020 (2019: nil). LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 8: EARNINGS PER SHARE Reconciliation of earnings to loss: 65 2020 $ 2019 $ Earnings used to calculate basic earnings per share (31,604,441) (42,765,589) Weighted average number of ordinary shares outstanding during the year used in calculating basic earnings per share Basic (loss)/earnings per share Diluted (loss)/earnings per share No. No. 789,942,896 552,104,149 Cents (4.00) (4.00) Cents (7.75) (7.75) There are 10,032,650 options outstanding at 30 June 2020, see Note 24(b). The options on issue have not been considered in the diluted earnings per share as their effect is anti-dilutive. NOTE 9: TRADE AND OTHER RECEIVABLES Current Trade receivables Accrued revenue Provision for doubtful debts Total Research and development grant receivable Other government grants receivable 2020 $ 2019 $ 7,970,451 7,445,358 1,295,178 126,990 (744,136) (538,339) 8,521,493 7,034,009 – – 4,888,980 275,038 Total current trade and other receivables 8,521,493 12,198,027 Provision for doubtful debts The Group makes use of a simplified approach in accounting for the impairment of trade and other receivables as well as other current assets and records the loss allowance at the amount equal to the lifetime expected credit loss (ECL). In using this practical expedient, the Group uses its historical experience, external indicators, and forward-looking information to calculate the ECL using a provision matrix. From this calculation, it was determined that the ECL in trade and other receivables was immaterial to be disclosed separately. During the period, the Group recognised a doubtful debt expense of $205,797 (2019: $371,379). This is shown within Other Expenses of $4,425,711 (2019: $2,258,233). LiveTiles Annual Report 2020Consolidated Financial Statements 66 NOTE 9: TRADE AND OTHER RECEIVABLES (CONTINUED) Research and development grant receivable The Group is entitled to claim eligible research and development expenditure (grant income) with the Australian Federal Government. The Group has taken a prudent view of only accruing estimated grant income on Australian expenditure. Grant income on eligible overseas expenditure is recognised when certain. In August 2019, LiveTiles received $0.9m and $2.9m for the 2017 and 2018 financial years, respectively, in relation to eligible expenditure claimed under the research and development tax incentive scheme. The amounts received represent eligible expenditure incurred in Australia and the USA. In April 2020, the Group received $5.6m for eligible expenditure incurred in the 2019 financial year. Of the total received, $4.5m was not accrued as at 30 June 2019 as follows: 1. Eligible overseas expenditure not recognised as income in the 2019 financial year of $3.5m, in line with the Company’s accounting policy; and 2. Additional eligible Australian R&D expenditure of $1.0m. The Group has not recognised an accrual for grant income relating to the 2020 financial year. As a result of the Group’s turnover exceeding $20m during the 2020 financial year, the Group is no longer entitled to receive a refund under the research and development tax incentive scheme, instead, the Group is entitled to receive a tax offset on eligible expenditure. In line with the Group’s accounting policy for deferred tax assets, no balance has been recorded. A breakdown of research and development grant receivable is as follows: Research and development grant receivable related to 2017 expenditure Research and development grant receivable related to 2018 expenditure Research and development grant receivable related to 2019 expenditure Total 2020 $ – – – – 2019 $ 930,054 2,862,604 1,096,322 4,888,980 LiveTiles Annual Report 2020Consolidated Financial Statements 67 NOTE 9: TRADE AND OTHER RECEIVABLES (CONTINUED) Credit risk The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties. The class of assets described as “trade and other receivables” is considered to be the main source of credit risk related to the Group. On a geographical basis, the Group has credit risk exposures in Australia, Asia, North America, Europe and the Middle East. The Group’s exposure to credit risk for trade receivables at the end of the reporting period in those regions is as follows: AUD Asia Pacific North America Europe Middle East & Africa 2020 $ 2019 $ 2,325,525 1,773,169 1,764,112 1,747,347 3,880,814 3,803,211 – 121,631 Total receivables exposed to credit risk 7,970,451 7,445,358 The following table details the Group’s trade and other receivables exposed to credit with ageing analysis and impairment provided for thereon. Amounts are considered as “past due” when the debt has not been settled, with the terms and conditions agreed between the Group and the customer or counterparty to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the Group. The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high credit quality. Past Due but Not Impaired (Days Overdue) $ Gross Amount $ Within Initial Trade Terms < 300 31–600 61–900 >900 Past Due and Impaired 2020 Trade and term receivables 2019 Trade and term receivables 7,970,451 5,017,378 1,009,364 267,127 952,188 339,396 384,998 7,445,358 4,722,302 1,506,825 214,475 598,345 281,781 121,630 LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 10: OTHER ASSETS AUD Current Deposits paid Prepaid expenses Total Non-current Rental Deposits 68 Note 2020 $ 2019 $ 88,166 892,090 980,256 321,502 697,381 1,018,883 75,331 960,997 1,036,328 279,193 226,342 505,535 Loans to Related Parties 26 Total NOTE 11: NON-CURRENT ASSETS – RIGHT-OF-USE ASSETS AUD Properties Equipment Balance at 1 July 2019 Additions Depreciation Foreign Exchange1 Balance at 30 June 2020 3,821,214 423,745 (875,315) 120,582 3,490,226 – 92,897 (22,319) 2,186 72,764 Total right-of-use asset 3,821,214 516,642 (897,634) 122,768 3,562,990 1 Represents the effect of movements in foreign exchange rates on assets and liabilities held in foreign currencies LiveTiles Annual Report 2020Consolidated Financial Statements 69 NOTE 12: INTANGIBLE ASSETS 2019 Financial Year At Cost Note Balance at 1 July 2018 Additions Disposals Capitalised development costs Software intellectual property Customer contracts and relationships Goodwill Total costs 2,952,153 2,090,082 1,068,000 8,723,000 427,000 5,448,000 3,034,717 27,170,943 7,481,870 43,432,025 – – – – – Foreign Exchange Balance at 30 June 2019 – 5,042,235 227,741 10,018,741 121,099 5,996,099 683,672 30,889,332 1,032,512 51,946,407 Accumulated amortisation Balance at 1 July 2018 Amortisation Charge Disposals Foreign exchange Balance at 30 June 2019 Capitalised development costs (2,952,153) (2,090,082) Software intellectual property (6,437) (443,050) Customer contracts and relationships Total accumulated amortisation (12,869) (1,255,300) (2,971,459) (3,788,432) – – – – – (5,042,235) (6,152) (455,639) (16,237) (1,284,406) (22,389) (6,782,280) Summary of net intangible assets Balance at 1 July 2018 Additions Amortisation charge Disposals Foreign exchange Balance at 30 June 2019 Net intangible assets 4,510,411 43,432,025 (3,788,432) Deferred tax liability (448,500) (3,188,475) 504,768 – – 1,010,123 45,164,127 (60,765) (3,192,972) LiveTiles Annual Report 2020Consolidated Financial Statements 70 NOTE 12: INTANGIBLE ASSETS (CONTINUED) 2020 Financial Year At cost Note Balance at 1 July 2019 Additions Disposals Capitalised development costs Software intellectual property Customer contracts and relationships 5,042,235 4,916,009 23 10,018,741 9,350,000 23 5,996,099 2,340,000 Goodwill Total costs 23 30,889,332 27,353,721 51,946,407 43,959,730 – – – – – Foreign exchange Balance at 30 June 2020 – 9,958,244 507,349 19,876,090 168,527 8,504,626 1,500,805 59,743,858 2,176,681 98,082,818 Accumulated amortisation Balance at 1 July 2019 Amortisation charge Disposals Foreign exchange Balance at 30 June 2020 Capitalised development costs (5,042,235) (4,916,009) Software intellectual property (455,639) (1,586,000) Customer contracts and relationships Total accumulated amortisation (1,284,406) (3,754,962) (6,782,280) (10,256,971) – – – – – (9,958,244) 2,062 (2,039,577) 8,695 (5,030,673) 10,757 (17,028,494) Summary of net intangible assets Balance at 1 July 2019 Additions Amortisation Charge Disposals Foreign Exchange Balance at 30 June 2020 Net intangible assets 45,164,127 43,959,730 (10,256,972) Deferred tax liability (3,192,972) (1,890,273) 611,385 – – 2,187,439 81,054,324 429,439 (4,042,421) LiveTiles Annual Report 2020Consolidated Financial Statements 71 NOTE 12: INTANGIBLE ASSETS (CONTINUED) The estimated useful life of capitalised development costs is determined to be in line with the frequency at which our software is updated and replaced. During the 2020 financial year, development costs were fully amortised in the same financial year given the iterative nature and frequency of updates in the Group’s product life cycle. Other intangible assets have a finite life and are amortised on a straight-line basis over their useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period. The useful life software intellectual property is 10 years. The useful life of customer contracts and relationships is 2 years. Goodwill