ANNUAL REPORT 2021 Consolidated financial statements for the year ended 30 June 2021 LiveTiles Limited • ABN 95 066 139 991 LiveTiles Annual Report 2021 2 Contents Company Snapshot Letter from the Chair and CEO Director’s Report Remuneration Report Consolidated Financial Statements Independent Auditor’s Report Shareholder Information Corporate Information 3 10 16 36 52 103 108 112 Contents 3 COMPANY SNAPSHOT LiveTiles Annual Report 2021 LiveTiles Annual Report 2021 Company Snapshot 4 WE ARE LIVETILES LiveTiles creates workplace technology for companies of all sizes to connect their employees to everything they need at work for a more personal, productive and purposeful experience. From complex digital workplaces to quick-to-deploy mobile apps our solutions help connect people to the very best employee experiences. Our company is a pioneer in the Employee Experience Platform (EXP) space. Employee experience is LiveTiles views Employee Experience in 5 key pillars: the emotional connection that emerges from the • Connection – helping companies create authentic experience between a person and their employer. relationships between employees and employers. Great Employee Experience is where employees are deeply connected and engaged to a company’s purpose, brand, values and vision, and where employees are enabled to perform at their best and are happy and healthy at work and in life. • Engagement – helping employees communicate and collaborate effectively within their teams and across the organisation. Simplifying the way people do their work by creating experiences that bring content from many systems into a single interface. • Well-being – helping companies prioritise the well-being of their people. • Performance – helping people understand how to be successful in their roles, by creating highly connected, engaged and healthy employees. • Inspiration – helping companies create environments where people are inspired to drive strong company performance and innovation. COMPANY SNAPSHOT Product sales commenced in February 2015 Listed on the Australian Stock Exchange in September 2015 2018 - Acquired Hyperfish, a US AI/Bot company for A$8.9m LiveTiles Annual Report 2021 5 The EXP industry is growing at a rapid rate as LiveTiles products offer a range of business-critical companies around the world make the investments capabilities, enabling strong communications, needed to improve the experience of their employees collaboration and engagement between employees. to retain talent and increase productivity. This also includes a powerful integration service which facilitates the seamless integration of key Employers need to adapt to become a place where business system’s data from other applications all employees actually want to work, not somewhere into the LiveTiles experience. they need to. An employee will interact with their workplace technology differently depending on With both Desktop and Mobile solutions, LiveTiles whether they are a frontline worker or at a desk, is one of the few companies in the world that offers a Millennial or a Baby Boomer, a Full-Timer or a a fully integrated solution to all workers. Contractor. Employee Experience Platforms must bridge all these divides. MOBILE Newly launched mobile application for staff communications. Primary target market : Frontline workers with no PC access. Our Solutions 10 DESKTOP Solutions for improving the workplace tech environment. From intranet to more complex Employee Experience Platforms (EXP). Our products make it easy for employees to get the information they want, in the application or environment of their choice. 2019 - Acquired Wizdom, a Danish digital software company for A$48m 2019 - Acquired CYCL, a Swiss intranet software company for $32.2m 2.3m Contracted Licences as at 30 June 2021 92% ARR Net Retention Rate Company Snapshot LiveTiles Annual Report 2021 Company Snapshot 6 Mobile employee app LiveTiles Reach Desktop Employee Experience Platform Demand has exceeded expectations A solution to simplify the complexity of the traditional digital workplace. Description Employee communications app. SaaS product hosted by LiveTiles. Description Target market Frontline workers with no PC access. e.g. Healthcare, Retail, Services, Construction, Manufacturing Market size US $11bn1 Competitors Workplace by Facebook, Staffbase, Workjam, Beekeeper, Dynamic Signal, Slack etc Complexity Low Go to market Direct and via Partners Sales cycle 1-6 months +. In person meetings preferable. Installation within minutes. Complexity “Stay in the loop with personalised employee experiences for everyone.” 1. Source : Statista https://www.statista.com/statistics/633178/worldwide-communication- software-market-size/ What was a traditional intranet has transformed into a much more complete offering. Low code, customisable solutions with a variety of additional features to drive strong employee experience. Target market Medium to large enterprises with >500 employees Market size US $300bn Competitors Highly fragmented market. Traditional IT firms, Company in-house developers, Unily, Simplrr, LumApps, Igloo, Valo, Powell etc. Medium to high. Most large organisations require integration and customisations of “tool kit”. LVT’s proprietary integration hub facilities this. LVT also offers a variety of advanced add-on capabilities such as “Directory” and “Everywhere”. Go to market Direct and via Partners Sales cycle 6-12 months. In person meetings preferable. More than an “intranet”, LiveTiles is a pioneer in this evolving space. Revenue of $45m as at June 2021 $(1.1)m Underlying EBITDA $51.8m Cash receipts 7 Operating revenue up 19% year on year Operating Revenue Govt. and Other Income 44.5 46.7 37.8 45.0 6.7 FY20 1.7 FY21 22.5 18.1 4.4 FY19 $AUDm Average annualised recurring revenue per customer up 22% 57% 5yr CAGR $A $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 7 1 n u J 7 1 c e D 8 1 n u J 8 1 c e D 9 1 n u J 9 1 c e D 0 2 n u J 0 2 c e D 1 2 n u J $45m Operating Revenue +19% yoy 2.3m Contracted licences +48% yoy +1211% LiveTiles Reach (Mobile) licence growth (yoy) $(1.1)m Underlying EBITDA +91% yoy LiveTiles Annual Report 2021Key Statistics Total contracted licences up 48% in FY21 Mobile Licences +1211% 28k FY20 363k FY21 Desktop Licences +14% 1.5m 1.7m FY20 FY21 Mobile & Desktop Bundled (EXP) +458% 245k 44k FY20 FY21 Licences for both products TOTAL +48% 2.3m 1.6m FY20 FY21 8 $51.8m Cash receipts +26% yoy 145 Employees in the US, EMEA and APAC $62.8m ARR +17% yoy 92% ARR Net $ Retention LiveTiles Annual Report 2021Key Statistics 9 Cash receipts up 26% for FY21 m $ D U A 60 50 40 30 20 10 0 51.8 41.0 19.6 6.9 8 1 n u J 7 1 c e D 8 1 c e D 9 1 n u J 9 1 c e D 0 2 n u J 0 2 c e D 1 2 n u J Annualised recurring revenue by industry as at 30 June 2021 6% Education 13% Other 9% Financial services 19% Services 13% Retail/ Consumer 14% Industrials 14% Government 12% Healthcare LiveTiles Annual Report 2021FY21 Financial and Business Highlights 10 LETTER FROM THE CHAIR AND CEO LiveTiles Annual Report 2021 11 Chairman’s Letter Dear Shareholder, It is a pleasure to present LiveTiles’ Annual Report for the 2020-21 financial year. Since my appointment in September 2020, LiveTiles has progressed from a digital workplace technology provider to a pioneer in the Employee Experience Platform (EXP) space. ‘Employee Experience’ as we knew it has changed forever and a renaissance of the concept is underway - right now - as a result of the dramatic changes in working environments around the globe. Organisations are becoming more mindful of the experiences they influence. Almost every organisation is realising the need to fundamentally change the way it engages with employees, the way it attracts and develops them, and ultimately, the way it connects with them so that employees feel they belong to a deeply connected purpose-driven community. Employees, now more than ever, need the means to connect, and disconnect, to set boundaries for the betterment of their own and their colleagues’ health and wellbeing. It’s no longer just about getting employees to engage with content. But it’s about generating deeper connections and interactions where employees are engaging, collaborating and learning from each other. We believe that LiveTiles is uniquely positioned to capitalise on the rapidly evolving EXP market. We are one of the few companies in the world that offers fully integrated solutions - both mobile and desktop – that enhances the engagement and collaboration needs of any employee in any industry, presenting both short- and long-term growth opportunities. In FY21, LiveTiles became ‘leaner and sharper’ concentrating on improvements across the business and realising healthy growth in our licence base and operating revenues. We reduced operating expenditures putting the company on a pathway to profitability and our Board is committed to continue its focus on disciplined cost management during FY22 and beyond. In acknowledgement of our share price performance and shareholder feedback, the Board commissioned an independent strategic review in Q3 of FY21 with the aim of evaluating the operations, structure and strategy of LiveTiles. The Board endorsed the review findings, resulting in a new strategic plan, with the execution of this plan started in late Q4 FY21, and will continue throughout FY22. The review confirmed that LiveTiles is well positioned to capitalise on the growing Employee Experience market noting the recent success of LiveTiles Reach. It has been encouraging to see the success of LiveTiles Reach, our Employee Experience mobile app, and the competitive advantage it has given LiveTiles in the market. Our LiveTiles Reach offering has been instrumental in securing record company deals and work with renowned global organisations such as United Healthcare Group, Nestle and Footlocker. This success comes as a result of production innovation based on deep customer insight, dedication to our long-term view and relationship building, and I thank the LiveTiles team for these achievements to date. We look forward to significantly leveraging our LiveTiles Reach offering within the EXP market in FY22. Another important outcome of the review has been our focus on improving LiveTiles’ operating efficiencies. The leadership team is focused on simplifying our business model, on consolidating our product portfolio, on refining our go-to-market strategy, and on disciplined performance management. To date, this has had improved underlying performance, which we expect to continue throughout FY22 and beyond. The outcomes of the commissioned review did not come without its challenges. The company undertook a restructure during Q4 of FY21, which resulted in a number of our colleagues leaving. We thank them for their contributions and commitment to LiveTiles. LiveTiles Annual Report 2021Letter from the Chair and CEO 12 During the 2021 financial year, I was delighted to I would like to thank our shareholders, customers welcome Fiona Le Brocq and Jesse Todd to the and partners for their ongoing support and patience LiveTiles Board. Fiona is a highly regarded branding during what has been an unusually challenging and marketing expert with additional skills in pandemic environment. digital transformation, customer experience and employee experience. Jesse brings an impressive The Company is focused and well positioned range of complementary skills including a forensic to maximise EXP growth opportunities in FY22 understanding of technology solutions particularly and beyond. for blue-chip companies and large public sector organisations across the globe. We will also continue to focus on inclusion and diversity. In terms of gender diversity, 57% of all new Yours sincerely, hires during FY21 in the APAC region are female. However, the Board does acknowledge that overall Dr Marc Stigter only 25% of LiveTiles employees are female and only Chairman one of the five board members is female. In FY22, LiveTiles Ltd. the Board will make the reshaping of our inclusion and overall diversity strategies, targets and measurements a top priority. Our people deserve a sincere thanks for their hard work and affective commitment to LiveTiles. I have been impressed by the collective ability, desire and courage of LiveTilers to think differently and create unforgettable experiences for our customers. This is not just an espoused value but a consistently demonstrated one that has become the norm within LiveTiles. The vibe and energy that I am experiencing at LiveTiles underpins our culture. How we foster and further evolve our own Employee Experience and culture during the next few years will be a key area of focus to me. LiveTiles Annual Report 2021Letter from the Chair and CEO 13 CEO’s Letter to Shareholders FY21 Operational Overview Dear Shareholder, Customers and Partners The last 12 months have been extraordinary, and I’d like to offer my thanks for your continued investment and support. FY21 was not without its global operational challenges due to the ongoing uncertainty with COVID-19. But we have continued to make significant improvements across the business during the year, while executing strict cost discipline, and we are pleased with the foundation the Company has built for FY22. FY21 Financial Performance Overview Our focus on delivering the best Employee Experience solutions through innovation and service has resonated strongly with customers and users. Over the last 12 months we have continued to obsess over providing the best experience possible for our customers with product and service innovations, as well as strategic partnerships to help grow sales pipeline. We have been successful in leveraging strategic partnerships to accelerate customer acquisitions, drive product innovation and improve the customer experience. Examples include making strategic Despite the challenges of FY21, our contracted licence investments into R&D partnerships with leading base grew 48% to 2.3 million, including an outstanding Australian Universities and research bodies, to 1211% increase in LiveTiles Reach. LiveTiles Reach deepen the functionality of LiveTiles products, was instrumental in signing record company deals joining the ServiceNow Partner Program and with some of the world’s largest brands, including the International Association of Microsoft United Healthcare Group and Nestle, which helped Channel Partners to broaden our go-to-market deliver 19% growth in operating revenues to $45m. channel opportunities, and our certification with Combined with our continued focus on keeping ISO27001:2013, a highly sought-after information operating expenditures under control, LiveTiles is now on a path to profitability with Underlying EBITDA1 security management standard. at $(1.1)m, a 91% improvement from FY20.A deeper Employees and social well-being look into the numbers reveals more encouraging signs for our business. Cash Receipts of $51.8m in FY21 were a fresh record, that’s an increase of 26% year on year and represents a 96% 3-year Compound annual growth rate. Adjusted2 net operating cash flow on a trailing twelve month basis has improved by 72% from $(22)m in FY20 to $(6.2)m. Cash and cash equivalents was $16.8m as at 30 June 2021, leaving sufficient capital to manage ongoing operations. At LiveTiles, we believe that Employee experience (EX) is the emotional connection that emerges from the experience between a person and their employer. Our continuous mission is to ensure that LiveTiles employees feel deeply connected to our company’s values, purpose, brand, and vision. As a company, we are always evolving and embracing change as we adapt to fluctuations in the market and the needs of our customers. However, our internal values are one aspect of the employee experience that remain constant and unwavering. 1. Underlying EBITDA excludes non-cash expenses and one-off non-recurring items 2. Adjusted Net Operating Cash Flows includes cash payments for capitalised software development costs (reported in Investing Activities), lease liability payments (reported in Financing activities) and excludes government grant income, as this is an accurate reflection of the Company’s operating cash positions LiveTiles Annual Report 2021Letter from the Chair and CEO 14 The LiveTiles core values state that we are 2025 Carbon Target decent humans, we get stuff done, and we create unforgettable experiences. These values underpin all aspects of the employee experience at LiveTiles, from recruitment, to onboarding, to conduct, to performance management, development, and all the moments in between. LiveTiles has always prided itself on being a people first company, one that embraces work/life blend (note, we don’t use the term “balance” which we believe to be more suggestive of a complex juggling act), and we are a company that truly cares about the wellbeing of its employees. Globally we have implemented competitive and consistent leave policies that encourage employees to take paid leave when needed or desired. In addition to annual leave, employees are provided additional Employee Experience Platforms help human beings work remotely and more efficiently. Our software reduces carbon emissions by boosting the performance and wellbeing of the human beings using it, as well as minimising unnecessary travel and bottlenecks. Today, LiveTiles takes another step. We are pledging to achieve net-zero emissions by 2025. This is significantly ahead of many industry peers. Our strategy to reduce our emissions will be multifaceted and will be assisted by Tim Hodgson, founder of carbon pledge start-up MyNetZero, to help bring our employees and our partners on this journey with us. Outlook days of paid leave to dedicate to initiatives that bring In light of the ongoing uncertainty created by the global joy outside of work. COVID-19 pandemic and the challenges it brings to the global business operations, the Group has decided not Our unique Employee Experience (EX) days allow to provide guidance in respect to FY22, other than employees 2 additional days per year to try new to reiterate its continued focus on disciplined cost experiences, and our Volunteering policy encourages management strategies and execution of the following employees to take up to 4 days throughout the year key strategic measures: to give back to the community or contribute to a cause that will better our world. • Continuing to leverage the operating model for efficiencies to maximise commercial opportunities The pandemic has highlighted the growing importance • Reshaping the go-to-market model and simplifying of mental health awareness and support in the LiveTiles’ product portfolio workplace, and LiveTiles has bolstered its existing programs to include quarterly training in mental health first aid. The company has expanded the reach and accessibility of its Employee Assistance Program (EAP) with 24/7 phone or online counselling • Accelerating the product roadmap for scale and working with strategic partners in new product development to further cement LiveTiles leading position in the global Employee Experience market. available in all regions and time zones. In addition to • The addition of our Employee Mobile App has mental health support, LiveTiles employees have the not only strengthened our product offering but opportunity to participate in regular online fitness increased the work environments that we can classes, meditation and mindfulness sessions, and target so that all workers can maximise their frequent social gatherings (online and in person) to Employee Experience. further support wellbeing and connection. LiveTiles Annual Report 2021Letter from the Chair and CEO 15 We would like to express our gratitude to the ongoing support from our shareholders, customers and partners and thank our dedicated staff for their commitment and hard work. We remain focused on delivering our new Premiership Plan, our unchanged vision to be a market leader in Employee Experience and building long term value for our shareholders. Our Board and Management team are committed to continue to focus on disciplined cost management strategies to maximise our growth opportunities and our confidence in the medium to longer term outlook remains strong. Karl Redenbach Chief Executive Officer & Co-Founder LiveTiles Ltd LiveTiles Annual Report 2021Letter from the Chair and CEO 16 DIRECTORS’ REPORT LiveTiles Annual Report 2021 17 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 2021. 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: Dr Marc Stigter Non-executive Chair (appointed 11 September 2020) Karl Redenbach Executive Director and Chief Executive Officer Peter Nguyen-Brown Executive Director and Chief eXperience Officer Jesse Todd Non-Executive Director (appointed 15 April 2021) Fiona Le Brocq Non-Executive Director (appointed 15 April 2021) Andrew McKeon Non-Executive Director (resigned 15 April 2021) David Lemphers Non-Executive Director (resigned 11 September 2020) Dana Rasmussen Non-Executive Director (resigned 15 April 2021) 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 None Peter Nguyen-Brown Executive Director and Chief Experience Officer Appointed 25 August 2015 Experience and qualifications Peter Nguyen-Brown has over 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 Remuneration Committee Directors’ ReportLiveTiles Annual Report 2021 18 Marc Stigter Non-Executive Chair Appointed 11 September 2020 Experience and qualifications Dr Marc Stigter is a global expert in creating high value boards, and driving strong leadership and performance in organisations. Marc is a former Shell Country Chairman in the Middle East and worked for other blue-chip companies around the world. He earned a PhD at Lancaster University Management School (UK) and also has three Masters degrees. He is an Honorary Senior Fellow at the University of Melbourne and an Associate Director at Melbourne Business School. His books on rethinking governance, strategy and culture are published by Bloomsbury and Palgrave Macmillan. Special responsibilities Remuneration Committee, Audit and Risk Committee Jesse Todd Non-Executive Director Appointed 15 April 2021 Experience and qualifications Jesse Todd is a global technology leader specialising in governance technology solutions for enterprise companies and public sector organisations across the world. Mr Todd is the co-founder and current CEO of compliance software consultancy firm Informotion and SaaS compliance platform EncompaaS. Prior to that Jesse served as Head of Group Technology for the Royal Bank of Scotland where he was responsible for technology across all the non-trading functions. In addition, Jesse has as worked for some of the largest financial companies including BT, Deutsche Bank and ABN AMRO. Special responsibilities Audit and Risk Committee (chair), Remuneration Committee Fiona Le Brocq Non-Executive Director Appointed 15 April 2021 Experience and qualifications Fiona Le Brocq has more than 25 years’ experience in marketing, building and growing brands across industries including health insurance and healthcare, digital marketplace and finance. She is passionate about customer-centricity, and the role that brands play to drive long-term growth. She spent 15 years agency-side working with ANZ, Transurban, Qantas and ABC before more moving to NAB, followed by SEEK, then moving to Medibank in 2015. Fiona’s current role is Senior Executive, Brand, Marketing & CX, responsible for customer growth, brand strategy and management, digital marketing & automation and lifecycle strategy. Special responsibilities Audit and Risk Committee, Remuneration Committee (chair) Andrew McKeon Non-Executive Director Appointed 1 April 2017, resigned 15 April 2021 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 Directors’ ReportLiveTiles Annual Report 2021 19 David Lemphers Non-Executive Director Appointed 1 September 2018, resigned 11 September 2020 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, resigned 15 April 2021 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 Remuneration Committee 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 Peter Nguyen-Brown Dr Marc Stigter Jesse Todd Fiona Le Brocq Andrew McKeon David Lemphers Dana Rasmussen 90,982,547 78,232,547 118,105 175,900 - - - - - - - - - - - - Directors’ ReportLiveTiles Annual Report 2021 20 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 Karl Redenbach Peter Nguyen-Brown Dr Marc Stigter1 Jesse Todd2 Fiona Le Brocq3 Andrew McKeon4 David Lemphers5 Dana Rasmussen6 Notes: 7 7 4 2 2 5 3 5 7 7 4 2 2 5 1 5 – – 1 1 1 – – – – – 1 1 1 – – – – 1 – – – – 1 1 – 1 – – – – 1 1 1. Dr Marc Stigter was appointed as Chair and Non-Executive Director on 11 September 2020 2. Jesse Todd was appointed as Non-Executive Director on 15 April 2021 3. Fiona Le Brocq was appointed as Non-Executive Director on 15 April 2021 4. Andrew McKeon resigned as Non-Executive Director on 15 April 2021 5. David Lemphers resigned as Non-Executive Director on 11 September 2020 6. Dana Rasmussen resigned as Non-Executive Director on 15 April 2021 Committees and membership During the year, the Company had the following committees: • Audit and Risk Committee; and • Remuneration Committee. The Remuneration Committee was in place from 1 July 2020 for the entire FY21; the Remuneration Committee consisted of the following Board Members through the period: David Lemphers 1 July 2020 – 11 September 2020 Dana Rasmussen (Chair) 1 July 2020 – 15 April 2021 Peter Nguyen-Brown 1 July 2020 – 30 June 2021 Marc Stigter 11 September 2020 – 30 June 2021 Fiona Le Brocq (Chair) 15 April 2021 – 30 June 2021 Jesse Todd 15 April 2021 – 30 June 2021 Directors’ ReportLiveTiles Annual Report 2021 21 On 15 April 2021 the Audit and Risk Committee was re-established. Mr Todd was appointed as Chair of the Audit and Risk Committee and Dr Stigter and Ms Le Brocq as members. Dr Stigter assumed the position of Chair of the Board upon his appointment on 11 September 2020. Members acting on the committees of the board during the year were: Audit and Risk Committee Remuneration Committee Jesse Todd (Chair) Fiona Le Brocq Dr Marc Stigter Fiona Le Brocq (Chair) Jesse Todd Dr Marc Stigter Peter Nguyen-Brown Dana Rasmussen (resigned 15 April 2021) David Lemphers (resigned 11 September 2020) Information on Company Secretary David Hwang has held the position as Company Secretary of the Company since 7 April 2021. Prior to that, Andrew Whitten held the position as Company Secretary of the Company since 28 April 2015. David is a Principal of Automic Legal and Chief Compliance Officer of Automic Group. He is an experienced executive, corporate lawyer and company secretary specialising in listings on ASX (IPOs and reverse listings), equity capital markets and providing advice on corporate governance and compliance issues. David currently serves as outsourced company secretary and non-executive director to a number of ASX listed entities. David holds a Bachelor of Laws from UNSW. Principal activities The Group’s principal continuing activities during the year was being a Software as a Service (SaaS) provider, specialising in the development and sale of Employee Experience software via cloud-based platform offerings. LiveTiles is a global leader in the Employee Experience workplace software market, creating and delivering solutions that drives engaged employee communication and collaboration in the modern workplace. LiveTiles has over 1,000 enterprise customers representing a diverse range of sectors across North America, Europe and Asia Pacific. Directors’ ReportLiveTiles Annual Report 2021 22 Operating and Financial review Certain financial information in the review of business operations below referencing Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) has been derived from the reviewed financial statements. The Annual Recurring Revenue (ARR1), EBITDA and Underlying EBITDA positions are non-IFRS financial information used by Directors and Management to assess the underlying performance of the business and as such have not been reviewed in accordance with Australian Auditing Standards. During the year ended 30 June 2021, despite the ongoing global challenges with COVID-19, LiveTiles has achieved another year of strong growth across its key business metrics of ARR, Revenues, EBITDA and Cash. • ARR grew +17% to $62.8m (2020: $53.8m), comprising 1,078 customers (2020: 1,092). On a constant currency basis when compared with 30 June 2020 FX rates, ARR grew 20% to $64.7m as at 30 June 2021. • Operating Revenues grew +19% to $44. 98m (2020: $37.8m). • EBTIDA improved by +19% to $(16.2)m 2020: $(19.9)m. On an Underlying EBITDA basis, there was a +91% improvement year over year to $(1.1)m. • Cash Receipts grew +26% to $51.8m (2020: $41m) and Adjusted Net Operating Cash Flows2 improved +26% to $(19.6)m (2020: $26.6m), when excluding one-off non-recurring payments in FY21 this position improved +72% to $(6.2)m leaving cash balance at 30 June 2021 at $16.8m (2020: $37.8m). 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. Adjusted Net Operating Cash Flows includes cash payments for capitalised software development costs (reported in Investing Activities), lease liability payments (reported in Financing activities) and excludes government grant income, as this is an accurate reflection of the Company’s operating cash positions. Directors’ ReportLiveTiles Annual Report 2021 The table below summarises the Group’s statement of profit or loss and other comprehensive income for the year, as well as the EBITDA and Underlying EBITDA positions, which are used as key management reporting metrics. 23 Software subscription revenue Software related services revenue Total operating revenue Other income Total Revenue Cost of revenues Gross Profit Gross Profit Margin Product research and development Sales and marketing General and administration Total operating expenses One off costs Depreciation and amortisation Non cash expenses Net Operating Profit / (Loss) EBITDA EBITDA Margin Underlying EBITDA Underlying EBITDA Margin Notes (a) (b) (c) (d) (e) FY21 ($000s) 34,402 10,574 44,977 1,745 46,722 (12,155) 32,821 73.0% (12,158) (15,399) (13,856) (41,412) FY20 ($000s) 28,981 8,810 37,790 Movement 19% 20% 19% 6,678 (74)% 44,468 5% (9,591) 28,200 (27)% 16% 74.6% (16 pp) (7,086) (72)% (24,628) (21,060) (52,774) 37% 34% 22% (14,030) (2,197) (539)% (5,950) (2,737) (6,508) (5,139) (29,562) (31,740) (16,206) (36.3)% (1,134) (2.8)% (19,891) (52.6)% 163 pp (12,558) 91% (33.2)% 304 pp 9 % 47% 7% 19% Net Profit / (Loss) after tax (30,141) (31,604) 5% Notes (a) Excludes other income. (b) (c) Includes amortisation of capitalised software development costs of $5.3m during the period. One-off costs include non-recurring expenses in connection to the settlement of litigation settled during the financial year, and one-off $1.6m Employee restructure and redundancy costs made in Q4FY21. (d) Non-cash expense items include $0.7m share based payments, $1.7m finance charges related to discounting of CYCL earn out provision and $0.3 unrealised foreign currency movements. (e) In the 31 December 2020 appendix 4D accounts, the term Adjusted EBITDA was used; this has now been changed to Underlying EBTIDA as a more accurate and appropriate measure of underlying company performance. There is no change however to the calculation or interpretation of the measure. Underlying EBITDA excludes non-cash expenses and one-off non-recurring items. Directors’ ReportLiveTiles Annual Report 2021 24 Financial Year 2021 Highlights ARR and Revenues Organic ARR (Reported Currency) Operating Revenue Acquired ARR in FY Govt. and other Income 62.8 53.8 49.1 62.8 4.7 FY20 FY21 40.1 32.1 8.0 FY19 44.5 46.7 22.5 18.1 4.4 FY19 37.8 45.0 6.7 FY20 1.7 FY21 ARR (AUD $m) Revenue (AUD $m) Despite the challenging operating environment over the past 12 months due to COVID-19, LiveTiles has successfully grown its Operating Revenues by +19% in FY21 when compared to FY20. This growth highlights the strength of the LiveTiles product offering in the evolving Employee Experience market in a post-COVID work environment. Results driven by the Company’s new business sales from both direct and indirect channels, the evolving sales motion of cross-selling LiveTiles products and upselling licence counts into existing customers, strategic partnerships, ongoing product innovation and strengthening brand awareness. For the 12 months to 30 June 2021, total revenue and other income was $46.72m (2020: $44.47m), including subscription revenue of $34.40m (2020: $28.98m), Software related services revenue of $10.57m (2020: $8.8m) and government grant, other income of $1.7m (2020: $6.7m). In addition, unearned revenue (a balance within the Statement of Financial Position) was $13.5m (2020: $11.28m); a result of invoicing customers their full fees in advance of their subscription period, a feature of Software as a Service (SaaS) business models. Directors’ ReportLiveTiles Annual Report 2021 25 ARR grew by +17% to $62.8m (2020: $53.8m) • Alliance Partnerships. These contracted comprising 1,078 paying customers (2020: 1,092) partnerships provide channels for the re-sale and with an average ARR per customer of $58.3k. use of LiveTiles and alliance partner products to On a constant currency basis when compared with the partner’s end-customers each year. During the 30 June 2020 FX rates, ARR grew +20% to $64.7m period there were existing contracted partnership as at 30 June 2021. arrangements recognised in the ARR from prior periods, that had approx. $2.4m not transact into ARR Net $ Retention3 at 30 June 2021 for the revenue throughout periods of FY21 due to the 12-month period was 92%. lack of sales by Partners to their end-users and uncertainty on any potential billing and collection During the past 12-18 months LiveTiles, its customers efforts on the Partner itself. and partners have all experienced various challenges from the impact of the COVID-19 pandemic and as a result; variances between the Company’s reported ARR and FY21 operating revenues have been realised, further explained from the following key material contributing factors: • COVID relief and deferred billings. LiveTiles had customers and partners that faced financial • Adverse FX movements: over the past 12 months throughout COVID-19 the global markets have been exposed to large currency fluctuations and with 61% of LiveTiles revenues coming from outside Australia, the company has been impacted with adverse FX rate movements when converting signed contracts to AUD, with an adverse impact of approximately $2.1m. hardships at various stages due to COVID and the Company in the interest of maintaining its existing • Delays in projects go-live: with a combination of larger complex integrations and the ongoing and long-term relationships with these partners COVID-19 restrictions limiting the ability for and customers agreed to provide commercial relief face-to-face project workshops, these have both during the financial year. It was agreed to provide contributed to longer delays from when a contract deferred billings or one-off reduced billed amounts is signed (timing of ARR recorded) to when with continued access to its subscription whilst projects go-live and the licence effective dates maintaining their contracted ARR values; over start (timing of accounting revenue recorded), the course of the financial year this contributed to this has contributed approx. $2.2m of the ARR approx. $2.3m for customer and $2.5m for partners and Revenue variance across both partner and of the ARR and Revenue variance. customer channels. These commercial concessions were provided as a one-off; and the customers and partners will return • Partner Margin: a cohort of partners acquired through the Group acquisitions historically had to their regular billing cycles per their ARR amounts their gross contracted amounts reported in ARR, in FY22. whilst accounting revenue was reported as net of partner discount margins, this has created approx. $1.8m of the ARR and Revenue variance. This was corrected over the last two quarters of FY21 and will remain reported in the ARR value as ‘net’ of partner discount margin, which is in line with rest of the Group’s ARR recognition policy. 