is carried at cost less any accumulated impairment losses. The Group tests annually whether goodwill has suffered any impairment. For the 2020 and 2019 reporting periods, the recoverable amount of the cash-generating units (CGUs) was determined based on value-in-use calculations, using cash flow projections based on financial budgets approved by management covering a five-year period. The assumptions used for the current reporting period may differ from the assumptions in the next reporting period as internal and external circumstances and expectations change. The Group has used the following assumptions in the 30 June 2020 calculation of value-in-use, based on past performance and management’s expectations for the future: • Annual sales growth rates of between 10%-20% over the five-year forecast period, representing compound annual growth rates of 12.57%-15.92% over the same period; • Terminal growth rate of 2.0%; and • Post-tax discount rate of 20.0%. Assumptions for gross margin, other operating costs and annual capital expenditure are based on past performance and management’s expectations for the future. Management has performed sensitivity analysis and assessed reasonable changes for key assumptions and has not identified any instances that could cause the carrying amount of the group of CGUs, over which goodwill is monitored, to exceed its recoverable amount. NOTE 13: TRADE AND OTHER PAYABLES Current Trade payables Employee benefits accruals Note 2020 $ 2019 $ 3,903,398 4,503,056 3,267,946 1,092,220 Employee benefits accruals to related parties 26 45,274 1,290,633 Other payables and accruals Total 227,100 127,742 7,443,718 7,013,651 LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 14: LEASE LIABILITIES At net present value: 72 Balance at 1 July 2019 Finance Cost Additions Payments Foreign Exchange Balance at 30 June 2020 4,508,419 423,547 463,334 (1,281,018) 144,022 4,258,304 – 1,668 92,675 (22,978) 2,210 73,575 4,508,419 425,215 556,009 (1,303,996) 146,232 4,331,879 30 June 2020 30 June 2019 858,754 45,946 904,700 3,399,550 27,629 3,427,179 – – – – – – Properties Equipment Total lease liabilities Current Properties Equipment Total Non-current Properties Equipment Total The Group leases various offices and equipment. Rental contracts are typically made for fixed periods of 2 to 5 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 15: OTHER LIABILITIES Current Unearned revenue Lease liability Unearned grant income Other current liabilities Total Non-current Unearned revenue US government program repayable Total 73 2020 $ 2019 $ 11,024,867 – 1,363,937 – 9,759,854 124,755 1,881,194 1,737 12,338,804 11,767,540 253,529 522,848 776,377 387,992 – 387,992 Unearned income is carried at amortised cost and represents amounts billed to customers in advance of the revenue being recognised in accordance with the revenue recognition policy outlined in note 1. Unearned income is presented as a current liability unless the performance obligations associated with the revenue will be satisfied in greater than 12 months. US government program repayable relates to amounts owed to the United States (US) Federal Government for monies loaned to the Group on a 1% annual interest loan under the US Small Business Administration (SBA) Paycheck Protection Program (PPP) (the program). Monies under this program were distributed by US commercial banks in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted on 27 March 2020. Under the program, the Group applied for, and received, an amount of $1,866,204 (USD $1,279,800). Under the terms of the program this was calculated to enable to Group to draw funds to the value of eight weeks payroll, employee related on costs and rental expenses. To the extent that the borrowed funds were used for these purposes, under the terms of the program, loan monies would be forgiven, adjusted for any reduction of headcount. The Group has estimated that the value of the loan which will be forgiven as $1,343,356, to reflect the reduction in headcount in the US as a result of restructuring during the period. This will be assessed during FY21. Government grant income has been recorded for the value of this estimated forgiveness, with the remaining balance of the loan remaining a payable. The unforgiven balance of the loan is not due and payable within the next twelve months. LiveTiles Annual Report 2020Consolidated Financial Statements 74 NOTE 16: EMPLOYEE BENEFITS PROVISION Current Non-current Total 2020 $ 2,258,095 140,094 2,398,189 2019 $ 644,610 83,133 727,743 Provision for employee benefits Provision for employee benefits represents amounts accrued for annual leave and long service leave. The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service. Based on past experience, the Group does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled within the next 12 months. However, these amounts must be classified as current liabilities since the Group does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement. It is expected that $453,827 will not be taken in the next 12 months. The non-current portion for this provision includes amounts accrued for long service leave entitlements that have not yet vested in relation to those employees who have not yet completed the required period of service. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. Refer to note 1 for the measurement and recognition criteria relating to employee benefits. NOTE 17: PROVISIONS FOR BUSINESS COMBINATIONS Current Provision for contingent consideration – Hyperfish Provision for contingent consideration – Wizdom Provision for contingent consideration – CYCL Total Non-current Provision for contingent consideration – CYCL Total Note 2020 $ 2019 $ 20(g) 20(k) 23 – – 114,260 9,948,063 3,069,981 – 3,069,981 10,062,323 23 8,988,671 8,988,671 – – LiveTiles Annual Report 2020Consolidated Financial Statements 75 NOTE 18: NON-CURRENT LIABILITIES – PENSION LIABILITIES • Longevity risk: changes in the estimation of mortality rates of current and former The Group’s pension liabilities relate to the defined employees; and benefit plans in Switzerland, which were acquired • Salary risk: increases in future salaries increase in December 2019 upon the completion of the the gross defined benefit obligation. acquisition of CYCL AG, see note 23. As at 30 June 2020, the fund has a funding ratio of 103.2%. As As the fund is a collective fund, return on assets are required under Swiss law, the plans are co-funded distributed to participants at a rate agreed by the by the Group with equal co-contributions required pension board and any surplus/(deficit) is held in by the employees ranging from 4%-10% of the reserve. The effect of this is to provide consistency employee’s salary. Upon retirement, employees are of returns and to enable the fund to have sufficient entitled to either receive a lump sum payment to reserves to fund any future payment obligations. the value of their accumulated retirement balance; or receive an ongoing annual annuity calculated as In the event of a funding shortfall, the pension plan a percentage (conversion rate) of their accumulated regulations outline that the following provisions balance – as at 30 June 2020 this conversion rate is 6.40%. will be made, in sequence: 1. Make changes to the way the fund is The defined benefit plans are legally separate from administered, including: the Group and administered by a separate fund. The pension plans of the Group are managed by • Adjustments to the calculation of future benefit Swiss pension fund ‘Profond Pension Fund’ (the fund), entitlements (conversion rate); which is a collective pension fund, which is common in Switzerland. Under this structure, members own • Adjustments to the investment strategy; a proportionate share of the aggregated collective • Adjustments to financing/benefits; and investments, rather than an individual share of the underlying assets, as is common in Australia. The Group’s members consist of 50 of the total 56,634 members as at 30 June 2020. The board of the fund is made up of independent trustees/directors. By law, the board is required to act in the best interests of participants to the schemes and has the responsibility of setting investment, contribution, benefit levels and other relevant policies. The plans are exposed to a number of risks, including: • Investment risk: movement of discount rate used against the return from plan assets; • Interest rate risk: decreases/increases in the discount rate used will increase/decrease the defined benefit obligation; • Restrictions on early withdrawals of benefits. 