3. Net Retention is ARR expansion from existing customers less any down sells or cancellations in the period / ARR at the beginning of the period. This does not include any ARR contracted to new customers or impact of FX currency movements in that period. Directors’ ReportLiveTiles Annual Report 2021 26 Customers By Industry 20% 15% 10% 5% 0% Education Finance G overn m ent H ealthcare Industrials C onsu m er Services O ther By Size ARR Per Customer 26% 58.3 57% 5yr CAGR 49.3 0 0 0 $ D U A 43.6 28.1 11.0 5.2 6.2 FY15 FY18 FY21 74% Enterprise Mid Market Directors’ ReportLiveTiles Annual Report 2021 27 During the 2021 financial year, Average ARR per customer over the year grew +18% from $49.3k to $58.3k and +22% to $60.0k on a constant currency basis when using 30 June 2020 FX rates. A result that reflects the shift in focus towards a greater mix of our customer based towards larger Enterprise customers. During the period, there were 110 new customers added, taking total customer numbers at 30 June 2021 to 1,078, (2020: 1,092). LiveTiles, as a leader in the Employee Experience market, continues to broaden its global base of enterprise customers, driven by the portfolio of products that addresses the needs of the corporate and front-line workforce around engagement, communication and collaboration. During the financial year 2021, the Group announced its three largest ever Customer signings with Footlocker (Q2), United Healthcare Group (Q3) and Nestle (Q4), that combined represents over 650,000 employees globally to potentially engage and collaborate using the LiveTiles Platform, demonstrating the diverse and competitive offering LiveTiles provides across multiple industries. Operating Expenses and EBITDA Performance $AUDm +$3.6m EBITDA (AUD $m) FY21 vs FY20 7.2 (16.2) (11.8) 4.1 (19.9) 2.3 (2.6) (4.7) 9.2 FY20 EBITDA Revenue Cost of Sales R&D S&M G&A One-Offs Non-Cash Expenses FY21 EBITDA Directors’ ReportLiveTiles Annual Report 2021 28 Product Research and Development AUD $000s FY21 FY20 Movement Product research and development (12,158.3) (7,085.9) 72% % of Total Revenue 26.0% 15.9% 101 pp R&D increased $4.7m, the increase was a result of having the CYCL developer team for the full year, which was acquired in Q2-FY20 and new strategic investments with third party R&D partners that commenced in Q4FY21 (see Strategic Review update below). During the year approx. $5.3m of R&D work on commercialised software was capitalised, in accordance with AASB138, up from $4.9m from 2020. Sales and Marketing AUD $000s Sales and marketing % of Total Revenue FY21 FY20 Movement (15,398.7) (24,628.4) (37%) 34.2% 65.2% (309 pp) Sales & Marketing improved by +37% with $9.2m savings, a key factor to the savings in the period was reduced marketing and T&E due to COVID19 restraints as well as the cancellation of a large US sales partnerships in Q3FY20. General and Administration AUD $000s FY21 FY20 Movement General and administration (13,855.5) (21,060.0) (34%) % of Total Revenue 29.7% 47.4% (177 pp) General & administration improved by 34% and $7.2m compared to 2020. Savings were realised through a slowdown of hiring in the departments, a reduction in office locations and lease costs and no professional fees incurred through capital raises or acquisition activities. Other Items impacting the results for 2021, include One-Off costs $14m incurred in connection with the settlement of litigation and legal costs during the period and an organisation restructure with redundancy costs in Q4FY21. Non-cash expense $2.7m items include employee share based payments, revaluation charges relating to the CYCL earn out provision and unrealised foreign currency movements. Directors’ ReportLiveTiles Annual Report 2021 29 Cash Receipts m $ D U A 60 50 40 30 20 10 0 51.8 41.0 19.6 6.9 8 1 n u J 7 1 c e D 8 1 c e D 9 1 n u J 9 1 c e D 0 2 n u J 0 2 c e D 1 2 n u J Adjusted net operating cashflow Adjusted net operating cashflows (exlcuding non-recurring, one off items) FY19 FY20 FY21 FY19 FY20 FY21 m $ D U A (33.8) (19.6) (26.6) m $ D U A (22.2) (33.0) (6.2) +72% YoY +26% YoY Cash Receipts of $51.8m for the Group in financial year 2021 was a record and saw 26% increase on the prior year and a 96% 3 year Compound Annual Growth Rate (CAGR). Cash Flows: Adjusted Net Operating Cash Flows on a Trailing Twelve Month (TTM) basis of $(19.6)m, improved +26%, compared to FY20 and when excluding one-off non-recurring items, this improved by +72% to net outflows of $(6.2)m. Improvements driven by increasing cash receipts and continued focus by Management on disciplined cost management. Cash and cash equivalents $16.8m as at 30 June 2021. Directors’ ReportLiveTiles Annual Report 2021 30 Significant activities during the financial year Company Strategic Review Following the review, the Board has since approved a new Company strategic plan with clearly defined goals. Underpinning this plan are three key initiatives, outlined below, that the Company looks to execute The Board and LiveTiles Management are pleased to over the short to mid-term, with part of these share the outcomes of the recently completed review initiatives already implemented. The initiatives are of the LiveTiles global business and the Company’s designed with the intent to drive the business to be strategic plan going forward. The review was initiated more focused, simplified, efficient, sustainable and in Q3 2021 with the view to evaluate and simplify achieve product-led growth for FY22 and beyond. its operations, improve the financial health, build a strategy to reposition the business for new growth By 2024 the Company aims to achieve the and scale, as well as to align and optimise the following three key strategic goals: company structure. The strategic business review was completed Employee Experience 1. Be recognised as the global leader in by an independent ex-McKinsey consultant with over 10+ years of global SaaS experience, with the following key outcomes identified: 2. Significantly increase Licenced User numbers, with minimum 5x growth 3. Have 50% of the world’s top 300 employers • Business Model opportunity to simplify the overall as LiveTiles customers model. It has inherited complexities from past acquisitions and now has two core products Achievement of these goals will be made through requiring different operating models. The Go-to- three focused initiatives across the business: market strategy and execution needs an overhaul to deliver scalable, high velocity growth. 1. Go-to-Market • Strategy: opportunity to clearly define vision, 2. Operating efficiencies 3. R&D and Product Investment strategy and direction of the company, to provide focus for product, sales and marketing teams, and to provide clarity to customers and investors. • Performance: opportunity to realign organisation structure aligned to focused strategic goals, top-down. • Product Focus opportunity to further simplify both the go-to-market and the product development priorities, to drive strong focus internally, and to compete strongly in the addressable market that LiveTiles plays in. • Financial: focus needed on improving cash burn, leveraging the foundations of a strong customer book, identify and chase profitable and scalable products. Directors’ ReportLiveTiles Annual Report 2021 31 1 Go-to-Market Model Land and Expand As part of the organisational restructure, the go-to-market and sales model has been adjusted, with a focus to not only continue with new business sales, which accounts for 71% of FY21 ARR growth; however, to increase our attention and investment into existing Account Management function and account-based marketing to drive greater upsell and cross-sell motions to our existing 1,000+ customers. There will be a specific focus on the existing customer base that accounts for 70% of current revenues, with an aim to have over 40% of future ARR growth come from existing customers and strengthen the Net $ Retention rates by 5-10% and move towards SaaS best in class. Starting from 1 July, the Account Management function now has 42% of total field roles compared to 26% in FY21. Enterprise and Small-Medium Sized Business (SMB) Starting in Q1FY22; there will be a shift in the investment and focus of the sales and marketing teams to the Enterprise and Mid-Market customer markets only, whilst the Company will provide a newly launched digital platform for the SMB market to access our Employee App offering (LiveTiles Reach) in a low to no touch motion. The approach is to get LiveTiles Reach into the hands of as many users as possible, whilst allowing LiveTiles focus to be on the higher return value customer. To support this initiative, we are launching a new LiveTiles Reach dedicated website, a robust digital marketing strategy and an engaging free LiveTiles Reach trial – bolstering LiveTiles Reach app downloads by 10x and an expected increase of 15-20% in LiveTiles Reach paying customers achieved as an outcome of conversions through the trial download. Product simplification 2 Operating Efficiencies The review determined that LiveTiles product offering is strong relative to its peers and has a unique competitive advantage to offer solutions to all customers, regardless of work environments (office vs front-line workforce). It identified that LiveTiles owns two distinct, yet very complimentary product offerings, both Mobile and Desktop solutions, that create an overall Employee Experience platform offering. Yet it also recognised that the sales and The review put forward several initiatives to improve key business operating efficiencies to maximise its commercial opportunities and drive long term sustainability. The key areas of focus for improving operating efficiencies over the next 12-24 months will be the following: Organisational Restructure and Alignment marketing strategies had not evolved along with In Q4FY21 the Company undertook an organisation this product shift and that the timing was ideal to restructure, aligned to the new strategic plan and re-align the product and go to market strategy. an outcome of the business review. These changes saw a reduction of 27 roles (16% of total Q3FY21 Going forward, 65-70% of marketing investments will headcount) across the business and a repositioning of move towards scaling LiveTiles Reach, the Employee roles into newly created positions, primarily focused Experience App to help scale the number of LiveTiles on customer facing activities. Through this exercise Reach licences sold. Particularly when LiveTiles the Company has realised approx. $3.5m in annualised Reach exceeded expectations with licence sales savings to invest back into the business over the next growth of +1211% in FY21 compared to FY20 12-24 months to help achieve the strategic growth and when combined with its simplicity and short plans, with a total of $1.6m in associated restructuring implementation time. and redundancy costs. Directors’ ReportLiveTiles Annual Report 2021 32 Improvement in Customer Acquisition Costs (CAC) 3 Product and R&D By simplifying the go-to-market model, business LiveTiles operates in a competitive Employee operations and focusing on the two core Employee Experience market and the shifts in buyer behaviour Experience solutions, Mobile and Desktop, this will and employee experience needs post-pandemic have allow the Company to better position its investments now opened a range of new product development into customer demand generation and marketing opportunities to invest in through both our organic initiatives that will help to improve our CAC and product development activities and along with customer profitability. strategic partners. To continue to maintain this competitive advantage, LiveTiles’ product and R&D The following activities are planned to be spend as a % of Total revenues will be approx. 27-35% implemented through FY22 with to improve the over the next 12 months, with the core investments current CAC payback period from 18months down focused in the following areas: to 12months and continue the trajectory of increasing the CAC:LTV from 2.6x (2020), 3.7x (2021) to at least 5-6x: • A redesign of the go-to-market pricing structure to align the new simplified product sale focuses (Mobile, Desktop or full-scale EX offering), a rebase of the discounting practices and provide scope for easy price add-ons to be made for value added features (e.g. Analytics services). Continue to expand and accelerate existing product roadmap In the same manner with the refined go to market and product simplification strategy, there will be a focus on evolving the LiveTiles Platform to enhance its rich feature set of the LiveTiles Reach SaaS products and consolidating the developed and acquired Intranet products over past 6 years. • Reset and re-contracting of approximately 70-80% marketing supplier agreements, with payments tied This work will see the LiveTiles product offerings being consolidated into one agnostic LiveTiles to set performance outcomes, rather than fixed fee Employee Experience Platform, that enables deliverables. There has also been a deliberate and customers (the Employer) to seamlessly connect, strategic focus on recruiting agencies with global collaborate and communicate with their Employees. capabilities, that can focus on driving scalable An example of these new and important projects are: growth in key priority markets such as the USA. • A newly established dedicated account management model (as outlined in item 1), with a compensation model to monetise customers faster to shorten the payback period and on achieving net $ retention benchmarks, with a minimum 95% threshold. • Analytics Services – deep proactive real time insights into the adoption and usage of employee experience applications, a service offering that is agnostic to the LiveTiles products and able to integrate with insights from other key business systems, using LiveTiles Integration Core product (see below). • Integration Core – one stop shop for connecting employee experience applications to business-critical systems (i.e. ServiceNow, Salesforce, Workplace, Jira etc.). Directors’ ReportLiveTiles Annual Report 2021 33 Innovation and scale through new channels and R&D partners These emerging use cases and activities will open new channels to market with these R&D partners The rapid digitisation of workplaces over the past 18 months presents new opportunities for our platform to be leveraged for specific use cases, such as employee well-being and climate change focus. LiveTiles will leverage existing innovation and deep technical experience with these R&D partners to accelerate bringing new products to market. Recognising these opportunities, LiveTiles has and present new customer use case opportunities from our evolving platform linked to specific high value outcomes. As such, LiveTiles believes its necessary to invest in these white-label initiatives and sees approximately 50-60% of total R&D spend going towards these strategic initiatives. Other Business Updates established strategic R&D partnerships with specialist Partnerships providers of these services, who have leveraged our LiveTiles continues to dedicate its go to market LiveTiles Reach product and our Employee Experience focus through its channel partners, in addition to platform to further develop and scale their offerings the direct sales approach. The number of contracted combined with LiveTiles software, under a white-label partners grew to 324 as at 30 June 2021 (up 46% product strategy. Including for example: since 30 June 2020), with the majority of LiveTiles’ partner channel activity contribution coming from • A trial using the LiveTiles Reach platform, the EMEA market with 38% of all partners. deployed into a global mining company to provide an employee well-being app experience to all Microsoft relationship employees. This strategy is underpinned by the size LiveTiles strategic relationship with Microsoft of the emerging Employee Well-Being marketplace, continues to strengthen each year, including following a Total Addressable Market (TAM) considered key activities: to be worth up to $33.6bil.4 • LiveTiles Reach being leveraged to support climate change focus groups within companies through a partnership with Monash University’s Climate Works. • Announced a new alliance and co-sell agreement with Microsoft, whereby LiveTiles Reach and LiveTiles Directory will be sold through the Microsoft’s SMC sales centre in the US. Also announced a co-marketing motion with Microsoft • LiveTiles is working on global AI initiatives which in the US to jointly target strategic enterprise includes projects with HumanLink, CSIRO’s Data61 accounts; The depth this of partnership and its and their National AI Centre, which will focus on co-sell activities was evidenced in the period, using the LiveTiles Reach platform to collaborate with the strong support provided in the United and engage at scale with the Australian developer Healthcare Group tender win. and engineering community, to assess personal and ethical values and understanding how they influence the outcome of bias in AI development. • In May, LiveTiles signed on the International Association of Microsoft Channel Partners (IAMCP) as a customer and strategic partner to • Develop a LiveTiles marketplace for Employee allow them to broaden its communications and Experience software and product solutions collaboration solutions, using LiveTiles Reach enabling low touch deployment to a broad range to engage and help its 2,000+ Microsoft partner of EX needs. The marketplace will provide a digital network, a network that represents $10bn in platform for customers, prospects and trial users partner revenues. to access a range of LiveTiles features and key third-party partner solutions for specific use cases. 4 Global Wellness Institute: Self-Improvement sub-market (Nov9-2020) https://globalwellnessinstitute.org/press-room/press-releases/gwi-finds-mental-wellness-is-a-121-billion-market/ Directors’ ReportLiveTiles Annual Report 2021 34 Industry Recognition Share options During the year, Gartner, a global technology During the financial year, no options were exercised. analyst firm released their Market Guide for Intranet Packaged Solutions, where LiveTiles was named As at the date of this report and as at the reporting as the largest vendor in terms of total deployments date, there were 17,851,550 options on issue and revenue (outside of Workplace by Facebook). (2020: 10,032,650). Refer to note 23 of the financial This type of research and recognition is significant statements for details on options issued during for LiveTiles, as the analyst coverage helps formally the financial year. define the market and market opportunity, and many executives of the largest companies in the Significant changes in state of affairs world subscribe to this, these industry recognition Other than as outlined in the Operating and papers have helped LiveTiles win in large competitive financial review of the Directors’ Report, there were tender processes. CYCL Integration no significant changes in the state of affairs of the Group during the financial year. LiveTiles Switzerland (formerly CYCL AG) was Outlook and likely developments successfully integrated during the 2021 Financial In light of the ongoing uncertainty created by the Year and is now an integral and key component to global COVID-19 pandemic and the challenges it the LiveTiles Group, with its two products becoming brings to the global business operations, the Group integral and fully deployed into the LiveTiles offering, has decided not to provide guidance in respect to with LiveTiles Reach and Intranet Hub further FY22, other than to reiterate its continued focus on strengthening the LiveTiles platform. CYCL’s team disciplined cost management strategies and execution now comprises the core of the global product and of the following key strategic measures: development team and the majority of Professional Services team in EMEA, whilst one of the co-founders • Continuing to leverage the operating model for is now LiveTiles global CTO; a testament to the efficiencies to maximise commercial opportunities. strength of their product team. Significant events since the end of the financial year • Reshaping the go-to-market model and simplifying LiveTiles’ product portfolio. There have been no significant events affecting • Accelerating the product roadmap for scale and the Group since the end of the Financial Year. working with strategic partners in new product development to further cement LiveTiles leading Environmental regulation and performance position in the global Employee Experience market. The Directors are not aware of any significant environmental issues affecting the Group or its The Directors continue to expect strong medium compliance with relevant environmental agencies to long-term growth potential for LiveTiles, driven or regulatory authorities. Dividends by increased remote working and the demand for Employee Experience solutions to support organisations in a post pandemic working environment. No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. Directors’ ReportLiveTiles Annual Report 2021 35 Indemnification and insurance of officers The directors are of the opinion that the services as and directors Under the Company’s constitution, to the extent permitted by law and subject to the provisions of the Corporations Act 2001, the Company indemnifies every Director, executive officer and secretary of disclosed in Note 6 to the financial statements do not compromise the external auditors’ independence requirements of the Corporations Act 2001 for the following reasons: the Company against any liability incurred by that • all non-audit services have been reviewed and person as an officer of the Company. The Company approved to ensure that they do not impact the has insured its Directors, executive officers and the integrity and objectivity of the auditors; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 35 of Annual Report. Company Secretary for the 2021 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 the liabilities insured by the policy or the amount of the 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. Indemnification of auditors The Company’s auditor, BDO Audit Pty Ltd, has not been indemnified under any circumstance. Non-audit services Details of the amounts paid or payable to the Company’s auditors for non-audit services provided during the financial year are outlined in Note 6 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditors (or by another person or firm on the auditors’ behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Directors’ ReportLiveTiles Annual Report 2021 36 REMUNERATION REPORT LiveTiles Annual Report 2021 37 REMUNERATION REPORT (AUDITED) 1 Introduction This Remuneration Report for the year ended 30 June 2021 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 2021. 