2. If a shortfall persists, for the duration of the cover shortfall, the pension plan may levy (non-returnable) contributions from employees, employers or pensioners. In the event that a funding shortfall does occur, separately to the pension plan regulations, the Swiss Government has established a scheme, the LOB Guarantee Fund, by which pension funds may be entitled to subsidies to enable equalisation. The fund may act to provide subsidies in the following circumstances: • benefit schemes with an unfavourable age structure; or • where a pension fund has become insolvent. LiveTiles Annual Report 2020Consolidated Financial Statements 76 NOTE 18: NON-CURRENT LIABILITIES – PENSION LIABILITIES (CONTINUED) AASB 119 requires that the assets and obligations of the fund are valued in accordance with an actuarial valuation, using the projected unit credit method. Under this method, where the fair value of plan assets differs from the projected benefit obligation of a pension plan must be recorded on the Consolidated Balance Sheet as an asset, in the case of an overfunded plan, or as a liability, in the case of an underfunded plan. The gains or losses and prior service costs or credits that arise but are not recognised as components of pension cost are recorded as a component of other comprehensive income. The service costs related to defined benefits are included in operating income. The other components of net benefit cost are presented in the consolidated profit and loss separately from the service cost component and outside operating income. The following tables summarise the components of net benefit expense recognised in profit and loss, actuarial gains and losses recognised in other comprehensive income, and funded status and amounts recognised in the consolidated statement of financial position. Initial recognition as at 3 December 2019 Current service cost Interest income/(expense) Defined benefit pension expense recognised in profit or loss Contributions by fund participants: Employer Plan participants Total contributions Remeasurements: Return on plan assets, excluding amounts included in interest income Loss from change in experience Gain from change in financial assumptions Defined benefit pension actuarial losses/(gains) recognised in other comprehensive income Present value of obligations $ Fair value of plan assets $ Balance $ (23,784,906) 16,862,683 (6,922,223) (465,828) (14,615) (480,443) – (308,028) (308,028) – 10,510 10,510 303,701 308,028 611,729 (465,828) (4,105) (469,933) 303,701 – 303,701 – 86,085 86,085 (107,050) 562,872 – – (107,050) 562,872 455,822 86,085 541,907 Benefits paid (405,116) 405,116 – Foreign exchange rate changes (912,273) 646,770 (265,503) Balance at 30 June 2020 (25,434,944) 18,622,893 (6,812,051) LiveTiles Annual Report 2020Consolidated Financial Statements 77 NOTE 18: NON-CURRENT LIABILITIES – PENSION LIABILITIES (CONTINUED) The projected unit credit method, requires management make certain assumptions relating to the long-term rate of return on plan assets, discount rates used to determine the present value of future obligations and expenses, salary inflation rates, mortality rates and other assumptions. The accounting estimates related to our pension plans are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes. The selection of assumptions is based on historical trends and known economic and market conditions at the time of valuation, as well as independent studies of trends performed by our actuarial advisors. However, actual results may differ substantially from the estimates that were based on the critical assumptions. The reconciliation to the fair value of plan assets and projected benefit obligation under the projected unit method are shown over page. Plan assets (as at 30 June 2020) Plan assets Adjustments for AASB 119 Estimation of the value of Pensions in Payment Fair value of plan assets Plan obligations (as at 30 June 2020) Plan obligations Adjustments for AASB 119 Estimation of the obligation of Pensions in Payment Projected unit credit method actuarial adjustment Projected plan obligations Net Pension Liabilities 30 June 2020 13,716,212 4,906,681 18,622,893 30 June 2020 13,716,212 4,906,681 6,812,051 25,434,944 6,812,051 The Group reviews annually the discount rate used to calculate the present value of pension plan liabilities. The discount rate used at each measurement date is set based on a high-quality corporate bond yield curve, derived based on bond universe information sourced from reputable third-party indexes, data providers, and rating agencies. Additionally, the expected long term rate of return on plan assets is derived for each benefit plan by considering the expected future long-term return assumption for each individual asset class. A single long-term return assumption is then derived for each plan based upon the plan’s target asset allocation. LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 18: NON-CURRENT LIABILITIES – PENSION LIABILITIES (CONTINUED) The actuarial assumption used in determining the present value of the defined benefit obligation 78 of the pension plans include: Actuarial assumptions Discount Rate Growth in future salaries Pension increase rate Longevity at retirement 30 June 2020 0.25% 1.00% 0.00% 19–22 years The following table depicts the sensitivity of estimated fiscal year 2020 pension expense to incremental changes in the discount rate and the expected long-term rate of return on assets. Actuarial assumptions Reasonably Possible Change Increase Decrease Discount Rate (+/- 0.50%) 22,844,446 28,471,481 Growth in future salaries (+/- 0.50%) 25,886,905 25,014,512 Defined benefit obligation NOTE 19: INTERESTS IN SUBSIDIARIES a. Information about principal subsidiaries The wholly-owned subsidiaries listed below have share capital consisting solely of ordinary shares which are held directly by the Group. The proportion of ownership interests held equals the voting rights held by the Group. Each subsidiary’s principal place of business is also its country of incorporation. Ownership interest Name of subsidiary Principal place of business LiveTiles Holdings Pty Ltd Australia LiveTiles APAC Pty Ltd Australia LiveTiles R and D Pty Ltd Australia LiveTiles Corporation USA Modun Resources Pte Ltd Singapore LiveTiles Ireland Limited Hyperfish, Inc Wizdom A/S CYCL AG Ireland USA Denmark Switzerland 2020 100% 100% 100% 100% 100% 100% 100% 100% 100% 2019 100% 100% 100% 100% 100% 100% 100% 100% 0% LiveTiles Annual Report 2020Consolidated Financial Statements 79 NOTE 19: INTERESTS IN SUBSIDIARIES (CONTINUED) b. Significant restrictions There are no restrictions over the Group’s ability to access or use assets, and settle liabilities, of the Group. c. Acquisition of controlled entities On 3 December 2019, LiveTiles Limited acquired 100% of the shares in CYCL AG (refer to Note 23). d. Disposal of controlled entities There were no disposals of controlled entities. NOTE 20: EQUITY – ISSUED CAPITAL Consolidated Group 30 June 2020 Shares 30 June 2019 Shares 30 June 2020 $ 30 June 2019 $ Ordinary shares – fully paid 871,393,902 624,707,227 202,831,116 122,972,591 Movements in ordinary share capital Date Shares No. Issue Price $ Total $ Balance 01-Jul-2018 473,209,472 61,649,135 Share capital issued Share capital issued Share capital issued Share capital issued Share capital issued Issue of shares upon exercise of Management Incentive Plan shares Less: capital raising costs Balance Share capital issued Share capital issued Share capital issued Share capital issued Share capital issued Less: capital raising costs (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) 14-Aug-2018 42,372,882 $0.59 25,000,000 17-Sep-2018 3,389,853 $0.59 2,000,013 29-Jan-2019 6,769,422 $0.41 2,786,828 11-Feb-2019 45,000,000 $0.34 15,300,000 13-Feb-2019 49,715,598 $0.36 17,828,013 25-Jun-2019 4,250,000 892,500 30-Jun-2019 624,707,227 (2,483,898) 122,972,591 30-Jul-2019 6,810,234 2,786,828 24-Sep-2019 142,857,143 $0.35 50,000,000 18-Oct-2019 14,285,422 $0.35 4,999,999 3-Dec-2019 42,605,922 $0.295 12,568,747 (k) 18-Feb-2020 40,127,954 $0.327 13,131,968 Balance 30-Jun-2020 871,393,902 Restricted shares on issue (l) 30,830,001 – Total issued capital 30-Jun-2020 902,223,903 202,831,116 (3,629,017) 202,831,116 LiveTiles Annual Report 2020Consolidated Financial Statements 80 NOTE 20: EQUITY – ISSUED CAPITAL (CONTINUED) a. On 14 August 2018, LiveTiles Limited issued 42,372,882 shares at $0.59 per share to raise $25,000,000. b. On 17 September 2018, LiveTiles Limited issued 3,389,853 shares at $0.59 per share to raise $2,000,013. c. On 29 January 2019, LiveTiles Limited issued 6,769,422 shares to Orange Fish Holdings LLC as payment for Hyperfish satisfying the performance targets of its first earn out. The fair value of the shares issued is based on the share price of j. On 3 December 2019, LiveTiles Limited issued 42,605,922 shares as consideration for 100% of the shares in CYCL AG. The fair value of the shares issued is based on the share price of LiveTiles Limited at the date of the acquisition. k. On 18 February 2020, LiveTiles Limited issued 40,127,954 shares to Webtop Holding ApS as payment for Wizdom satisfying the performance targets of its earn out. The fair value of the shares issued is based on the share price of LiveTiles Limited at the acquisition date. LiveTiles Limited at the date of the acquisition. l. As at 30 June 2020, LiveTiles Limited had issued d. On 11 February 2019, LiveTiles Limited issued 45,000,000 shares at $0.34 per share to raise $15,300,000. e. On 13 February 2019, LiveTiles Limited issued 49,715,598 shares to Webtop Holding ApS as consideration for 100% of the shares in Wizdom A/S. The fair value of the shares issued is based on the share price of LiveTiles Limited at the date of the acquisition f. On 25 June 2019, 4,250,000 Tranche A Management Incentive Plan shares were exercised at an exercise price of $0.15 per share. The 30,830,001 shares under the Management Incentive Plan. • Tranches A, B and C – 26,250,000 shares were issued under the Management Incentive Plan on 25 August 2015. • Tranches D, E and F – 1,200,000 shares were issued under the Management Incentive Plan on 5 April 2016. • Tranches G, H and I – 300,000 shares were issued under the Management Incentive Plan on 2 June 2017. movement in equity in relation to the options • Tranches J, K and L – 600,000 shares were reflects the amount paid to exercise those MIP issued under the Management Incentive Plan shares, being $637,500, and the modified value on 20 November 2017. of the MIP shares at issue date, being $255,000 g. On 30 July 2019, LiveTiles Limited issued • Tranches M, N and O – 800,001 shares were issued under the Management Incentive Plan 6,810,234 shares to Orange Fish Holdings LLC as on 6 May 2019. payment for Hyperfish satisfying the performance targets of its second earn out. The fair value of the shares issued is based on the share price of LiveTiles Limited at the date of the acquisition. • Tranches P, Q and R – 1,680,000 shares were issued under the Management Incentive Plan on 16 March 2020. h. On 25 September 2019, LiveTiles Limited issued Refer to Note 24(a). 142,857,143 shares at $0.35 per share to raise $50,000,000. i. On 18 October 2019, LiveTiles Limited issued 14,285,422 shares at $0.35 per share to raise $4,999,999. Shares issued under the Management Incentive Plan are not included in the earnings per share calculation in Note 8. LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 21: RESERVES Share based payments reserve Foreign currency translation reserve Pension revaluation reserve Total 81 2020 $ 2019 $ 2,662,669 8,519,292 (872,667) (1,445,373) 445,608 – 2,235,610 7,073,919 a. Share based payments reserve The share based payments reserve records items recognised as expenses on valuation of share based payments. Movements in share based payments reserve Note 2020 $ 2019 $ Opening balance Share based payment expense – management incentive plan – long-term incentive plan – Hyperfish post combination services – Wizdom post combination services 8,519,292 2,277,138 24(a) 24(b) 24(c) 24(d) 132,503 544,023 227,462 225,506 – 4,844,923 3,252,130 3,871,831 Shares issued for Hyperfish earn-out 20(c)(g) (2,672,568) (2,672,568) MIP shares exercised Shares issued for Wizdom earn-out Closing balance 20(f) 20(k) – (255,000) (7,112,711) – 2,662,669 8,519,292 b. Foreign currency translation reserve The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary. Movements in foreign currency translation reserve Opening balance Foreign currency translation of subsidiaries within the Group 2020 $ (1,445,373) 572,706 2019 $ (617,754) (827,619) Closing balance (872,667) (1,445,373) LiveTiles Annual Report 2020Consolidated Financial Statements 82 NOTE 21: RESERVES (CONTINUED) c. Pension revaluation reserve The pension revaluation reserve records movements arising from actuarial gain or loss on the revaluation of the Group’s defined benefit pension plan assets, net of tax. Movements in pension revaluation reserve 2020 $ 2019 $ Opening balance Actuarial gain/(loss), net of tax Closing balance – 445,608 445,608 – – – NOTE 22: CAPITAL AND LEASING COMMITMENTS Operating lease commitments 2020 $ 2019 $ Non-cancellable operating leases contracted for but not recognised in the financial statements Payable – minimum lease payments: – not later than 12 months – between 12 months and 5 years – later than 5 years Total - - - 1,073,822 3,110,984 2,068,827 513,654 7,265,683 Capital commitments 2020 $ 2019 $ Capital commitments contracted for but not recognised in the financial statements Payable – minimum lease payments: – not later than 12 months – between 12 months and 5 years Total 65,404 448,250 513,654 64,676 460,726 525,402 Capital commitments represent minimum capital spend relating to ongoing government grants to be incurred by 31 December 2021. There were no contingent liabilities or assets as at 30 June 2020 (2019: nil). LiveTiles Annual Report 2020Consolidated Financial Statements 83 NOTE 23: ACQUISITION OF CYCL AG On 3 December 2019, LiveTiles acquired 100% of Management has assessed that it is probable that the the shares on issue in CYCL AG (CYCL), the leading performance hurdles will be met and have therefore Switzerland-based intelligent intranet software recorded the full value of the earn-out as a provision provider (Acquisition). CYCL is Microsoft-aligned; for business combination. and through its Condense and MatchPoint products, has a leading market position in Switzerland and The Acquisition meets the requirements of AASB Germany, with a small and growing US presence. 3 Business Combinations therefore CYCL has been The combination of joint capabilities between CYCL’s Group from the date of the acquisition, being consolidated into the financial statements of the MatchPoint product, LiveTiles and Wizdom creates 3 December 2019. an enhanced intelligent workplace offering which will open up greater opportunities to serve enterprise The fair value of the consideration has been customers. CYCL’s Condense product, a low-touch, determined using the market price of LiveTiles mobile-focused product will expand LiveTiles’ shares at the date of the Acquisition, probability of addressable market through targeting organisations with large front-line (deskless) workforces. contingencies being met and an appropriate discount rate to reflect payment periods. The acquisition of CYCL will enable LiveTiles to The Group has assumed that the earn-out payments achieve its strategic product vision more quickly, are paid in full and have been recognised as by the LiveTiles intelligent workplace platform in contingent consideration liabilities. the Microsoft ecosystem. CYCL will allow LiveTiles to deliver new capabilities to current and existing A valuation was undertaken in relation to acquired customers. At the same time, LiveTiles’ leading intangibles with respect to intellectual property AI capabilities provide a significant cross-sell and customer contracts. The relief from royalty opportunity to CYCL’s growing customer base method was used to value the intellectual property. across Europe. This method considers the discounted estimated royalty payments that are expected to be avoided Under the Share Purchase Agreement, the total as a result of the intellectual property. The multi- amount payable for the Acquisition comprises period excess earnings method (MEEM) was used the following two components: to derive the value of customer contracts. The MEEM considers the present value of net cash flows • Base consideration of 42,605,922 shares in LiveTiles Limited and cash consideration of expected to be generated by the customer contracts. A$6,373,461; and • Two earn-out payments contingent upon performance hurdles being met as at 31 December 2020 and as at 31 December 2021. Goodwill has been measured as the excess of consideration over the identifiable net assets of CYCL. LiveTiles Annual Report 2020Consolidated Financial Statements 84 NOTE 23: ACQUISITION OF CYCL AG (CONTINUED) The statement of financial position of the acquired entity, CYCL AG, upon completion of the Acquisition was as follows: Note Fair value at acquisition date $ Cash and equivalents Trade and other receivables Other assets Deferred tax asset Trade and other payables Unearned revenue Pension liability Deferred tax liability Bank overdraft Other liabilities Identifiable intangibles – Software intellectual property – Customer contracts and relationships Net identifiable assets acquired Representing: Shares issued in LiveTiles Limited Up front cash consideration Working capital adjustment Contingent consideration Fair value of consideration transferred Goodwill recognised on acquisition of CYCL 12 12 33,328 1,363,793 1,897,131 1,125,257 (1,637,674) (1,212,554) (6,922,223) (1,890,273) (455,708) (482,447) 9,350,000 2,340,000 3,508,630 12,568,747 6,373,461 306,918 11,613,225 30,862,351 27,353,721 From the date of the Acquisition, CYCL contributed revenue of $8,273,158 and a net loss after tax of $195,973. If the Acquisition had occurred on 1 July 2019, the Group’s consolidated revenue and net profit after tax for the financial year ended 30 June 2020 would have been $14,463,947 and $121,977 respectively. Expenses related to the acquisition of CYCL Transaction costs (a) 2020 $ $339,706 a. The Group incurred costs of $339,706 in relation to the acquisition of CYCL which have been expensed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income as professional fees. The accounting for the transaction at 30 June 2020 is provisional, the Group has 12 months from the date of acquisition to finalise the acquisition accounting to reflect any new information. LiveTiles Annual Report 2020Consolidated Financial Statements 85 NOTE 24: SHARE-BASED PAYMENTS EXPENSE Non-cash share based payment expense – Management Incentive Plan shares – Long Term Incentive Plan shares – Contingent