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 Jarrod Magee Chief Financial Officer (appointed 14 October 2020) Rowan Wilkie Chief Financial Officer (ceased to be KMP 14 October 2020) Non-Executive Directors Dr Marc Stigter Non-Executive Chair (appointed 11 September 2020) Jesse Todd Non-Executive Director (appointed 15 April 2021) Fiona Le Brocq Non-Executive Director (appointed 15 April 2021) Andrew McKeon Non-Executive Director (resigned 15 April 2021) David Lemphers Non-Executive Director (resigned 11 September 2020) Dana Rasmussen Non-Executive Chair (resigned 15 April 2021) There were no other changes to KMP after the reporting date and before the date the financial report was authorised for issue. LiveTiles Annual Report 2021Remuneration Report 38 2 Remuneration governance The Remuneration Committee was in place from 1 July 2020 for the entire FY21; the Remuneration Committee consisted of the following Board Members through the period: David Lemphers 1 July 2020 – 11 September 2020 Dana Rasmussen (Chair) 1 July 2020 – 15 April 2021 Peter Nguyen-Brown 1 July 2020 – 30 June 2021 Marc Stigter 11 September 2020 – 30 June 2021 Fiona Le Brocq (Chair) 15 April 2021 – 30 June 2021 Jesse Todd 15 April 2021 – 30 June 2021 The Remuneration Committee 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 Remuneration Committee also reviews the remuneration arrangements for the non-executive directors of the Board, including fees, travel and other benefits. Non-director members, including members of management, may attend all or part of Remuneration Committee meetings. Further information on Remuneration can be seen in the Corporate Governance Statement on the Company’s website at www.livetilesglobal.com/company/investors/. LiveTiles Annual Report 2021Remuneration Report 39 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. Short term incentives (STI) Paid in cash or shares. 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. Discretionary bonus linked to specific financial and non- financial targets. Executives and other key employees who have an impact on the Group’s performance. Executives and other key employees. 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. Company performance A key underlying principle of the Group’s executive remuneration framework is that remuneration levels should be linked to Group performance. As the Group’s strategy is focused on investing in growth to drive recurring revenues and set up for future profitability, it has not been appropriate, to date, to assess the Group’s performance on the basis of profitability. LiveTiles Annual Report 2021Remuneration Report 40 The Group’s key financial measures of performance are summarised in the table below: 30 June 2021 30 June 2020 30 June 2019 30 June 2018 30 June 2017 Annualised Recurring Revenue $62.8m $53.8m $40.1m $15.0m $4.0m Cash balance Share price Loss before income tax expense and non-recurring and non-cash items $16.8m $37.8m $14.9m $17.8m $3.5m $0.15 $0.23 $0.44 $0.48 $0.23 $(9.8)m $(21.3)m $(34.2)m $(20.8)m $(6.2)m Dividends nil nil nil nil nil The Group’s key financial measure of performance over the longer term includes the increase in annualised recurring revenue which has increased to $62.8 million at 30 June 2021 from $53.8 million 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. Base salary Superannuation Bonus Karl Redenbach, CEO and Executive Director1 Peter Nguyen- Brown, CXO and Executive Director2 Jarrod Magee, CFO3 Rowan Wilkie, CFO4 $977,160 Statutory minimum $700,000 Statutory minimum $300,000 Statutory minimum $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 30% of base salary, subject to meeting performance targets. Discretionary cash bonus capped at 50% of base salary, subject to meeting performance targets. Notice period 6 months 6 months 3 months 3 months Notes: 1 The Remuneration Committee approved an increase for Karl Redenbach from US$690,000 to US$750,000 effective from 1 July 2020. During the year, Mr Redenbach’s remuneration was adjusted as a result of his re-location to Australia, at which point his salary was converted to AUD at the prevailing FX rate of USD 1 : AUD1.3029. The Remuneration Committee approved a base salary increase for Peter Nguyen-Brown A$500,000 to A$700,000 effective from 1 July 2020. Jarrod Magee joined LiveTiles as CFO and a KMP on 14 October 2020. Rowan Wilkie ceased to be a KMP on 14 October 2020. 2 3 4 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. LiveTiles Annual Report 2021Remuneration Report 41 5 Executive remuneration details Details of the remuneration paid to KMP executives for the year are set out below. Fixed remuneration and Long-Term Incentive (LTI) In 2019, the Board implemented the outcomes of an independent review of the Company’s executive director remuneration. In FY20 due to the impacts of the COVID19 pandemic, rather than having ARR growth as the only measure, a focus on cash management was also required. For the 2021 financial year, the same principles from both 2019 and 2020 were also applied. These changes were also a result of investor and proxy firm feedback to add additional performance metrics beyond ARR growth to the Company’s fixed remuneration framework. In relation to the FY21 LTI measures, the aim was to foster greater alignment between employees, shareholders, customers and executive outcomes, with the focuses on: i. long term financial performance hurdles and delivery against the Company longer-term strategy; and ii. creation of sustained shareholder value. In financial year 2021 no Executive Directors were awarded LTI. The CEO and CXO, respectively, remain the single largest shareholders in the Group, providing strong alignment with shareholder interests. Future measures of long-term value creation, in the form of incentive schemes as part of executive remuneration, will be reviewed by the Board in financial year 2022. Short-Term Incentive (STI) In respect of Executive Director STI for financial year 2021, the targets related to ARR growth, balancing the operating investments that drive growth with disciplined cash efficiencies as stated above and other qualitative metrics aligned to strategy. ARR growth 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 future revenues 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 shareholder. Whilst the cash measures have been adopted in light of recent macro-environment pressures and a view by the Board to drive disciplined cost initiatives. For financial year 2021, the Group achieved +17% ARR growth and realised a +26% improvement in its Adjusted Net Operating Cash Flow on a trailing 12-month basis. The Remuneration Committee assessed the Executive Directors to have achieved their FY21 STI targets; however, the Executive Directors offered to forego their FY21 bonus payments considering the current macro environment and ultimately in the interests of the Company and shareholders. This was accepted and endorsed by the Remuneration Committee. The Company’s annual performance management cycle is due to complete by October. The Board will update investors on the performance management cycle outcome and metrics at the Company’s Annual General Meeting in November 2021. CFO targets relate to the external audit, global taxation framework, robust financial performance and analysis, implementation of key business systems, strategic planning, transformation, and operations support. LiveTiles Annual Report 2021Remuneration Report 42 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 $ s u n o b I T S Karl Redenbach 2021 993,554 - 2020 853,199 298,860 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 7,231 - 1,000,785 0% - 16,952 1,169,011 27% Peter Nguyen-Brown Jarrod Magee Rowan Wilkie2 Total 2021 700,000 - 111,934 21,694 - 833,628 2020 477,652 220,000 48,835 21,003 5,651 773,141 2021 214,773 35,000 13,150 15,866 46,172 324,961 2020 - - - - - - 2021 109,375 153,875 6,001 6,327 11,075 286,653 2020 325,739 30,000 28,050 21,003 76,384 481,176 2021 2,017,702 188,875 131,085 51,118 57,247 2,446,027 2020 1,656,590 548,860 76,885 42,006 98,987 2,423,328 0% 29% 25% - 58% 22% 10% 27% 1 Represents shares issued under the Management Incentive Plan and options under the Long Term Incentive Plan (as detailed in Section 7 of the Remuneration Report and Note 23 of the financial statements), and shares issued in lieu of cash STI. 2 Mr Wilkie ceased being a KMP on 14 October 2020 therefore the table reflects remuneration up to that date. 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 director letters of appointment are in place with Dr Marc Stigter, Jesse Todd and Fiona Le Brocq. For the period from 11 September 2020 to 30 June 2021, Dr Stigter was entitled to remuneration of $165,000 per annum (including superannuation, if applicable). For the period from 15 April 2021 to 30 June 2021, Mr Todd was entitled to remuneration of $110,000 per annum (including superannuation, if applicable). LiveTiles Annual Report 2021Remuneration Report 43 For the period from 15 April 2021 to 30 June 2021, Ms Le Brocq was entitled to remuneration of $110,000 per annum (including superannuation, if applicable). For the period from 1 July 2020 to 15 April 2021, Mr McKeon was entitled to remuneration of $100,000 per annum (including superannuation, if applicable) (2020: $100,000). Mr McKeon resigned as Non-Executive Director on 15 April 2021. For the period from 1 July 2020 to 15 April 2021, Ms Rasmussen was entitled to remuneration of $100,000 per annum (including superannuation, if applicable) (2020: $100,000). Ms Rasmussen resigned as Non-Executive Director on 15 April 2021. For the period from 1 July 2020 to 11 September 2020, Mr Lemphers was entitled to remuneration of $100,000 per annum (including superannuation, if applicable) (2020: $100,000). Mr Lemphers resigned as Non-Executive Director on 11 September 2020. The table below outlines remuneration paid to non-executive directors for the year. e v i t u c e x e - n o N r o t c e r i d r a e y l a i c n a n i F $ s e e F $ 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 $ 1 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 Dr Marc Stigter1 2021 131,875 Jesse Todd2 Fiona Le Brocq3 Andrew McKeon4 David Lemphers5 Dana Rasmussen6 Cassandra Kelly7 Total 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 - 23,333 - 23,333 - 87,083 95,000 20,076 95,000 87,083 70,000 - 33,750 2021 372,784 2020 293,750 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,216 - - - - - - - - - 2,216 - - - - - - - - - - - - - - - - - $ l a t o T 131,875 - 23,333 - 25,549 - 87,083 95,000 20,076 95,000 87,083 70,000 - 33,750 375,000 293,750 - - - - - - - - - - - - - - - - 1 Dr Marc Stigter was appointed as Non-Executive Chair on 11 September 2020. 2 3 4 Jesse Todd was appointed as Non-Executive Director on 15 April 2021. Fiona Le Brocq was appointed as Non-Executive Director on 15 April 2021.During the period, Ms Le Brocq was overpaid $2,217 as at 30 June 2021, this overpayment has since been adjusted for in the FY22 period. Andrew McKeon resigned as Non-Executive Director on 15 April 2021. 5 David Lemphers resigned as Non-Executive Director on 11 September 2020. 6 Dana Rasmussen resigned as Non-Executive Director on 15 April 2021. 7 Cassandra Kelly resigned as Non-Executive Director on 27 September 2019. LiveTiles Annual Report 2021Remuneration Report 44 7 Equity instruments held by key management personnel Long Term Incentive Plan The purpose of the Long Term Incentive Plan (LTIP) is to assist in the reward, retention and motivation of eligible management and employees and to align the interests of these persons more closely with the interests of the Company’s shareholders. Options issued under the LTIP to key management personnel have been structured such that KMPs are remunerated only when the Company’s share price exceeds the vesting price. The following tranches of options have been issued to key management personnel under the LTIP: Tranche Number of shares Date issued Vesting date Expiry date Vesting price 2020 150,000 01/03/2021 01/03/2023 01/03/2025 $0.36 Fair value per share at grant date $0.07 The following table represents options issued to key management personnel under the LTIP. Balance at 1 July 2020 Issued during the year Exercised during the year Net change other Balance at 30 June 2021 Fair value at 30 June 2021 Senior Executives Karl Redenbach Peter Nguyen-Brown Jarrod Magee Rowan Wilkie Non-executive directors Marc Stigter Jesse Todd Fiona Le Brocq Andrew McKeon David Lemphers Dana Rasmussen Cassandra Kelly - - - - - - - - - - - - - 150,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 150,000 $10,500 - - - - - - - - - - - - - - - - LiveTiles Annual Report 2021Remuneration Report 45 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. 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: No. of shares Date issued Vesting date Expiry date Vesting price Fair value1 Tranche A 15,000,000 25/08/2015 24/08/2017 24/08/2021 Tranche B 10,000,000 25/08/2015 24/08/2018 24/08/2021 Tranche C 10,000,000 25/08/2015 24/08/2019 24/08/2021 Tranche M 266,667 06/05/2019 05/05/2020 06/05/2025 Tranche N 266,667 06/05/2019 05/05/2021 06/05/2025 Tranche O 266,667 06/05/2019 05/05/2022 06/05/2025 Tranche S Tranche T 100,000 15/01/2021 15/10/2021 15/01/2027 100,000 15/01/2021 15/10/2022 15/01/2027 Tranche U 100,000 15/01/2021 15/10/2023 15/01/2027 1 Fair value per share at grant date. $0.25 $0.35 $0.45 $0.57 $0.57 $0.57 $0.23 $0.23 $0.23 $0.06 $0.06 $0.06 $0.17 $0.17 $0.17 $0.09 $0.09 $0.09 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. LiveTiles Annual Report 2021Remuneration Report 46 Shareholdings of Key Management Personnel (KMP) The table below outlines the ordinary shares held by KMP (excluding shares held under the MIP). Balance at 1 July 2020 Granted as remuneration Options exercised Net change other Balance at 30 June 2021 Senior Executives Karl Redenbach1 91,122,082 Peter Nguyen-Brown1 91,122,082 Jarrod Magee Rowan Wilkie Non-executive directors Marc Stigter2 Jesse Todd2 Fiona Le Brocq Cassandra Kelly - - - - - - Andrew McKeon3 277,778 David Lemphers Dana Rasmussen - - - - - - - - - - - - - - - - - - - - - - - - (19,639,535) 71,482,547 (19,639,535) 71,482,547 - - - - 118,105 118,105 175,900 175,900 - - (277,778) - - - - - - - 1 Karl Redenbach and Peter Nguyen-Brown sold 11.5m shares each to fund the legal case while also transferring 8.1m shares each in an off market trade as part of the settlement agreement of the same case. Refer to ASX announcements on 21 October 2020 and 9 December 2020 for further details. 2 3 Jesse Todd and Marc Stigter purchased shares on market in a personal capacity on 19 June 2021 and 13 May 2021, respectively. Refer to ASX announcements on those dates for further information. Andrew McKeon resigned as Non-Executive Director during the year. His shares held upon resignation are reversed in the “net change other” column in the table above and therefore no balances are disclosed as at 30 June 2021. LiveTiles Annual Report 2021Remuneration Report 47 The following table represents shares issued to key management personnel under the Management Incentive Plan, as approved by the Company’s shareholders on 30 November 2020 (as described in section 7 above). Balance at 1 July 2020 Issued during the year Exercised during the year Net change other Balance at 30 June 2021 Fair value at 30 June 2021 Senior Executives Karl Redenbach 19,500,000 Peter Nguyen-Brown 6,750,000 - - Jarrod Magee - 300,000 Rowan Wilkie1 800,001 Non-executive directors Marc Stigter Jesse Todd Fiona Le Brocq Cassandra Kelly Andrew McKeon David Lemphers Dana Rasmussen - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 19,500,000 $1,170,000 6,750,000 $405,000 300,000 $27,000 (800,001) - - - - - - - - - - - - - - - - - - - - - - - 1 Rowan Wilkie ceased to be a KMP during the year. His MIP shares held upon ceasing to be a KMP are reversed in the “net change other” column in the table above and therefore no balances are disclosed as at 30 June 2021. LiveTiles Annual Report 2021Remuneration Report 48 Loans to Key Management Personnel The following non-recourse loans have been provided by the Company to KMP under the MIP (as approved by shareholders at a general meeting on 30 November 2020). 