payment on acquisition of Hyperfish, Inc – Contingent payment on acquisition of Wizdom A/S Total share based payments expense Note 2020 $ 2019 $ (a) (b) (c) (d) 132,503 544,023 227,462 225,506 – 4,844,923 3,252,130 3,871,831 3,928,656 9,169,722 a. Management Incentive Plan shares On 25 August 2015, LiveTiles Limited issued 35,000,000 shares to certain Directors via a limited recourse loan under the Management Incentive Plan. The effect of this arrangement is equivalent to granting the Directors an option to purchase the shares at $0.15. These shares were issued in Tranches A, B and C. On 5 April 2016, LiveTiles Limited issued 1,200,000 shares to senior employees of the Company via a loan under the Management Incentive Plan. The effect of this arrangement is equivalent to granting the employees an option to purchase the shares at $0.285. These shares were issued in Tranches D, E and F. On 2 June 2017, LiveTiles Limited issued 300,000 shares to a senior employee of the Company via a loan under the Management Incentive Plan. The effect of this arrangement is equivalent to granting the employee an option to purchase the shares at $0.245. These shares were issued in Tranches G, H and I. On 20 November 2017, LiveTiles Limited issued 600,000 shares to a senior employee of the Company via a limited recourse loan under the Management Incentive Plan. The effect of this arrangement is equivalent to granting the employee an option to purchase the shares at $0.25. These shares were issued in Tranches J, K and L. On 6 May 2019, LiveTiles Limited issued 800,001 shares to a senior employee of the Company via a limited recourse loan under the Management Incentive Plan. The effect of this arrangement is equivalent to granting the employee an option to purchase the shares at $0.57. These shares were issued in Tranches M, N and O. On 3 March 2020, LiveTiles Limited issued 1,680,000 shares to senior employees of the Company via a limited recourse loan under the Management Incentive Plan. The effect of this arrangement is equivalent to granting the employee an option to purchase the shares at $0.15. These shares were issued in Tranches P, Q and R. LiveTiles Annual Report 2020Consolidated Financial Statements 86 NOTE 24: SHARE-BASED PAYMENTS EXPENSE (CONTINUED) Fair value is independently determined using a Black-Scholes option pricing model that takes into account the effective exercise price, the term of the non-recourse loans, the share price at grant date and expected price volatility of the underlying share. An adjustment has also been made to the valuation to reflect the time and price based vesting conditions. The volatility is based on the volatility in the Company’s share price since the date of the reverse acquisition. The assumptions used to value the Management Incentive Plan shares are set out below: Tranche Share price Term of loan to fund acquisition of shares (years) Compounded risk-free interest rate Volatility Discount to reflect vesting conditions A, B, C D, E, F G, H, I J, K, L M, N, O P, Q, R $0.15 $0.25 $0.235 $0.27 $0.445 Effective exercise price $0.15 $0.285 $0.245 $0.25 $0.57 6 6 6 6 6 $0.15 $0.15 6 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 75% 40% 75% 40% 75% 40% 75% 40% 75% 40% 75% 40% Discounted value per share $0.06 $0.10 $0.09 $0.11 $0.17 $0.06 LiveTiles Annual Report 2020Consolidated Financial Statements 87 NOTE 24: SHARE-BASED PAYMENTS EXPENSE (CONTINUED) The value of the loan shares issued under the Management Incentive Plan has been expensed as a share based payment for the period ended 30 June 2020 as follows: Number of Shares Date issued Vesting date Vesting price Expense for 12 months ended 30 June 2020 $ Tranche A 15,000,000 25/8/2015 24/8/2017 Tranche B 10,000,000 25/8/2015 24/8/2018 Tranche C 10,000,000 25/8/2015 24/8/2019 Tranche D 400,000 5/4/2016 6/4/2017 Tranche E 400,000 5/4/2016 6/4/2018 Tranche F 400,000 5/4/2016 6/4/2019 Tranche G 100,000 2/6/2017 2/6/2018 Tranche H 100,000 2/6/2017 2/6/2019 Tranche I 100,000 2/6/2017 2/6/2020 Tranche J 200,000 20/11/2017 20/11/2018 Tranche K 200,000 20/11/2017 20/11/2019 Tranche L 200,000 20/11/2017 20/11/2020 Tranche M 266,667 6/5/2019 5/5/2020 Tranche N 266,667 6/5/2019 5/5/2020 Tranche O 266,667 6/5/2019 5/5/2020 Tranche P 560,000 16/3/2020 16/3/2021 Tranche Q 560,000 16/3/2020 16/12/2021 Tranche R 560,000 16/3/2020 16/12/2021 Total $0.25 $0.35 $0.45 $0.285 $0.285 $0.285 $0.245 $0.245 $0.245 $0.25 $0.25 $0.25 $0.57 $0.57 $0.57 $0.15 $0.15 $0.15 – – 22,603 – – – – – 2,770 – 4,310 7,353 38,502 22,728 15,153 9,870 5,629 3,585 132,503 b. Long Term Incentive Plan shares • On 16 November 2018, LiveTiles Limited issued 4,056,000 options to certain employees under the Long-Term Incentive Plan. • On 16 January 2019, LiveTiles Limited issued 555,000 options to certain employees under the Long-Term Incentive Plan. • On 25 November 2019, LiveTiles Limited issued 4,521,650 options to certain employees under the Long-Term Incentive Plan. • On 16 March 2020, LiveTiles Limited issued 900,000 options to certain employees under the Long-Term Incentive Plan. LiveTiles Annual Report 2020Consolidated Financial Statements 88 NOTE 24: SHARE-BASED PAYMENTS EXPENSE (CONTINUED) Fair value is independently determined using a Black-Scholes option pricing model that takes into account the effective exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share. The value of the loan shares issued under the Management Incentive Plan has been expensed as a share based payment for the period ended 30 June 2020 as follows: Number of options Date issued Vesting date Vesting price Expense for 12 months ended 30 June 2020 $ 200,000 200,000 940,000 940,000 888,000 888,000 185,000 185,000 185,000 611,325 611,325 1,468,500 1,468,500 181,000 181,000 450,000 450,000 Total 16/11/2019 16/11/2019 16/11/2019 16/11/2020 16/11/2019 16/11/2020 16/11/2019 16/11/2021 16/11/2019 16/11/2020 16/11/2019 16/11/2021 16/1/2019 16/1/2020 16/1/2019 16/1/2021 16/1/2019 16/1/2022 25/11/2019 25/11/2021 25/11/2019 25/11/2022 25/11/2019 25/11/2021 25/11/2019 25/11/2022 25/11/2019 25/11/2021 25/11/2019 25/11/2022 16/3/2020 16/12/2021 16/3/2020 16/12/2022 $0.41 $0.41 $0.41 $0.41 $0.59 $0.59 $0.52 $0.52 $0.52 $0.43 $0.43 $0.30 $0.30 $0.30 $0.30 $0.15 $0.15 12,767 27,234 65,146 66,506 57,265 42,880 12,559 17,663 19,357 19,731 14,709 91,149 78,488 6,639 4,428 4,583 2,919 544,023 c. Contingent payment on acquisition of Hyperfish, Inc On 8 June 2018, LiveTiles acquired Hyperfish, Inc from Orange Fish Holdings LLC. Because part of the total amount payable to Orange Fish Holdings LLC is contingent on the continued employment of key Hyperfish staff, such amount is deemed to be a share based payment for post combination services. The fair value has been determined using the market price of LiveTiles shares, probability of contingencies being met and an appropriate discount rate to reflect payment periods. d. Contingent payment on acquisition of Wizdom A/S On 13 February 2019, LiveTiles acquired Wizdom A/S from Webtop Holding ApS. Because part of the total amount payable to Webtop Holding ApS is contingent on the continued employment of key Wizdom staff, such amount is deemed to be a share based payment for post combination services. The fair value has been determined using the market price of LiveTiles shares, probability of contingencies being met and an appropriate discount rate to reflect payment periods. LiveTiles Annual Report 2020Consolidated Financial Statements 89 NOTE 25: CASH FLOW INFORMATION a. Reconciliation of cash flows from operating activities with loss after income tax expense Loss after income tax expense (31,604,441) (42,765,589) Cash flows excluded from profit attributable to operating activities: 2020 $ 2019 $ 3,928,656 1,207,703 10,256,971 1,164,513 3,676,534 (235,761) 430,067 942,942 1,613,485 (631,125) (9,250,456) 9,169,722 (2,283,926) 3,911,926 (504,768) (7,829,851) (909,907) 3,884,554 6,433,296 194,143 (2,374,513) (33,074,429) Non-cash flows in loss: – share based payments expense – foreign exchange differences – depreciation and amortisation – deferred tax Changes in assets and liabilities: – (increase)/decrease in trade and other receivables – decrease in other non-current assets – increase in trade and other payables – increase in other liabilities – increase in provisions – net current assets of acquired entities Cash flows used in operating activities NOTE 26. RELATED PARTY TRANSACTIONS The Group’s related parties are as follows: Parent entity LiveTiles Limited is the legal parent entity. Subsidiaries Interests in subsidiaries are set out in note 19. Key management personnel Key management personnel are limited to those named in the Directors’ report. Those personnel have been determined to have authority and responsibility for planning, directing and controlling the activities of the entity and all payments related to their services have been included in the table below. LiveTiles Annual Report 2020Consolidated Financial Statements 90 NOTE 26. RELATED PARTY TRANSACTIONS (CONTINUED) Payments to key management personnel for services: Note 2020 $ 2019 $ Short term employee benefits Post-employment benefits Share based payments