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 2020 Loans issued Loans repaid Net change other Balance at 30 June 2021 Senior Executives Karl Redenbach $2,925,000 Peter Nguyen-Brown $1,012,500 - - Jarrod Magee - $51,000 Rowan Wilkie1 $456,000 Non-executive directors Marc Stigter Jesse Todd Fiona Le Brocq Cassandra Kelly Andrew McKeon David Lemphers Dana Rasmussen - - - - - - - - - - - - - - - - - - - - - - - - - - - - $2,925,000 $1,012,500 $51,000 $(456,000) - - - - - - - - - - - - - - - 1 Rowan Wilkie ceased to be a KMP during the year. His non-recourse loans held upon ceasing to be a KMP are reversed in the “net change other” column in the table above and therefore no balances are disclosed as at 30 June 2021. LiveTiles Annual Report 2021Remuneration Report 49 The following loans have been provided to key management personnel by the Company. Balance at 1 July 2020 Loans increase Interest accrued Loans repaid Balance at 30 June 2021 Senior Executives Karl Redenbach $348,691 $161,127 $73,169 Peter Nguyen-Brown $348,691 $161,127 $73,169 Jarrod Magee Rowan Wilkie Non-executive directors Marc Stigter Jesse Todd Fiona Le Brocq Cassandra Kelly Andrew McKeon David Lemphers Dana Rasmussen - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $582,987 $582,987 - - - - - - - - - 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 principal 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 2021Remuneration Report 50 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 30 November 2020, shareholders voted to adopt the 2020 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 Dr Marc Stigter Chairman Date: 26 August 2021 Melbourne Karl Redenbach CEO and Executive Director Date: 26 August 2021 Melbourne LiveTiles Annual Report 2021Remuneration Report 51 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 MARTIN COYLE TO THE DIRECTORS OF LIVETILES LIMITED As lead auditor of LiveTiles Limited for the year ended 30 June 2021, 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. Martin Coyle Director BDO Audit Pty Ltd Sydney, 26 August 2021 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 2021Auditor’s Independence Declaration 52 CONSOLIDATED FINANCIAL STATEMENTS LiveTiles Annual Report 2021 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 53 Revenue Other income Total Revenues 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 Litigation costs Restructuring costs Unrealised currency loss Finance costs Loss before income tax Income tax (expense) / benefit Net loss for the year Other comprehensive income: Note 2021 $ 2020 $ 3 3 44,976,600 37,790,403 1,745,588 6,678,080 46,722,188 44,468,483 5 (24,523,730) (30,163,090) (8,628,277) (8,569,830) (1,926,189) (3,041,599) (423,748) (2,537,367) (2,168,657) (3,212,118) (1,540,402) (2,362,924) (3,411,363) (2,714,242) (5,234,104) (4,425,711) (1,157,735) (1,166,772) 12 23 (10,128,638) (10,256,971) (711,498) (3,928,656) (12,408,256) - (1,621,780) (2,196,735) (330,020) (1,207,703) (2,069,475) (425,215) (76,283,872) (76,208,933) (29,561,684) (31,740,450) 4 (579,266) 136,009 (30,140,950) (31,604,441) Items that will be reclassified subsequently to profit or loss when specific conditions are met: Exchange differences on translating foreign operations, net of tax (3,480,916) 572,706 Items that will not be reclassified subsequently to profit or loss: Actuarial gain on remeasurement of defined benefit pension schemes, net of tax 883,720 445,608 Other comprehensive (loss) / income for the year (2,597,196) 1,018,314 Total comprehensive loss for the year (32,738,146) (30,586,127) Earnings per share for loss attributable to the owners of LiveTiles Limited Basic earnings per share (cents) Diluted earnings per share (cents) 8 8 (3.45) (3.45) (4.00) (4.00) The accompanying notes form part of these financial statements. LiveTiles Annual Report 2021Consolidated Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021 Note 2021 $ 2020 $ 54 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 Income tax payable 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 4 14 17 18 15 20 21 16,804,924 37,791,314 8,589,999 8,521,493 1,749,806 980,256 27,144,729 47,293,063 828,945 - 977,860 291,833 2,504,394 3,562,990 72,508,993 81,054,324 251,956 1,018,883 76,094,288 86,905,890 103,239,017 134,198,953 7,863,233 7,443,718 1,885,287 1,324,238 861,978 904,700 2,924,288 2,258,095 10,822,951 3,069,981 14,274,368 12,388,804 38,632,105 27,389,536 161,366 541,798 140,094 - 2,079,508 2,967,791 2,365,036 3,427,179 - 8,988,671 5,085,636 6,812,051 490,008 776,377 10,723,352 23,112,163 49,355,457 50,501,699 53,883,560 83,697,254 205,044,070 202,831,116 349,912 2,235,610 (151,510,422) (121,369,472) 53,883,560 83,697,254 LiveTiles Annual Report 2021Consolidated Financial Statements 55 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2021 Note Issued capital $ Reserves $ Accumulated losses $ Total equity $ 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 loss 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(b)(c) 54,999,999 Transaction costs (3,629,017) Shares issued for CYCL AG 20(d) 12,568,747 - - Shares issued for earn outs 20(a)(e) 15,918,796 (9,785,279) Share based payment expense 23 - 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 Balance at 1 July 2020 202,831,116 2,235,610 (121,369,472) 83,697,254 Loss for the year Other comprehensive income for the year, net of tax Remeasurements of the defined benefit asset, net of tax Total comprehensive loss for the year Transactions with owners, in their capacity as owners - - - - - (30,140,950) (30,140,950) (3,480,916) 883,720 - - (3,480,916) 883,720 (2,597,196) (30,140,950) (32,738,146) Shares issued for earn outs Share based payment expense 20(f) 23 2,212,954 - - 711,498 Total transactions with owners 2,212,954 711,498 - - - 2,212,954 711,498 2,924,452 Balance at 30 June 2021 205,044,070 349,912 (151,510,422) 53,883,560 The accompanying notes form part of these financial statements. LiveTiles Annual Report 2021Consolidated Financial Statements 56 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2021 Note 2021 $ 2020 $ Cash flows from operating activities Receipts from customers (inclusive of GST) 51,883,609 40,968,708 Payments to suppliers and employees (inclusive of GST) (56,472,307) (61,240,424) Net cash used in ordinary operating activities (4,588,698) (20,271,716) Litigation settlement payment Interest received Interest and other finance costs paid Government grants received Income tax paid (8,445,000) 28,243 (388,177) 1,053,865 - 170,574 (425,241) 11,511,545 (9,540) (235,618) Net cash used in operating activities 24 (12,349,307) (9,250,456) Cash flows from investing activities Payments for development costs Payments for plant and equipment Net cash acquired as part of acquisition of subsidiaries 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 Repayment of lease liability Net cash (used in) / from financing activities (5,336,652) (4,916,009) (173,872) - - (219,816) (422,380) (10,647,148) (306,813) (400,933) (5,817,337) (16,606,286) 20 - - (842,078) (842,078) 54,999,999 (3,629,017) (878,755) 50,492,227 Net (decrease) / increase in cash held (19,008,722) 24,635,485 Cash and cash equivalents at beginning of financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of financial year 37,791,314 (1,977,668) 16,804,924 14,880,920 (1,725,091) 37,791,314 The accompanying notes form part of these financial statements. LiveTiles Annual Report 2021Consolidated Financial Statements 57 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2021 These consolidated financial statements and notes In preparing the consolidated financial statements, represent LiveTiles Limited and controlled entities all intercompany balances and transactions, income (the “Consolidated Group” or “Group”). and expenses and profit or losses resulting from intra-group transactions are eliminated in full. The financial statements were authorised for issue Accounting policies of subsidiaries have been changed on 26 August 2021 by the directors of the Company. and adjustments made where necessary to ensure uniformity of the accounting policies adopted by NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES the Group. Basis of Preparation These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for- profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. The financial report is presented in Australian dollars and all values are rounded to the nearest dollar. a. Principles of consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent entity (LiveTiles Limited) and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 19. The assets, liabilities and results of all subsidiaries are consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. b. Fair value of assets and liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable, and willing market participants at the measurement date. As fair value is a market-based measure, the closest 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 fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). LiveTiles Annual Report 2021Consolidated Financial Statements 58 For non-financial assets, the fair value measurement Subsequent to initial recognition, right-of-use also takes into account a market participant’s ability assets are measured at cost (adjusted for any to use the asset in its highest and best use or to sell remeasurement of the associated lease liability), it to another market participant that would use the less accumulated depreciation and any accumulated asset in its highest and best use. 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 of the lease term and the estimated useful life of to share based payment arrangements) may the underlying asset, consistent with the estimated be valued, where there is no observable market consumption of the economic benefits embodied in price in relation to the transfer of such financial the underlying asset. instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, Lease liabilities Lease liabilities are initially recognised at the present other valuation techniques are adopted and, value of the future lease payments (i.e., the lease where significant, are detailed in the respective payments that are unpaid at the commencement date note to the financial statements. of the lease). These lease payments are discounted c. Finance costs 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 which they Group’s incremental borrowing rate. 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 At the commencement date of a lease (other than payments (i.e., the lease payments that are unpaid leases of 12-months or less and leases of low value at the reporting date). Interest expense on lease assets), the Group recognises: liabilities is recognised in profit or loss (presented • a right-of-use asset representing its right to use the underlying asset; and as a component of finance costs). Lease liabilities are remeasured to reflect changes to lease terms, changes to lease payments and any lease modifications not • a lease liability representing its obligation to make accounted for as separate leases. lease payments. Payments related to short-term leases or leases Right-of-use assets Right-of-use assets are initially recognised at cost, of low-value asset not included in the measurement of lease liabilities are recognised as an expense when comprising the amount of the initial measurement incurred. Short-term leases are leases with a lease of the lease liability, any lease payments made term of 12 months or less. Low-value assets comprise at or before the commencement date of the lease, IT-equipment and small items of office furniture. less any lease incentives received, any initial direct costs incurred by the Group, and an estimate of costs to be incurred by the Group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. LiveTiles Annual Report 2021Consolidated Financial Statements 59 e. Impairment of assets The carrying amount of recognised and unrecognised At the end of each reporting period, the Group deferred tax assets are reviewed at each reporting assesses whether there is any indication that an date. Deferred tax assets recognised are reduced to asset may be impaired. The assessment will include the extent that it is no longer probable that future the consideration of external and internal sources of taxable profits will be available for the carrying information. If such an indication exists, an impairment amount to be recovered. Previously unrecognised test is carried out on the asset by comparing the deferred tax assets are recognised to the extent that recoverable amount of the asset, being the higher it is probable that there are future taxable profits of the asset’s fair value less costs of disposal and value available to recover the asset. in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable Deferred tax assets and liabilities are offset only amount is recognised immediately in profit or loss. where there is a legally enforceable right to offset current tax assets against current tax liabilities and Where it is not possible to estimate the recoverable deferred tax assets against deferred tax liabilities; amount of an individual asset, the Group estimates and they relate to the same taxable authority on the recoverable amount of the cash-generating unit either the same taxable entity or different taxable to which the asset belongs. entities which intend to settle simultaneously. Impairment testing is performed annually for LiveTiles Limited (the ‘head entity’) and its intangible assets with indefinite lives and intangible wholly-owned Australian subsidiaries have formed assets not yet available for use. f. Income tax an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue The income tax expense or benefit for the period is to account for their own current and deferred tax the tax payable on that period’s taxable income based amounts. The tax consolidated group has applied on the applicable income tax rate for each jurisdiction, the ‘separate taxpayer within group’ approach in adjusted by the changes in deferred tax assets and determining the appropriate amount of taxes to liabilities attributable to temporary differences, allocate to members of the tax consolidated group. unused tax losses and the adjustment recognised for prior periods, where applicable. In addition to its own current and deferred tax Deferred tax assets and liabilities are recognised for tax liabilities (or assets) and the deferred tax assets temporary differences at the tax rates expected to arising from unused tax losses and unused tax credits be applied when the assets are recovered or liabilities assumed from each subsidiary in the tax group. amounts, the head entity also recognises the current are settled, based on those tax rates that are enacted or substantively enacted. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are Deferred tax assets are recognised for deductible recognised as amounts receivable from or payable to temporary differences and unused tax losses only other entities in the tax consolidated group. The tax if it is probable that future taxable amounts will funding arrangement ensures that the intercompany be available to utilise those temporary differences charge equals the current tax liability or benefit and losses. 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. LiveTiles Annual Report 2021Consolidated Financial Statements 60 g. Business combinations i. Foreign currency transactions and balances Business combinations occur where an acquirer obtains control over one or more businesses. Functional and presentation currency The functional currency of each of the Group’s A business combination will be accounted for from economic environment in which that entity operates. the date that control is attained whereby fair value of The consolidated financial statements are presented the identifiable assets acquired and liabilities assumed in Australian dollars, which is the parent entity’s is recognised (with limited exceptions). functional currency. entities is measured using the currency of the primary The consideration transferred for the acquisition including any contingent consideration is generally Transactions and balances Foreign currency transactions are translated measured at fair value. Where the fair value of into functional currency using the exchange the consideration is greater than the fair value rates prevailing at the date of the transaction. of the identifiable assets and liabilities, goodwill Foreign currency monetary items are translated is recognised. Goodwill is tested annually for at the year-end exchange rate. Non-monetary impairment. Where fair value of the consideration items measured at historical cost continue to be is less than fair value of the identifiable assets and carried at the exchange rate at the date of the liabilities, a gain on a bargain purchase is recognised transaction. Non-monetary items measured at fair in the Income Statement. value are reported at the exchange rate at the date Transaction costs are expensed as incurred unless except if they relate to the issue of debt Exchange differences arising on the translation or equity securities. of monetary items are recognised in profit or loss. when fair values were determined. Contingent consideration is classified as a financial Exchange differences arising on the translation liability. Subsequent changes in the fair value of of non-monetary items are recognised directly the contingent consideration are recognised in in other comprehensive income to the extent that the Income Statement. the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange h. Research and development difference is recognised in profit or loss. Research costs are expensed in the period in which they are incurred. Group companies The financial results and position of foreign Development costs are only capitalised when it is operations, whose functional currency is different probable that the project will be a success, the Group from the Group’s presentation currency, are will use or sell the asset, the Group has sufficient translated as follows: resources and intent to complete the asset and the development costs can be measured reliably. If one or • assets and liabilities are translated at exchange more of these criteria are not met, development costs rates prevailing at the end of the reporting period; 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 • income and expenses are translated at average exchange rates for the period; and pattern of consumption, up to a maximum of 5 years • retained earnings are translated at the exchange or shorter dependant on their deemed useful life. rates prevailing at the date of the transaction. LiveTiles Annual Report 2021Consolidated Financial Statements 61 Exchange differences arising on translation of foreign operations with functional currencies other Defined benefit pension benefits All employees of the Group who are based in than Australian dollars are recognised in other Switzerland, as required by Swiss law, become comprehensive income and included in the foreign members of the Group’s defined benefit pension plans. currency translation reserve in the statement of The plans are co-funded by the Group with equal financial position. The cumulative amount of these co-contributions required by the employees ranging differences is reclassified into profit or loss in the from 4% – 10% of the employee’s salary. Contributions period in which the operation is disposed of. in respect of employees’ defined benefit entitlements are recognised as an expense in the period in which j. Employee benefits they are incurred. Short-term employee benefits Liabilities for wages and salaries, including non- k. Defined benefit pension obligations monetary benefits, annual leave and long service Upon retirement, members of the Group’s defined leave expected to be settled within 12 months of the benefit pension plans are entitled to either receive a reporting date are measured at the amounts expected lump sum payment to the value of their accumulated to be paid when the liabilities are settled. retirement balance, or receive an ongoing annual Other long-term employee benefits The liability for annual leave and long service leave annuity calculated as a percentage (conversion rate) of their accumulated balance. not expected to be settled within 12 months of the Assets and obligations of the fund are valued in reporting date are measured as the present value accordance with an actuarial valuation, using the of expected future payments to be made in respect of projected unit credit method. Under this method, services provided by employees up to the reporting where the fair value of plan assets differs from the date using the projected unit credit method. projected benefit obligation of a pension plan must Consideration is given to expected future wage and be recorded on the Consolidated Balance Sheet as salary levels, experience of employee departures an asset, in the case of an overfunded plan, or as a and periods of service. Expected future payments liability, in the case of an underfunded plan. are discounted using market yields at the reporting date on corporate bond rates with terms to maturity The gains or losses and prior service costs or credits and currency that match, as closely as possible, the that arise but are not recognised as components estimated future cash outflows. of pension cost are recorded as a component of other comprehensive income. The service costs Defined contribution pension benefits All employees of the Group who are based in Australia related to defined benefits are included in operating income. The other components of net benefit cost and Denmark receive defined contribution pension are presented in the consolidated profit and loss entitlements, for which the Group pays the fixed separately from the service cost component and pension guarantee contribution (currently between outside operating income. 6% and 9.5% of the employee’s average ordinary salary) to the employee’s pension fund of choice. l. Share based payments All contributions in respect of employees’ defined Equity settled share based compensation benefits contribution entitlements are recognised as an are provided to employees and related parties. Equity expense in the period in which they are incurred. settled transactions are awards of shares, or options over shares, that are provided to employees and suppliers in exchange for the rendering of services. LiveTiles Annual Report 2021Consolidated Financial Statements 62 The cost of equity-settled transactions are measured m. Provisions at fair value on grant date. Fair value is independently Provisions are recognised when the Group has a determined using the Black-Scholes option pricing present (legal or constructive) obligation as a result of model that takes into account the exercise price, the a past event, it is probable the Group will be required term of the option, the impact of dilution, the share to settle the obligation, and a reliable estimate can price at grant date and expected price volatility of the be made of the amount of the obligation. The amount underlying share, the expected dividend yield and recognised as a provision is the best estimate of the the risk free interest rate for the term of the option, consideration required to settle the present obligation together with non-vesting conditions that do not at the reporting date, taking into account the risks and determine whether the Group receives the services uncertainties surrounding the obligation. that entitle the employees to receive payment. No account is taken of any other vesting conditions. n. Cash and cash equivalents If equity settled awards are modified, as a minimum deposits held at call with financial institutions, other an expense is recognised as if the modification has short-term, highly liquid investments with original Cash and cash equivalents includes cash on hand, not been made. maturities of three months or less that are readily convertible to known amounts of cash and which are An additional expense is recognised, over the subject to an insignificant risk of changes in value. remaining vesting period, for any modification that increases the total fair value of the share based o. Revenue and other income compensation benefit as at the date of modification. Revenue is recognised when it is probable that If the non-vesting condition is within the control of the the revenue can be reliably measured. Revenue Group or employee, the failure to satisfy the condition is measured at the fair value of the consideration the economic benefit will flow to the Group and is treated as a cancellation. If the condition is not received or receivable. within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised Software subscription revenue Subscription revenue is recognised when the Group’s over the remaining vesting period, unless the performance obligations are satisfied. For annual award is forfeited. subscription contracts, revenue is recognised evenly over the subscription period for which the customer If equity settled awards are cancelled, it is treated is contracted. For perpetual licences, where an as if it has vested on the date of cancellation, and upfront payment is made in addition to annual support any remaining expense is recognised immediately. fees, revenue related to the upfront payment is If a new replacement award is substituted for the recognised evenly over the estimated lifetime cancelled award, the cancelled and new award of the customer contract. is treated as if they were a modification. 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 subscription for that period. LiveTiles Annual Report 2021Consolidated Financial Statements 63 Services revenue Revenue from services are recognised by reference to service hours delivered, for contractual arrangements p. Financial instruments Initial recognition and measurement Financial assets and financial liabilities are recognised billed on a time and materials basis or by reference to when the Group becomes a party to the contractual the stage of completion for contractual arrangements provisions of the instrument. Financial assets and billed on a fixed price basis. Stage of completion is financial liabilities are initially measured at fair value. measured by reference to labour hours incurred to Transaction costs that are directly attributable to the date as a percentage of total estimated labour hours acquisition or issue of financial assets and financial for each contract. liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added Research and development grant income Research and development grant income is recognised to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial when the Group is entitled to the research and recognition. Transaction costs directly attributable to development grant. The amount is treated as other the acquisition of financial assets or financial liabilities income in the period in which the research and at fair value through profit or loss are recognised development costs were incurred. immediately in profit or loss. Grant income Government grants are recognised at fair value where Classification and subsequent measurement Financial assets that meet the following conditions there is reasonable assurance that the grant will be are measured subsequently at amortised cost: received and all grant conditions will be met. Grants relating to expense items are recognised as income • Held within a business model whose objective is to over the periods necessary to match the grant to the hold financial assets in order to collect contractual costs it is compensating. Grants relating to assets cash flows; 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. • 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; • 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. LiveTiles Annual Report 2021Consolidated Financial Statements 64 By default, all other financial assets are measured Cash flows are presented on a gross basis. The GST or subsequently at fair value through profit or loss (FVTPL). VAT components of cash flows arising from investing or financing activities which are recoverable from, As at the reporting date, the Group`s financial assets or payable to, the local tax office are presented consisted of cash and cash equivalents and trade and as operating cash flows included in receipts from other receivables which are measured at amortised customers or payments to suppliers. cost in accordance with the above accounting policy. r. Current and non-current classification Non-derivative financial liabilities are initially Assets and liabilities are presented in the statement measured at fair value and are subsequently measured of financial position based on current and non-current at amortised cost. Gains or losses are recognised in classification. profit or loss through the amortisation process and when the financial liability is derecognised. An asset is classified as current when: it is either expected to be realised or intended to be sold As at the reporting date, the Group`s financial or consumed in normal operating cycle; it is held liabilities consisted of trade and other payables and primarily for the purpose of trading; it is expected lease liabilities which are measured at amortised cost to be realised within 12 months after the reporting in accordance with the above accounting policy. period; or the asset is cash or cash equivalent unless Impairment At the end of each reporting period, the Group assesses whether there is objective evidence 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. that a financial instrument has been impaired. A liability is classified as current when: it is either The impairment methodology applied depends expected to be settled in normal operating cycle; it is on whether there has been a significant increase in held primarily for the purpose of trading; it is due credit risk. The Group applies the AASB 9 simplified to be settled within 12 months after the reporting approach to measuring expected credit losses which period; or there is no unconditional right to defer the uses a lifetime expected loss allowance for all trade settlement of the liability for at least 12 months after receivables and contract assets. the reporting period. All other liabilities are classified q. Goods and Services Tax (GST), Value Added Tax as non-current. (VAT) and other consumption taxes Deferred tax assets and liabilities are always classified Revenues, expenses and assets are recognised net of as non-current. the amount of GST or VAT, except where the amount of GST or VAT incurred is not recoverable from the s. Intangible assets local tax office. Goodwill Goodwill arising on the acquisition of subsidiaries is Receivables and payables are stated inclusive of the measured at cost less accumulated impairment losses. amount of GST or VAT receivable or payable. The Group tests goodwill annually or more frequently The net amount of GST or VAT recoverable from, if events or changes in circumstances indicate that or payable to, the local tax office is included with goodwill may be impaired. other receivables or payables in the statement of financial position. LiveTiles Annual Report 2021Consolidated Financial Statements 65 Intellectual property Intellectual property acquired as part of a business u. Critical accounting estimates and judgements The preparation of the financial statements requires combination is recognised separately from goodwill. management to make judgements, estimates and The intellectual property assets are carried at fair assumptions that affect the reported amounts in value at the date of acquisition less accumulated the financial statements. Management continually amortisation and impairment losses. Intellectual evaluates its judgements and estimates in relation property assets are amortised over the period in to assets, liabilities, contingent liabilities, revenue which the benefits are expected to be obtained. and expenses. Management bases its judgements, estimates and assumptions on historical experience Customer contracts and relationships Customer contracts and relationships acquired and on other various factors, including expectations of future events, management believes to be reasonable as part of a business combination is recognised under the circumstances. The resulting accounting separately from goodwill. The customer contracts judgements and estimates will seldom equal the and relationships are carried at fair value at the related actual results. The judgements, estimates and date of acquisition less accumulated amortisation assumptions that have a significant risk of causing a and impairment losses. Customer contracts and material adjustment to the carrying amounts of assets relationship assets are amortised over the period in and liabilities (refer to the respective notes) within the which the benefits are expected to be obtained. next financial year are discussed below. t. Earnings per share v. Key estimates Basic earnings per share is calculated by dividing the i. Share-based payment transactions 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. The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. ii. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. LiveTiles Annual Report 2021Consolidated Financial Statements 66 iii. Government grant income w. New or amended Accounting Standards The Group measures government grant income over the period necessary to match the income with the costs that they are intended to compensate. The accounting estimates and assumptions relating to the recognition of government grant income include the project duration, value and forecast expenditure over the life of the project. iv. Performance based payments for acquired entities and Interpretations 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 2020. 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. The Group measures performance based y. Going concern payments (earn-out payments) for acquired For the year ended 30 June 2021, the Group made entities estimating the probability of the targets a loss of $30,140,950 (2020: $31,604,441) and had being met and using an appropriate discount rate net cash flows used in ordinary operating activities of to reflect payment periods. These performance $4,588,698 (2020: $20,271,716). Further cost savings based payments are disclosed within provisions are expected to be realised in FY22 as a result of for business combinations in the statement of reduced headcount and other cost synergies realised financial position. from restructuring completed during the period. At 30 June 2021, the Group had a cash balance of v. Valuation of goodwill and other intangible assets $16,804,924 (2020: $37,791,314). Furthermore, a In determining the recoverable value of goodwill and other intangible assets the Group makes estimates pertaining to the future cash flows of each of the Cash Generating Units (CGUs). Refer to Note 12 for details of current year assumptions. major component of the Group’s current liabilities relate to unearned revenue, deferred tax liabilities and deferred share liabilities recognised within provisions for business combinations of $24,913,111 which is not expected to be paid in cash. vi. Capitalisation of development costs and useful life of intangible assets The Directors are therefore of the opinion that the Group will be able to continue as a going concern taking into account, cash on hand, reduced operating cash The Group has made judgements when assessing outflows, expected growth in customer receipts and whether internal development projects meet the ongoing management of cash operating expenses. the criteria to be capitalised, and measuring the costs and useful life attributed to such projects. On acquisition, specific intangible assets are recognised separately from goodwill and then amortised over their useful lives. The capitalisation of these assets and related amortisation charges are based on judgements about the value and useful life of such items. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Refer to Note 12 for details of current year assumptions. LiveTiles Annual Report 2021Consolidated Financial Statements 67 NOTE 2: PARENT INFORMATION The following information has been extracted from the records of the parent, LiveTiles Limited. Statement of Financial Position 2021 $ 2020 $ Parent entity Assets Current assets Non-current assets TOTAL ASSETS Liabilities Current liabilities Non-current liabilities TOTAL LIABILITIES Equity Issued capital 1,866,568 15,749,777 65,128,028 76,088,760 66,994,596 91,838,537 (13,111,036) (3,460,552) - (8,988,671) (13,111,036) (12,449,223) 530,359,293 528,146,339 Accumulated losses and reserves (476,475,733) (448,757,025) TOTAL EQUITY 53,883,560 79,389,314 Statement of Profit or Loss and Other Comprehensive Income Total loss Total comprehensive loss (28,430,206) (40,864,164) (28,430,206) (40,864,164) In the 2021 financial year, included within the parent entity loss of $28,430,206 is a provision against intercompany receivables from and investments in other entities within the Group of $13,648,280. 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. 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 2021Consolidated Financial Statements 68 NOTE 3: REVENUE AND OTHER INCOME Revenue: Software subscription revenue 34,402,311 28,980,551 Software related services revenue 10,574,289 8,809,852 2021 $ 2020 $ Total revenue Other income: Interest income Research and development grant income Other grant income Other income Total other income 44,976,600 37,790,403 174,607 240,701 - 4,524,280 1,540,767 1,788,817 30,214 124,282 1,745,588 6,678,080 Total revenue and other income 46,722,188 44,468,483 LiveTiles Annual Report 2021Consolidated Financial Statements NOTE 4: INCOME TAX a. The components of tax benefit / (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 26% (2020: 27.5%) Adjust for: 69 2021 $ 2020 $ (1,102,847) (1,297,627) 523,581 1,433,636 (579,266) 136,009 (29,561,684) (31,740,540) 7,686,038 8,728,624 tax effect of variance in overseas tax rates (300,641) (1,246,031) withholding tax expense (410,752) (1,295,840) tax effect of non-deductible research and development expenditure (1,261,431) (2,563,091) tax effect of other permanent differences tax effect of other temporary differences (3,345,738) (1,931,890) 164,798 - current year losses not recognised (2,425,842) (5,086,087) de-recognition of deferred tax balances (257,483) 1,433,636 utilisation of prior period losses Income tax (expense) / benefit attributable to entity 1,668,473 (579,266) - 136,009 The Group qualifies for the small business company tax rate of 26%. 