Total 2,706,492 3,503,521 42,006 64,500 41,063 188,241 2,812,998 3,732,825 (a) a. Share-based payments The share based payments relate to the shares issued under the Management Incentive Plan (refer to Note 24(a)). Receivables and payables to key management personnel for services: Non-current receivables: Note 2020 $ 2019 $ Loans to key management personnel (b) 697,381 226,342 Current payables: Accrued short term benefits to key management personnel (45,274) (1,290,633) Net receivables to key management personnel 652,107 (1,064,291) b. Loans to key management personnel The loans have been provided to key management personnel of the Company at arm’s length with a monthly cap of $40,000 and total capped amount of $950,000. Interest charged at 15% per annum and is capitalised annually. NOTE 27: FINANCIAL RISK MANAGEMENT The Group’s principal financial instruments comprise receivables, payables and cash. The Group manages its exposure to key financial risks, including interest rate, foreign currency, credit risk and liquidity risk, with the objective of providing support to the delivery of the Group’s financial target while protecting financial security. The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, interest rate risk and foreign currency risk. The Group uses different methods to measure and manage different types of risk to which it is exposed. These include analysis of aging reports to monitor and manage credit risk, analysis of future rolling cash flow forecasts to monitor and manage liquidity risk, monitoring levels of exposure to interest rate and foreign currency risk, and assessments of market forecasts for interest rate and foreign currency exchange rate movement. The Board reviews and agrees risk management strategies for managing each of the risk identified above. LiveTiles Annual Report 2020Consolidated Financial Statements 91 NOTE 27: FINANCIAL RISK MANAGEMENT (CONTINUED) Primary responsibility for identification and control of financial risks rests with Management under authority of the Board. Risks exposures and responses i. Interest rate risk The Group’s exposure to interest rate risk is minimal given the Group has no borrowings. The Group does not enter into any interest rate swaps, interest rate options or similar derivatives. At the balance date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk that are not designated in cash flow hedges: Financial assets Cash and cash equivalents Net exposure 2020 $ 37,791,314 37,791,314 2019 $ 14,880,920 14,880,920 (Loss)/profit – Higher/(lower) Equity – Higher/(lower) 2020 $ 2019 $ 2020 $ 2019 $ Judgements of reasonable possible movements +0.50% -0.50% 188,957 74,405 188,957 74,405 (188,957) (74,405) (188,957) (74,405) ii. Foreign currency risk The Group’s functional currency is Australian dollars (AUD) and the Group is exposed to transactional currency exposures. Such exposures arise primarily as a result of sales and expenses of LiveTiles Corporation being made in foreign currencies in addition to bank accounts being held in foreign entities. Foreign currency risk is managed by holding the Group’s cash in a combination of USD, DKK, EUR, CHF and AUD. Management also reviews the foreign currency product pricing structure on a quarterly basis. LiveTiles Annual Report 2020Consolidated Financial Statements NOTE 27: FINANCIAL RISK MANAGEMENT (CONTINUED) At balance date, the Group had the following exposure to foreign currencies that is not designated in cash flow hedges: AUD Cash and cash equivalents – USD Cash and cash equivalents – EUR Cash and cash equivalents – DKK Cash and cash equivalents – CHF Trade and other receivables – USD Trade and other receivables – EUR Trade and other receivables – DKK Trade and other receivables – CHF Trade and other payables – USD Trade and other payables – EUR Trade and other payables – DKK Trade and other payables – CHF 2020 $ 16,231,166 1,984,440 680,063 885,374 2,789,250 2,123,585 882,968 1,081,985 (507,015) (55,002) (122,097) (396,672) 92 2019 $ 5,462,747 201,002 1,544,086 – 2,439,301 57,550 3,561,466 – (3,212,450) (42,672) (2,034,139) – Net exposure 25,578,045 7,976,891 LiveTiles Annual Report 2020Consolidated Financial Statements 93 NOTE 27: FINANCIAL RISK MANAGEMENT (CONTINUED) ii. Foreign currency risk (continued) The following sensitivity analysis is based on the foreign exchange rate exposures in existence at the balance sheet date: At the balance date, had the Australian dollar moved, with all other variables held constant, the loss for the year and equity would have been affected as follows: Post tax profit Higher/(lower) Equity Higher/(lower) 2020 $ 2019 $ 2020 $ 2019 $ Judgements of reasonable possible movements AUD/USD +10% AUD/USD -10% AUD/EUR +10% AUD/EUR -10% AUD/DKK +10% AUD/DKK -10% AUD/CHF +10% AUD/CHF -10% 1,851,340 468,970 1,851,340 468,970 (1,851,340) (468,970) (1,851,340) (468,970) 405,302 21,588 405,302 21,588 (405,302) (21,588) (405,302) (21,588) 144,093 307,141 144,093 307,141 (144,093) (307,141) (144,093) (307,141) 157,069 (157,069) – – 157,069 (157,069) – – The judgement of reasonable possible rate movement is based upon management’s current assessment of the possible change in foreign currency exchange rates. This is based on regular review of current trends and forecasts. There has been no change in assumptions and sensitivities from the previous year. iii. Liquidity risk The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments. Less than 6 months 6 to 12 months 1 to 5 years Total 2020 Trade and other payables Income tax payable Total 2019 Trade and other payables Income tax payable Total 7,443,718 1,324,238 8,767,956 7,013,651 406,872 7,420,523 – – – – – – – – – – – – 7,443,718 1,324,238 8,767,956 7,013,651 406,872 7,420,523 LiveTiles Annual Report 2020Consolidated Financial Statements 94 NOTE 27: FINANCIAL RISK MANAGEMENT (CONTINUED) iv. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group assesses the credit worthiness of the counterparty before entering into a sales contract. Further mitigating this risk is the ability to turn off the customer’s software if a customer begins to default on their contractual obligations. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment to those assets, as disclosed in the statement of financial position and notes to the financial statements. v. Fair value of financial instruments Unless otherwise stated, the carrying value of financial instruments reflect their fair value. The carrying amounts of trade receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at their current market interest rate that is available for similar financial instruments. NOTE 28: OPERATING SEGMENTS The consolidated entity has identified three operating segments based on the internal reports that are reviewed and used by the Board of Directors & Chief Executive Officer (who is identified as the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. The operating results of the consolidated entity are currently reviewed by the CODM and decisions are based on three operating segments which also represent the three reporting segments, as follows: Americas APAC EMEA Represents the revenue and operating expenses attributable to activities conducted in United States of America, Canada, Central America & South America. Represents the revenue and operating expenses attributable to activities conducted in Australia, New Zealand & Asia. Represents the revenue and operating expenses attributable to activities conducted in Europe, Middle East & Africa. LiveTiles Annual Report 2020Consolidated Financial Statements 95 NOTE 28: OPERATING SEGMENTS (CONTINUED) The table below shows the segment information provided to the CODM for the reportable segments for the financial years ending 30 June 2019 and 30 June 2020: Consolidated – 30 June 2019 APAC Americas EMEA Unallocated /Head Office Total Subscription revenue 2,654,056 10,812,671 4,625,155 – 18,091,882 Other revenue 3,498,949 329,340 29,908 535,770 4,393,967 Revenue EBITDA 6,153,005 11,142,011 4,655,063 535,770 22,485,849 (3,609,440) (26,013,067) (1,095,856) (8,468,691) (39,187,054) Depreciation & amortisation (1,288,035) (912,672) (12,869) (1,698,350) (3,911,926) Finance costs – – – – – Loss before income tax expenses (4,897,475) (26,925,739) (1,108,725) (10,167,041) (43,098,980) Income tax expense (154,983) (5,689) (10,705) 504,768 333,391 Loss after income tax expenses Consolidated – 30 June 2019 Assets (5,052,458) (26,931,428) (1,119,430) (9,662,273) (42,765,859) APAC Americas EMEA Unallocated /Head Office Total Segment assets 6,896,732 9,370,329 5,898,153 52,237,277 74,402,491 Liabilities Segment liabilities (4,445,953) (9,855,849) (5,779,139) (13,478,152) (33,559,093) LiveTiles Annual Report 2020Consolidated Financial Statements 96 NOTE 28: OPERATING SEGMENTS (CONTINUED) Consolidated – 30 June 2020 APAC Americas EMEA Unallocated /Head Office Total Subscription revenue 5,761,792 12,602,189 19,426,422 – 37,790,403 Other revenue 4,525,109 1,723,704 66,284 362,983 6,678,080 Revenue EBITDA 10,286,901 14,325,893 19,492,706 362,983 44,468,483 (2,193,869) (8,234,355) 206,134 (9,669,403) (19,891,493) Depreciation & amortisation (1,032,509) (2,230,465) (2,819,807) (5,340,961) (11,423,742) Finance costs (15,799) (399,174) (10,242) – (425,215) Loss before income tax expenses (3,242,177) (10,863,994) (2,623,915) (15,010,364) (31,740,450) Income tax expense (158,644) (1,137,196) 267,337 1,164,512 136,009 Loss after income tax expenses Consolidated – 30 June 2020 Assets (3,400,821) (12,001,190) (2,356,578) (13,845,852) (31,604,441) APAC Americas EMEA Unallocated /Head Office Total Segment assets 3,705,484 22,105,609 10,886,378 97,501,482 134,198,953 Liabilities Segment liabilities (4,161,059) (12,474,661) (18,448,967) (15,417,012) (50,501,699) The CODM uses adjusted EBITDA as a measure to assess the performance of the segments. This excludes the effects of significant items of income and expenditure which may have an impact on the quality of earnings such as acquisition costs, legal expenses and impairments when the impairment is the result of an isolated, non–recurring event. It also excludes the effects of equity-settled share-based payments, unrealised gains/losses on financial instruments and amortisation of intangibles. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group. LiveTiles Annual Report 2020Consolidated Financial Statements 97 NOTE 29: CONTINGENT LIABILITIES As per ASX announcements of 2 May 2018 and 1 June 2018, four subsidiaries of LiveTiles have been added to proceedings (among a total of 12 defendants) concerning a shareholder dispute involving the co-founders of LiveTiles, Mr Karl Redenbach (CEO) and Mr Peter Nguyen-Brown (CXO). Proceedings have been brought by Mr Karl Redenbach’s brother, Mr Keith Redenbach. The proceedings have been referred to mediation to take place on 18 September 2020 before Mr McDougall QC, and set down for a hearing to occur later this year. The assessment of the directors is that the outcome remains too uncertain to recognise a liability. NOTE 30: EVENTS AFTER THE REPORTING PERIOD There have been no significant events affecting the Group since the end of the financial year. NOTE 31: COMPANY DETAILS The registered office of the company is: LiveTiles Limited 2 Riverside Quay Southbank VIC 3006 The principal places of business are: Australia Level 14 77 King Street Sydney, NSW 2000 USA 137 W 25th Street 6th floor New York NY 10001 Denmark Toldbodgade 18 Copenhagen 1253 Switzerland Malzgasse 7a Basel 4052 LiveTiles Annual Report 2020Consolidated Financial Statements 98 Directors’ Declaration LiveTiles Annual Report 2020 99 In accordance with a resolution of the directors of LiveTiles Limited, the directors of the company declare that: 1. The financial statements and notes, as set out on pages 42 to 97, are in accordance with the Corporations Act 2001 and: a. comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board; and b. give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended on that date of the consolidated group; 2. in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and 3. the directors have been given the declarations required by s 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer. Director ……………………………………… Karl Redenbach Dated this 27th day of August 2020 LiveTiles Annual Report 2020Directors’ Declaration 100 Independent Auditor’s Report LiveTiles Annual Report 2020 101 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia INDEPENDENT AUDITOR'S REPORT To the members of LiveTiles Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of LiveTiles Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. LiveTiles Annual Report 2020Independent Auditor’s Report 102 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia 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. Revenue Recognition INDEPENDENT AUDITOR'S REPORT Key audit matter How the matter was addressed in our audit To the members of LiveTiles Limited As disclosed in Note 3, the Group recognised software Our procedures, amongst others, included: subscription revenue and services revenue of $37,790,403 for the year ended 30 June 2020. Revenue was identified as a key audit matter as it is a key Report on the Audit of the Financial Report performance indicator to the users of the financial Opinion report and because of the high level of judgement • Considering whether the revenue recognition policies are in accordance with Australian Accounting Standards and the Group’s accounting policies described in Note 1; subscriptions were provided. involved in determining the timing and amounts recognised in revenue over the period the services and We have audited the financial report of LiveTiles Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the supporting documentation, cash receipts and consolidated statement of profit or loss and other comprehensive income, the consolidated statement verified whether revenue was accounted for of changes in equity and the consolidated statement of cash flows for the year then ended, and notes appropriately for the year ended 30 June to the financial report, including a summary of significant accounting policies and the directors’ declaration. throughout the financial year and traced to Selecting a sample of revenue transactions 2020; and • In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: revenue schedules in order to ensure that Obtaining and inspecting the deferred • (i) Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and recognise the revenue in the appropriate correct adjustments were recorded to reporting period. (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Key audit matter Basis for opinion Accounting for the acquisition of CYCL AG 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 (including Independence Standards) (the Code) Reviewing the acquisition agreement to that are relevant to our audit of the financial report in Australia. We have also fulfilled our other shares on issue in CYCL AG (an entity incorporated in ethical responsibilities in accordance with the Code. December 2019 LiveTiles Limited acquired 100% of the As disclosed in Note 23 of the financial report, on 3 Our procedures, amongst others included: How the matter was addressed in our audit understand the key terms and conditions, • Switzerland). and confirming our understanding of the The accounting for this acquisition is a key audit 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. matter due to the significant judgment and complexity Assessing the estimation of the contingent transaction with management; • involved in assessing the fair value of identifiable consideration by challenging the key assets and liabilities and the final purchase price which We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. assumptions including probability of included contingent deferred consideration. achievement of future Annualised Recurring BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. acquired businesses; historical financial information of the Revenue; • Comparing the assets and liabilities recognised on acquisition against the LiveTiles Annual Report 2020Independent Auditor’s Report 103 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia Key audit matter How the matter was addressed in our audit INDEPENDENT AUDITOR'S REPORT To the members of LiveTiles Limited • • Evaluating the assumptions and methodology in management's determination of the fair value assets and liabilities acquired; Obtaining a copy of the external valuation report to critically assess the determination of the fair values of the identifiable intangible assets associated with the acquisition; and • Assessing the adequacy of the disclosures of Report on the Audit of the Financial Report the acquisition. Opinion Carrying value of Intangible Assets We have audited the financial report of LiveTiles Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the Key audit matter consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes At 30 June 2020, the carrying value of Intangible Assets to the financial report, including a summary of significant accounting policies and the directors’ declaration. was $81,054k, as disclosed in Note 12. included, but were not limited to, the following: How the matter was addressed in our audit Our audit procedures to address the key audit matter In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Analysing management’s key assumptions The assessment of the carrying value of Intangible used in the discounted cash flow models to Act 2001, including: Assets requires management to make significant determine their reasonableness; Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and accounting judgements and estimates in producing the (i) discounted cash flow models used to determine Challenging the appropriateness of management’s discount rates used in the discounted cash flow models; Complying with Australian Accounting Standards and the Corporations Regulations 2001. whether the assets are appropriately carried. (ii) An annual impairment test for Intangible Assets is Basis for opinion required for indefinite life assets or where there are We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under indicators of impairment under Australian Accounting those standards are further described in the Auditor’s responsibilities for the audit of the Financial Standard (AASB) 136 Impairment of Assets. Refer to Report section of our report. We are independent of the Group in accordance with the Corporations Note 12 for the detailed disclosures, which include the Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s related accounting policies and the critical accounting Performing sensitivity analysis on key APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) judgements and estimates. assumptions to determine if there would be a that are relevant to our audit of the financial report in Australia. We have also fulfilled our other significant change to the carrying value of ethical responsibilities in accordance with the Code. the asset; Checking the mathematical accuracy of the discounted cash flow model; Challenging assumptions around timing of future cash flows; 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. Assessed the adequacy of the Group’s disclosures in respect of Intangible Assets` carrying values and impairment assessment assumptions as disclosed in note 12 of the financial report; and We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Consider any additional impairment indicators as per AASB 136 Impairment of Assets and the effects of such on management’s assumptions. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. LiveTiles Annual Report 2020Independent Auditor’s Report 104 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2020, 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. INDEPENDENT AUDITOR'S REPORT 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 To the members of LiveTiles Limited report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Report on the Audit of the Financial Report Responsibilities of the directors for the Financial Report Opinion 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 We have audited the financial report of LiveTiles Limited (the Company) and its subsidiaries (the and for such internal control as the directors determine is necessary to enable the preparation of the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the financial report that gives a true and fair view and is free from material misstatement, whether due to consolidated statement of profit or loss and other comprehensive income, the consolidated statement fraud or error. of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ In preparing the financial report, the directors are responsible for assessing the ability of the group to declaration. continue as a going concern, disclosing, as applicable, matters related to going concern and using the In our opinion the accompanying financial report of the Group, is in accordance with the Corporations going concern basis of accounting unless the directors either intend to liquidate the Group or to cease Act 2001, including: operations, or has no realistic alternative but to do so. Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its (i) Auditor’s responsibilities for the audit of the Financial Report financial performance for the year ended on that date; and Complying with Australian Accounting Standards and the Corporations Regulations 2001. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free (ii) 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 Basis for opinion audit conducted in accordance with the Australian Auditing Standards will always detect a material We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under misstatement when it exists. Misstatements can arise from fraud or error and are considered material those standards are further described in the Auditor’s responsibilities for the audit of the Financial if, individually or in the aggregate, they could reasonably be expected to influence the economic Report section of our report. We are independent of the Group in accordance with the Corporations decisions of users taken on the basis of this financial report. Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s A further description of our responsibilities for the audit of the financial report is located at the APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: 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. https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf We confirm that the independence declaration required by the Corporations Act 2001, which has been This description forms part of our auditor’s report. given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. LiveTiles Annual Report 2020Independent Auditor’s Report 105 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of LiveTiles Limited, for the year ended 30 June 2020, INDEPENDENT AUDITOR'S REPORT complies with section 300A of the Corporations Act 2001. Responsibilities To the members of LiveTiles Limited 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. Report on the Audit of the Financial Report Opinion We have audited the financial report of LiveTiles Limited (the Company) and its subsidiaries (the BDO Audit Pty Ltd Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. Gareth Few Director In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Sydney, 27 August, 2020 Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. LiveTiles Annual Report 2020Independent Auditor’s Report 106 Shareholder Information LiveTiles Annual Report 2020 107 The following information is current as at 14 October 2020: 1 Shareholding a. Distribution of Shareholders Category (size of holding) Ordinary Shares % of Shares Listed 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 371,501 12,663,914 19,191,019 170,907,946 699,089,523 902,223,903 0.04 1.40 2.13 18.94 77.49 100.00 b. The number of shareholdings held in less than marketable parcels is 2,798. c. The names of the substantial shareholders listed in the holding company’s register are: Shareholder Karl Redenbach Peter Nguyen-Brown HSBC Custody Nominees (Australia) Limited Webtop Holdings APS d. Voting Rights Ordinary Shares % of Shares Listed 110,622,082 97,872,082 114,282,562 40,127,954 12.26 10.85 12.67 4.45 The voting rights attached to each class of equity security are as follows: Ordinary shares • Each ordinary share is entitled to one vote when a poll is called; otherwise each member present at a meeting or by proxy has one vote on a show of hands. LiveTiles Annual Report 2020Shareholder Information 108 e. 20 Largest Shareholders – Ordinary Shares Name Number of Ordinary Fully Paid Shares Held % Held of Issued Ordinary Capital 1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 114,282,562 2. ZTH TECH PTY LTD3. NIA TECH PTY LTD 4. WEBTOP HOLDINGS APS 5. CITICORP NOMINEES PTY LIMITED 6. NATIONAL NOMINEES LIMITED 7. MR KARL REDENBACH 8. MATTHIAS WALTER 8. PATRICK PUNTENER 9. MR BRIAN COOK 10. MR KEFENG GAO 11. ORANGE FISH HOLDINGS LLC 12. MR PETER NGUYEN-BROWN 13. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 14. MR ANTHONY SHANE KITTEL & MRS MICHELE THERESE KITTEL 15. BOYCECORP PTY LTD 16. MR ANDREW JAMES GRAY 17. URS BRAWAND 18. BNP PARIBAS NOMINEES PTY LTD 91,122,082 57,427,638 40,127,954 26,397,424 24, 297, 168 19,500,000 15,406,870 15,406,870 10,049,132 6,848,888 6,810,234 6,750,000 6,274,513 6,126,133 5,498,445 5,305,556 4,872,258 4,357,049 19. MR ANTHONY SHANE KITTEL & MRS MICHELE THERESE 3,600,000 KITTEL 20. ARRAKIS NOMINEES PTY LTD 12.67 10.10 6.37 4.45 2.93 2.69 2.16 1.71 1.71 1.11 0.76 0.75 0.75 0.70 0.68 0.61 0.59 0.54 0.48 0.40 0.40 474,034,110 52.54 LiveTiles Annual Report 2020Shareholder Information 109 2 The name of the company secretary is Andrew Whitten. 3 The address of the principal registered office in Australia is: 2 Riverside Quay Southbank VIC 3006 Telephone +61 2 8072 1400 4 Registers of securities are held at the following addresses: Automic Pty Ltd Level 5, 126 Phillip Street Sydney NSW 2000 5 Stock Exchange Listing Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited. 6 Unquoted Securities Nil LiveTiles Annual Report 2020Shareholder Information 110 Corporate Information LiveTiles Annual Report 2020 LiveTiles Annual Report 2020 Corporate Information 111 The registered office of the company is 2 Riverside Quay Southbank VIC 3006 Australia Share Registry Automic Group Level 5, 126 Phillip Street Sydney NSW 2000 Sydney The principal place of business is LiveTiles Limited 137 West 25th Street, 6th Floor New York NY 10001 United States Auditors BDO Sydney Level 11, 1 Margaret Street Sydney NSW 2000 Australia Stock exchange listing LiveTiles Limited shares are listed on the Australian Securities Exchange. (Ticker: LVT) Website www.livetilesglobal.com Annual General Meeting The 2020 Annual General Meeting of LiveTiles Limited will be held via video conference on 9am on 30th November 2020. LiveTiles is the global leader in intranet and workplace technology software, creating and delivering solutions that drive digital transformation, productivity and employee communications in the modern workplace. LiveTiles have operations spanning North America, Europe, Asia and Australia, and services over 1,000 Enterprise customers in over 30 countries. LiveTiles was named by The Australian Financial Review as Australia’s fastest growing technology company in 2020 and by Forrester & Gartner as a leader in this space globally. livetilesglobal.com