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 (158,603) (198,363) Intangible assets on acquisition of Wizdom A/S (1,529,390) (2,154,320) Intangible assets on acquisition of CYCL AG (1,135,504) (1,689,738) Defined benefit pension liabilities of CYCL AG 743,989 1,074,630 Total deferred tax liability (2,079,508) (2,967,791) e. Net tax effect of carried forward losses not brought to account 60,070,275 49,567,470 f. Income tax payable 2,427,085 1,324,238 LiveTiles Annual Report 2021Consolidated Financial Statements 70 The income tax payable reflects income tax payable and withholding tax payable at the end of the reporting period. Of the total above, $541,798 is classified as a non-current liability, related to income tax owed to Danish taxation authorities not payable within the next 12 months. Further details on timing of income tax payments are detailed in Note 26 (iii). 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 2021 $ 2020 $ 16,568,617 19,995,392 2,072,694 1,569,198 1,305,537 2,569,869 1,109,925 1,768,009 761,939 1,232,939 Pension and superannuation expense 1,363,161 1,210,016 Annual leave and long service leave expense 1,256,573 1,672,913 Other employee benefits expense Total employee benefit expense 85,284 144,754 24,523,730 30,163,090 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 2021 $ 2020 $ 187,800 - 187,800 94,304 - 94,304 18,468 112,772 214,200 12,000 226,200 57,851 18,221 76,072 11,637 87,709 LiveTiles Annual Report 2021Consolidated Financial Statements 71 NOTE 7: DIVIDENDS LiveTiles Limited has not paid or proposed to pay any dividends for the year ended 30 June 2021 (2020: nil). NOTE 8: EARNINGS PER SHARE Reconciliation of earnings to loss: 2021 $ 2020 $ Earnings used to calculate basic earnings per share (30,140,950) (31,604,441) 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. 873,549,070 789,942,896 Cents (3.45) (3.45) Cents (4.00) (4.00) There are 17,851,550 options outstanding at 30 June 2021, see Note 23(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 Provision for doubtful debts 2021 $ 2020 $ 7,191,130 7,970,451 1,988,978 1,295,178 (590,109) (744,136) 8,589,999 8,521,493 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 $360,397 (2020: $205,797). This is shown within Other Expenses of $5,234,104 (2020: $4,425,711). LiveTiles Annual Report 2021Consolidated Financial Statements 72 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 2021 $ 2020 $ 2,415,960 2,325,525 1,899,618 1,764,112 2,875,552 3,880,814 Total receivables exposed to credit risk 7,191,130 7,970,451 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 7,191,130 4,736,257 1,506,293 102,728 381,304 198,417 266,131 7,970,451 5,017,378 1,009,364 267,127 952,188 339,396 384,998 2021 Trade and term receivables 2020 Trade and term receivables LiveTiles Annual Report 2021Consolidated Financial Statements NOTE 10: OTHER ASSETS AUD Current Deposits paid Prepaid expenses Loans to related parties Non-current Rental Deposits Loans to related parties 73 Note 2021 $ 2020 $ 25 25 98,080 485,752 1,165,974 1,749,806 251,956 - 88,166 892,090 - 980,256 321,502 697,381 251,956 1,018,883 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 AUD Properties Equipment Balance at 1 July 2020 Additions Depreciation Foreign Exchange1 Balance at 30 June 2021 3,490,226 107,787 (818,850) (300,377) 2,478,786 72,764 - (44,052) (3,104) 25,608 Total right-of-use asset 3,562,990 107,787 (862,902) (303,481) 2,504,394 1 Represents the effect of movements in foreign exchange rates on assets and liabilities held in foreign currencies. LiveTiles Annual Report 2021Consolidated Financial Statements 74 NOTE 12: INTANGIBLE ASSETS 2020 Financial Year At Cost Note Balance at 1 July 2019 Additions Disposals Capitalised development costs Software intellectual property Customer contracts and relationships Goodwill Total costs 5,042,235 4,916,009 10,018,741 9,350,000 5,996,099 2,340,000 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 10,256,971 Deferred tax liability (3,192,972) (1,890,273) 611,385 - - 2,187,438 81,054,324 429,439 (4,042,421) LiveTiles Annual Report 2021Consolidated Financial Statements 75 2021 Financial Year At cost Capitalised development costs Software intellectual property Customer contracts and relationships Goodwill Total costs Note Balance at 1 July 2020 Additions Disposals 9,958,244 5,336,652 19,876,090 8,504,626 59,743,858 - - - 98,082,818 5,336,652 - - - - - Foreign exchange Balance at 30 June 2021 - 15,294,896 (941,217) 18,934,873 (346,963) 8,157,663 (2,812,599) 56,931,259 (4,100,779) 99,318,691 Accumulated amortisation Balance at 1 July 2020 Amortisation charge Disposals Foreign exchange Balance at 30 June 2021 Capitalised development costs (9,958,244) (5,336,652) Software intellectual property (2,039,577) (1,919,876) Customer contracts and relationships Total accumulated amortisation (5,030,673) (2,872,110) (17,028,494) (10,128,638) - - - - - (15,294,896) 116,263 (3,843,190) 231,171 7,671,612 347,434 (26,809,698) Summary of net intangible assets Balance at 1 July 2020 Additions Amortisation Charge Disposals Foreign Exchange Balance at 30 June 2021 Net intangible assets 81,054,324 5,336,652 (10,128,638) Deferred tax liability (4,042,421) - 1,053,145 - - (3,753,345) 72,508,993 165,779 (2,823,497) 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 2021 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 of 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. LiveTiles Annual Report 2021Consolidated Financial Statements 76 The Group tests annually whether goodwill has suffered any impairment. For the 2021 and 2020 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. Of the Group’s goodwill at 30 June 2021, $3.1m relates to the acquisition of Hyperfish Inc., $27.1m relates to the acquisition of Wizdom A/S and $26.7m relates to the acquisition of CYCL AG. 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 2021 calculation of value-in-use, based on conservative expectations for the future: Goodwill Impairment Testing Assumptions Annual Revenue Growth Rate Compound Annual Growth Rate Terminal Growth Rate Post-tax discount Rate Hyperfish Inc. Wizdom A/S CYCL AG 10% – 17% 10% – 17% 10% – 17% 13.87% 13.12% 15.73% 2.00% 2.00% 2.00% 17.10% 17.10% 17.10% Assumptions for gross margin, other operating costs and annual capital expenditure are based on past performance and management’s expectations for the future. Should these assumptions not occur the resulting goodwill carrying may decrease. 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. Analysis performed as follows: • If the annual revenue growth rate applied was 5% lower, no impairment noted; • If gross margin / operating cost and annual capital expenditure forecasts exceeded by 5% – 10%, no impairment noted; • Terminal growth rate assumed at the lowest end of the range of historical inflation rates (i.e 2.0% – 3.5%); • Post-tax discount rate assumed at the highest end of the range of industry peers, per benchmarking analysis. Management believes that other reasonable changes in the key assumptions on which the recoverable amount is based would not cause the CGUs carry amount to exceed its recoverable amount. LiveTiles Annual Report 2021Consolidated Financial Statements 77 NOTE 13: TRADE AND OTHER PAYABLES Current Trade payables Employee benefits accruals Note 2021 $ 2020 $ 5,160,988 3,903,398 2,037,605 3,267,946 Employee benefits accruals to related parties 25 132,004 45,274 Other payables and accruals Total NOTE 14: LEASE LIABILITIES 532,636 227,100 7,863,233 7,443,718 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 Balance at 1 July 2020 Finance Cost Additions Payments Foreign Exchange Balance at 30 June 2021 4,258,304 335,376 107,787 (1,135,336) (365,091) 3,201,040 73,575 1,944 - (44,062) (5,483) 25,974 4,331,879 337,320 107,787 (1,179,398) (370,574) 3,227,014 At net present value: Properties Equipment Total lease liabilities At net present value: Properties Equipment Total lease liabilities LiveTiles Annual Report 2021Consolidated Financial Statements Current Properties Equipment Total Non-current Properties Equipment Total 78 30 June 2021 30 June 2020 836,004 25,974 861,978 2,365,036 - 2,365,036 858,754 45,946 904,700 3,399,550 27,629 3,427,179 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. NOTE 15: OTHER LIABILITIES Current Unearned revenue Unearned grant income Total Non-current Unearned revenue US government program repayable Total 2021 $ 2020 $ 13,319,659 954,709 14,274,368 188,157 301,851 490,008 11,024,867 1,363,937 12,338,804 253,529 522,848 776,377 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. LiveTiles Annual Report 2021Consolidated Financial Statements 79 Under the program, the Group applied for, and received, a second distribution amount of $962,789 (2020: $1,866,204). Under the terms of the program this was calculated to enable the Group to draw funds to the value of twenty four weeks payroll, employee related oncosts 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 received notice of forgiveness of $1,655,138, relating to the first distribution amount received in 2020, leaving $211,066 remaining payable. The Group has estimated that the value of the second distribution amount which will be forgiven as $872,004, leaving $90,785 remaining payable, reflecting the impact of reductions in headcount in the US as a result of restructuring during the period. This will be assessed during the 2022 financial year. 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 balances of the loans are not due and are not payable within the next twelve months. NOTE 16: EMPLOYEE BENEFITS PROVISION Current Non-current Total 2021 $ 2,924,288 161,366 3,085,654 2020 $ 2,258,095 140,094 2,398,189 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 $584,858 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. LiveTiles Annual Report 2021Consolidated Financial Statements NOTE 17: PROVISIONS FOR BUSINESS COMBINATIONS Current Provision for contingent consideration – CYCL Total Non-current Provision for contingent consideration – CYCL Total 80 2021 $ 2020 $ 10,822,951 3,069,981 10,822,951 3,069,981 - - 8,988,671 8,988,671 Of the amounts included in provisions, $3,108,496 is expected to be settled in cash, the remaining balance of $7,714,455 is expected to be settled in stock. The second earn out test date is 31 December 2021. NOTE 18: NON-CURRENT LIABILITIES – PENSION LIABILITIES The Group’s pension liabilities relate to the defined benefit plans in Switzerland, which were acquired in December 2019 upon the completion of the acquisition of CYCL AG. As at 30 June 2021, the fund has a funding ratio of 118%. As required under Swiss law, 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. Upon retirement, employees 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 – as at 30 June 2021 this conversion rate is 6.20%. The defined benefit plans are legally separate from the Group and administered by a separate fund. The pension plans of the Group are managed by Swiss pension fund ‘Profond Pension Fund’ (the fund), which is a collective pension fund, which is common in Switzerland. Under this structure, members own a proportionate share of the aggregated collective investments, rather than an individual share of the underlying assets, as is common in Australia. The Group’s members consist of 45 of the total 57,775 members as at 30 June 2021. 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. LiveTiles Annual Report 2021Consolidated Financial Statements 81 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; • Longevity risk: changes in the estimation of mortality rates of current and former employees; and • Salary risk: increases in future salaries increase the gross defined benefit obligation. As the fund is a collective fund, return on assets are distributed to participants at a rate agreed by the pension board and any surplus/(deficit) is held in reserve. The effect of this is to provide consistency of returns and to enable the fund to have sufficient reserves to fund any future payment obligations. In the event of a funding shortfall, the pension plan regulations outline that the following provisions will be made, in sequence: 1. Make changes to the way the fund is administered, including: • Adjustments to the calculation of future benefit entitlements (conversion rate); • Adjustments to the investment strategy; • Adjustments to financing/benefits; and • 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. 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. LiveTiles Annual Report 2021Consolidated Financial Statements 82 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 2021Consolidated Financial Statements 83 Balance as at 30 June 2020 (25,434,944) 18,622,893 (6,812,051) Present value of obligations $ Fair value of plan assets $ Balance $ 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 Gain from change in experience Gain from change in demographic assumptions Gain from change in financial assumptions Defined benefit pension actuarial losses/(gains) recognised in other comprehensive income (767,878) (59,013) (826,891) - (528,324) (528,324) - 25,292 25,292 (767,878) (33,721) (801,599) 517,065 528,324 517,065 - 1,045,389 517,065 - 70,595 70,595 240,998 1,170,389 145,079 - - - 240,998 1,170,389 145,079 1,556,466 70,595 1,627,061 Benefits paid 2,014,415 (2,014,415) - Foreign exchange rate changes 1,483,542 (1,099,654) 383,888 Balance at 30 June 2021 (21,735,736) 16,650,100 (5,085,636) 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. LiveTiles Annual Report 2021Consolidated Financial Statements 84 Plan assets Plan assets Adjustments for AASB 119 30 June 2021 30 June 2020 12,133,929 13,716,212 Estimation of the value of Pensions in Payment Fair value of plan assets 4,516,170 16,650,099 4,906,681 18,622,893 Plan obligations 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 2021 30 June 2020 12,133,929 13,716,212 4,516,170 5,085,636 21,735,735 5,085,636 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. The actuarial assumption used in determining the present value of the defined benefit obligation of the pension plans include: Actuarial assumptions Discount Rate Growth in future salaries Pension increase rate Longevity at retirement 30 June 2021 30 June 2020 0.30% 1.00% 0.00% 0.25% 1.00% 0.00% 20 – 22 years 19 – 22 years The following table depicts the sensitivity of estimated fiscal year 2021 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%) 19,714,071 24,085,531 Growth in future salaries (+/- 0.50%) 22,036,279 21,451,035 Defined benefit obligation LiveTiles Annual Report 2021Consolidated Financial Statements 85 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. Name of subsidiary Principal place of business LiveTiles Holdings Pty Ltd LiveTiles APAC Pty Ltd LiveTiles R and D Pty Ltd LiveTiles Corporation Modun Resources Pte Ltd LiveTiles Ireland Limited Hyperfish, Inc Australia Australia Australia USA Singapore Ireland USA LiveTiles Europe A/S (formerly Wizdom A/S) Denmark LiveTiles Switzerland (formerly CYCL AG) Switzerland Ownership interest 2021 100% 100% 100% 100% 100% 100% 100% 100% 100% 2020 100% 100% 100% 100% 100% 100% 100% 100% 100% 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 There were no acquisitions during the period. d. Disposal of controlled entities There were no disposals of controlled entities. LiveTiles Annual Report 2021Consolidated Financial Statements 86 NOTE 20: EQUITY – ISSUED CAPITAL Consolidated Group 30 June 2021 Shares 30 June 2020 Shares 30 June 2021 $ 30 June 2020 $ Ordinary shares – fully paid 879,859,403 871,393,902 205,044,070 202,831,116 Movements in ordinary share capital Date Shares No. Issue Price $ Total $ Balance 30-Jun-2019 624,707,227 Share capital issued Share capital issued Share capital issued Share capital issued Share capital issued Less: capital raising costs (a) (b) (c) (d) (e) 30-Jul-2019 6,810,234 24-Sep-2019 142,857,143 18-Oct-2019 14,285,422 3-Dec-2019 42,605,922 18-Feb-2020 40,127,954 $0.35 $0.35 $0.295 $0.327 Balance 30-Jun-2020 871,393,902 122,972,591 2,786,828 50,000,000 4,999,999 12,568,747 13,131,968 (3,629,017) 202,831,116 Share capital issued (f) 26-Feb-2021 8,465,501 $0.26 2,212,954 Balance 30-Jun-2021 879,859,403 205,044,070 Restricted shares on issue (g) 32,530,001 – Total issued capital 30-Jun-2021 912,389,404 205,044,070 a. On 30 July 2019, LiveTiles Limited issued 6,810,234 shares to Orange Fish Holdings LLC as 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. b. On 25 September 2019, LiveTiles Limited issued 142,857,143 shares at $0.35 per share to raise $50,000,000. c. On 18 October 2019, LiveTiles Limited issued 14,285,422 shares at $0.35 per share to raise $4,999,999. d. 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. e. 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. f. On 26 February 2021, LiveTiles Limited issued 8,465,501 shares to the former owners of CYCL AG as payment for CYCL satisfying the performance targets of its first earn out. The fair value of the shares issued is based on the share price of LiveTiles Limited at the acquisition date. g. As at 30 June 2021, LiveTiles Limited had issued 32,530,001 shares under the Management Incentive Plan. LiveTiles Annual Report 2021Consolidated Financial Statements 87 • 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 • Tranches J, K and L – 600,000 shares were issued under the Management Incentive Plan on 20 November 2017 • Tranches M, N and O – 800,001 shares were issued under the Management Incentive Plan on 6 May 2019 • Tranches P, Q and R – 1,680,000 shares were issued under the Management Incentive Plan on 16 March 2020 • Tranches S, T and U – 300,000 shares were issued under the Management Incentive Plan on 25 January 2021 • Tranches V, X and W – 1,400,000 shares were issued under the Management Incentive Plan on 8 March 2021 Refer to Note 23(a). Shares issued under the Management Incentive Plan are not included in the earnings per share calculation in Note 8. NOTE 21: RESERVES Share based payments reserve 2021 $ 2020 $ 3,374,167 2,662,669 Foreign currency translation reserve (4,353,583) (872,667) Pension revaluation reserve Total 1,329,328 445,608 349,912 2,235,610 LiveTiles Annual Report 2021Consolidated Financial Statements 88 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 2021 $ 2020 $ Opening balance Share based payment expense – management incentive plan Share based payment expense – long-term incentive plan Share based payment expense – Wizdom post combination services Shares issued for Hyperfish earn-out Shares issued for Wizdom earn-out Closing balance 23(a) 23(b) 23(d) 20(a) 20(e) 2,662,669 8,519,292 130,768 132,503 580,730 544,023 - - - 3,252,130 (2,672,568) (7,112,711) 3,374,167 2,662,669 b. Foreign currency translation reserve The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary. Foreign currency translation reserves relate to the translation of foreign operations with functional currencies other than Australian dollars. Exchange differences arising on translation are recognised in other comprehensive income. Current period movement predominately relates to the translation of intercompany balances domiciled in the USA and denominated in AUD that are considered permanent in nature. Intercompany balances fully eliminate upon consolidation. Movements in foreign currency translation reserve 2021 $ 2020 $ Opening balance (872,667) (1,445,373) Foreign currency translation of subsidiaries within the Group (3,480,916) 572,706 Closing balance (4,353,583) (872,667) 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 Opening balance Actuarial gain, net of tax Closing balance 2021 $ 445,608 883,720 1,329,328 2020 $ - 445,608 445,608 LiveTiles Annual Report 2021Consolidated Financial Statements 89 NOTE 22: CAPITAL AND LEASING COMMITMENTS Capital commitments 2021 $ 2020 $ Capital commitments contracted for but not recognised in the financial statements Payable – minimum capital commitments: – not later than 12 months – between 12 months and 5 years Total 63,992 410,442 474,434 65,404 448,250 513,654 Capital commitments represent minimum capital spend relating to ongoing government grants as at 30 June 2021. There were no material contingent liabilities or assets as at 30 June 2021 (2020: nil). NOTE 23: SHARE BASED PAYMENTS EXPENSE Operating lease commitments Note 2021 $ 2020 $ Non-cash share based payment expense – Management Incentive Plan shares – Long Term Incentive Plan shares – Contingent payment on acquisition of Wizdom A/S Total share based payments expense (a) Management Incentive Plan shares (a) (b) (c) 130,768 580,730 132,503 544,023 - 3,252,130 711,498 3,928,656 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. LiveTiles Annual Report 2021Consolidated Financial Statements 90 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. On 25 January 2021, LiveTiles Limited issued 300,000 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 $0.23. These shares were issued in Tranches S, T and U. On 1 March 2021, LiveTiles Limited issued 1,400,000 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 $0.25. These shares were issued in Tranches V, X and W. 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: Share price Effective exercise price Term of loan to fund acquisition of shares (yrs) Compounded risk-free interest rate Discount to reflect vesting conditions Discounted value per share Volatility Tranch A, B, C $0.15 $0.15 D, E, F $0.25 $0.285 G, H, I $0.235 $0.245 J, K, L $0.27 $0.25 M, N, O $0.445 $0.57 P, Q, R $0.15 $0.15 S, T, U $0.23 $0.23 V, W, X $0.25 $0.25 6 6 6 6 6 6 6 6 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 75% 75% 75% 75% 75% 75% 75% 75% 40% 40% 40% 40% 40% 40% 40% 40% $0.06 $0.10 $0.09 $0.11 $0.17 $0.06 $0.09 $0.10 LiveTiles Annual Report 2021Consolidated Financial Statements 91 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 2021 as follows: Number of Shares Date issued Vesting date Vesting price Expense for 12 months ended 30 June 2021 $ 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 5/5/2021 Tranche O 266,667 6/5/2019 5/5/2022 Tranche P 560,000 16/3/2020 16/3/2021 Tranche Q 560,000 16/3/2020 16/12/2022 Tranche R 560,000 16/3/2020 16/12/2023 Tranche S 100,000 15/1/2021 15/10/2021 Tranche T 100,000 15/1/2021 15/10/2022 Tranche U 100,000 15/1/2021 15/10/2023 Tranche V 467,000 1/3/2021 1/3/2022 Tranche X 467,000 1/3/2021 1/3/2023 Tranche W 467,000 1/3/2021 1/3/2024 Total (b) Long Term Incentive Plan Options $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 $0.23 $0.23 $0.23 $0.25 $0.25 $0.25 - - - - - - - - - - - 2,853 - 19,189 14,572 24,116 19,383 12,343 5,658 2,421 1,540 15,659 7,830 5,204 130,768 On 16 November 2018, LiveTiles Limited issued 4,056,200 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. LiveTiles Annual Report 2021Consolidated Financial Statements 92 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. On 1 March 2021, LiveTiles Limited issued 7,818,700 options to certain employees under the Long-Term Incentive Plan. 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 2021 as follows: Number of options Date issued Vesting date Vesting price Expense for 12 months ended 30 June 2021 $ 200,000 200,000 940,000 940,000 888,100 888,100 185,000 185,000 185,000 611,325 611,325 1,468,500 1,468,500 181,000 181,000 450,000 450,000 2,605,000 2,605,000 1,304,350 1,304,350 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 1/3/2021 1/3/2021 1/3/2021 1/3/2021 1/3/2023 1/3/2024 1/3/2023 1/3/2024 $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 $0.25 $0.25 $0.36 $0.36 - 6,384 16,039 30,180 18,073 37,167 - - - 30,547 29,085 75,307 69,396 11,788 8,968 23,089 24,754 71,260 57,389 37,646 33,658 580,730 LiveTiles Annual Report 2021Consolidated Financial Statements 93 (c) 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. NOTE 24: CASH FLOW INFORMATION (a) Reconciliation of cash flows used in operating activities with after tax loss Loss after income tax expense (30,140,950) (31,604,441) Cash flows excluded from loss attributable to operating activities: 2021 $ 2020 $ 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 – increase/(decrease) in other non-current assets – increase in trade and other payables – (increase)/decrease in other liabilities – increase in provisions – net current assets of acquired entities 711,498 1,889,297 11,286,373 523,581 (838,056) 1,128,142 2,689,712 (286,369) 687,465 - Cash flows used in operating activities (12,349,307) 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) LiveTiles Annual Report 2021Consolidated Financial Statements 94 NOTE 25: 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. Payments to key management personnel for services: Note 2021 $ 2020 $ Short term employee benefits Post-employment benefits Share based payments Total (a) Share based payments (a) 2,745,446 2,706,492 53,334 22,247 42,006 64,500 2,821,027 2,812,998 The share based payments relate to the shares issued under the Management Incentive Plan (refer to Note 23 (a)). Receivables and payables to key management personnel for services: Current receivables (30 June 2020: Non-current): Note 2021 $ 2020 $ - Loans to key management personnel (b) 1,165,974 697,381 Current payables: - Accrued short term benefits to key management personnel (132,004) (45,274) Net receivables to key management personnel 1,033,970 652,107 (b) Loans to key management personnel 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. LiveTiles Annual Report 2021Consolidated Financial Statements 95 NOTE 26: 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. 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 variable interest rate risk that are not designated in cash flow hedges: Financial assets Cash and cash equivalents Net exposure 2021 $ 16,804,924 16,804,924 2020 $ 37,791,314 37,791,314 (Loss)/profit – Higher/(lower) Equity – Higher/(lower) 2021 $ 2020 $ 2021 $ 2020 $ Judgements of reasonable possible movements +0.50% -0.50% 84,025 188,957 84,025 188,957 (84,025) (188,957) (84,025) (188,957) LiveTiles Annual Report 2021Consolidated Financial Statements 96 (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. 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 – GBP 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 Net exposure 2021 $ 7,756,061 5,587,286 1,088,738 445,932 2,108,250 195,707 1,057,443 944,297 497,694 (204,237) (287,958) (149,484) (1,065,002) 17,974,727 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) 25,578,045 LiveTiles Annual Report 2021Consolidated Financial Statements 97 (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 loss Higher/(lower) Equity Higher/(lower) 2021 $ 2020 $ 2021 $ 2020 $ Judgements of reasonable possible movements AUD/USD +10% AUD/USD -10% AUD/GBP +10% AUD/GBP -10% AUD/EUR +10% AUD/EUR -10% AUD/DKK +10% AUD/DKK -10% AUD/CHF +10% AUD/CHF -10% 1,006,855 1,851,340 1,006,855 1,851,340 (1,006,855) (1,851,340) (1,006,855) (1,851,340) 19,571 (19,571) 693,269 - - 19,571 (19,571) - - 405,302 693,269 405,302 (693,269) (405,302) (693,269) (405,302) 218,252 144,093 218,252 144,093 (218,252) (144,093) (218,252) (144,093) 200,863 157,069 200,863 157,069 (200,863) (157,069) (200,863) (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. LiveTiles Annual Report 2021Consolidated Financial Statements 98 (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 2021 Trade and other payables 7,863,233 - - 7,863,233 Lease liabilities 430,989 430,989 2,365,036 3,227,014 Income tax payable 1,788,885 96,402 541,798 2,427,085 Total 2020 Trade and other payables Lease liabilities Income tax payable Total 10,083,107 527,391 2,906,834 13,517,332 7,443,718 452,350 1,324,238 9,220,306 - - 7,443,718 452,350 3,427,179 4,331,879 - - 1,324,238 452,350 3,427,179 13,099,835 (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. LiveTiles Annual Report 2021Consolidated Financial Statements 99 NOTE 27: 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. The table below shows the segment information provided to the CODM for the reportable segments for the financial years ending 30 June 2020 and 30 June 2021: 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) LiveTiles Annual Report 2021Consolidated Financial Statements 100 Consolidated – 30 June 2021 APAC Americas EMEA Unallocated /Head Office Total Subscription revenue 12,340,650 8,384,880 24,251,070 - 44,976,600 Other revenue 356 1,452,711 62,312 230,209 1,745,588 Revenue EBITDA 12,341,006 9,837,591 24,313,382 230,209 46,722,188 (4,326,582) (854,262) 6,212,733 (17,237,725) (16,205,836) Depreciation & amortisation (1,048,810) (1,474,814) (3,814,401) (4,948,348) (11,286,373) Finance costs (2,981) (319,017) (53,978) (1,693,499) (2,069,475) Loss before income tax expenses (5,378,373) (2,648,093) 2,344,354 (23,879,572) (29,561,684) Income tax expense (154,950) (677,020) (800,441) 1,053,145 (579,266) Profit / (loss) after income tax expenses (5,533,323) (3,325,113) 1,543,913 (22,826,427) (30,140,950) Consolidated – 30 June 2021 Assets APAC Americas EMEA Unallocated /Head Office Total Segment assets 6,318,957 11,042,896 11,527,364 74,349,800 103,239,017 Liabilities Segment liabilities (7,004,324) (11,549,549) (18,019,626) (12,781,958) (49,355,457) The CODM uses underlying 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. NOTE 28: CONTINGENT LIABILITIES There are no material contingent liabilities. NOTE 29: EVENTS AFTER THE REPORTING PERIOD There have been no significant events affecting the Group since the end of the financial year. LiveTiles Annual Report 2021Consolidated Financial Statements 101 NOTE 30: 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 2021Consolidated Financial Statements 102 DIRECTORS DECLARATION 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 52 to 101, are in accordance with the Corporations Act 2001 and: a. comply with Australian Accounting Standards, which, as stated in the 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 2021 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 26th day of August 2021 LiveTiles Annual Report 2021Directors’ Declaration 103 INDEPENDENT AUDITOR’S REPORT LiveTiles Annual Report 2021 104 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 2021, 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 2021 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. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Audit 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 2021Independent Auditor’s Report 105 Revenue recognition Key audit matter How the matter was addressed in our audit Australian Accounting Standard AASB 15: To determine whether revenue was appropriately accounted for Revenue from Contracts with Customers (‘AASB 15’) users a five step model to and disclosed within the financial statements, we performed, amongst others, the following audit procedures: recognise revenue. A number of estimates and judgements are made by management in order to determine the point at which performance obligations are met and when revenue can be recognised. • Critically evaluated the revenue recognition policies for all material sources of revenue and from our detailed testing performed, ensured that revenue was being recognised appropriately, in line with Australian Accounting Standards and policies disclosed within the Due to these factors and the overall financial statements. This included ensuring that revenue significance of revenue to the Group as a was recognised in accordance with the requirements of key performance indicator, we considered AASB 15. this area to be a key audit matter. • Selecting a sample of revenue transactions agreeing revenue recognised to supporting documentation to confirm the existence and accuracy of the revenue recognised and to consider whether the transactions were recorded in the correct period. Furthermore, we obtained and inspected the deferred revenue schedules in order to ensure that correct adjustments were recorded to recognise the revenue in the appropriate reporting period. Carrying value of intangible assets Key audit matter How the matter was addressed in our audit As at 30 June 2021, the Group recognised Our audit procedures for assessing the carrying value of the intangible assets with a carrying value of Group’s intangible assets included, but were not limited to, the $72,508,993 as disclosed in Note 12. following: The assessment of the carrying value of intangible assets was considered a key audit matter due to the significant value of these assets in the Consolidated Statement of Financial Position in addition to the key estimates and judgements applied by management in determining the recoverable value of these assets under Australian Accounting Standard (AASB) 136 Impairment of Assets. • • • Evaluated the discounted cash flow models prepared by management and challenged the assumptions and judgements made. This included considering the reliability of the cash generating units (‘CGU’) historical performance in comparison to forecast future cash flows. Together with BDO valuation specialists, assessed the reasonableness of the discount rates applied by management. Performed sensitivity analysis on the key inputs applied to the discounted cash flow models to assess the impact that minor changes in the assumptions would make to the recoverable value of the CGU. LiveTiles Annual Report 2021Independent Auditor’s Report 106 • • 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. Considered any additional impairment indicators as per AASB 136 Impairment of Assets and the impact on management’s assumptions. Other information The directors are responsible for the other information. The other information comprises the information in the Directors’ Report (excluding the audited Remuneration Report section) for the year ended 30 June 2021, but does not include the financial report and the auditor’s report thereon, which we obtained prior to the date of this auditor’s report, and the Annual Report to Shareholders, which is expected to be made available to us after that date. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, 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. When we read the Annual Report to Shareholders, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and will request that it is corrected. If it is not corrected, we will seek to have the matter appropriately brought to the attention of users for whom our report is prepared. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. LiveTiles Annual Report 2021Independent Auditor’s Report 107 Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report under the heading ‘Remuneration Report’ for the year ended 30 June 2021. In our opinion, the Remuneration Report of LiveTiles Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit Pty Ltd Martin Coyle Director Sydney, 26 August 2021 LiveTiles Annual Report 2021Independent Auditor’s Report 108 SHAREHOLDER INFORMATION LiveTiles Annual Report 2021 109 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES The following information is current as at 1 October 2021: 1 Shareholding a. Distribution of Shareholders Category (size of holding) Ordinary Shares % of Shares Listed 1-1000 1,001-5,000 5,001-10,000 10,001–100,000 100,001 and over 322,732 10,491,331 15,750,104 140,952,187 722,587,548 890,103,902 0.04% 1.18% 1.77% 15.84% 81.18% 100.00% b. The number of shareholdings held in less than marketable parcels is 3,795 c. The names of the substantial shareholders listed in the holding company’s register are: Shareholder Karl Redenbach Peter Nguyen-Brown FIL Limited Ordinary Shares % of Shares Listed 90,982,547 78,232,547 48,352,274 10.08% 8.67% 5.36% d. Voting Rights 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 2021Shareholder Information 110 e. 20 Largest Shareholders – Ordinary Shares Name Number of Ordinary Fully Paid Shares Held % Held of Issued Ordinary Capital HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 148,094,549 16.64% 1 2 3 4 5 6 KARL REDENBACH NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED PETER NGUYEN-BROWN JINLAND PTY LTD7 MR PATRICK PUNTENER 8 MR MATTHIAS WALTER 83,482,547 54,478,900 48,327,686 42,732,547 16,328,6 88 15,406,870 15,396,870 9 BNP PARIBAS NOMINEES PTY LTD 10,788,219 10 MR BRIAN COOK 11 BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM 12 MR KEFENG GAO 10,049,132 9 ,798,619 9,250,000 13 CS THIRD NOMINEES PTY LTD 7,219,013 14 BRIAN COOK 15 BOYCECORP PTY LTD 16 MR XIA LI 17 BNP PARIBAS NOMINEES PTY LRD SIX SIS LTD 18 ONMELL PTY LTD 19 URS BRAWAND 20 CROSSWAVES PTY LTD 6,810,234 4,998,445 4,850,000 3,369,705 3,177,550 3,172,258 3,000,000 9.38% 6.12% 5.43% 4.80% 1.83% 1.73% 1.73% 1.21% 1.13% 1.10% 1.04% 0.81% 0.77% 0.56% 0.54% 0.38% 0.36% 0.36% 0.34% Total 500,731,832 56.26% LiveTiles Annual Report 2021Shareholder Information 111 2 The name of the company secretary is David Hwang. 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 2021Shareholder Information 112 CORPORATE INFORMATION LiveTiles Annual Report 2021 113 The registered office of the company is Website 2 Riverside Quay Southbank VIC 3006 Australia www.livetilesglobal.com The principal place of business is Annual General Meeting The 2021 Annual General Meeting of LiveTiles Limited will be held via video conference on 11am on 30th November 2021. LiveTiles Limited Level 14, 77 King St, Sydney Auditors BDO Level 11, 1 Margaret Street Sydney NSW 2000 Australia Share Registry Automic Group Level 5, 126 Phillip Street Sydney NSW 2000 Stock exchange listing LiveTiles Limited shares are listed on the Australian Securities Exchange. (Ticker: LVT) LiveTiles Annual Report 2021Shareholder Information livetilesglobal.com