N1 Holdings Limited
Annual Report 2016

Plain-text annual report

Page | 1 For personal use only Corporate Directory Directors Ren Hor Wong Executive Chairman, CEO Jia Penny He Executive Director, CFO Tarun Kanji Non-Executive Director Corporate Office Suite 502, 77 King Street Sydney NSW 2000 Company Secretary Solicitors Anand Sundaraj Whittens McKeough & Sundaraj Pty Ltd Level 29, 201 Elizabeth Street Sydney NSW 2000 Auditors Share Registry Crowe Horwath Sydney Level 15, 1 O’Connell Street Sydney NSW 2000 Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Notice of Annual General Meeting Corporate Governance Statement Annual General Meeting of N1 Holdings Limited will be held at: Whittens McKeough & Sundaraj Pty Ltd Level 29, 201 Elizabeth Street Sydney NSW 2000 Time: 10:00 am Date: 25 November 2016 Stock Listing N1 Holdings Limited is listed on Australian Securities Exchange (ASX) under the code N1H. N1 Holdings Limited and the board are committed to achieving and demonstrating the highest standards of corporate governance. N1 Holdings Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2016 corporate governance statement reflects the corporate governance practices in place since listed. The 2016 corporate governance statement was approved by the board on 18 March 2016. A description of the Group's current corporate governance practices is set out in the Group's corporate governance statement which can be viewed at: http://www.n1holdings.com.au/ Page | 2 For personal use only Page | 3 For personal use only Page | 4 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Page | 5 For personal use only Annual Report for the year ended 30 June 2016 CONTENTS Directors’ Report Auditor's Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Auditor's Report Shareholder Information Page 7 18 19 20 21 22 23 47 48 50 Page | 6 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Directors’ Report The directors of the Company (Directors) present their report on the consolidated entity consisting of the Company and its controlled entities (Group) for the financial year ended 30 June 2016 (Directors’ Report). The information in the Chairman’s Letter forms part of this Directors’ Report and is to be read in conjunction with the following information: Directors The following persons were directors of N1 Holdings Limited during or since the end of the financial year up to the date of this report: Mr Ren Hor Wong (Executive Chairman, CEO, appointed 24 November 2015); Ms Jia Penny He (Executive Director, CFO, appointed 24 November 2015); and Mr Tarun Kanji (Non-executive Director, appointed 18 March 2016). Company Secretary Mr Anand Sundaraj (Company Secretary, appointed 24 November 2015) Information relating to Directors and Company Secretary Mr Ren Hor Wong (Executive Chairman, CEO) Qualifications, experience and special responsibilities Mr Wong is the founder, Executive Chairman and Chief Executive Officer of the Company. Mr Wong has been responsible for developing the Company’s business strategy and expanding its business into Asia Pacific. Prior to establishing the Company, Mr Wong had, over a span of 6 years, applied his entrepreneurial and management skills in industries ranging from courier services, printing services and real estate. He has previously founded and successfully exited various businesses including Copiko Printing, Sydneymove.com.au and Packers Unpackers. Mr Wong is a licensed mortgage broker and fluent in both spoken and written Mandarin and Cantonese. Mr Wong conducts regular seminars and provides topical discussions across Asia in relation to Australian property investments and financing. Mr Wong has also published multiple guides and learner books for release in China. Mr Wong holds a Bachelor of Engineering with Honours from University of New South Wales. Interest in shares and options in the Company (Shares and Options, respectively) 50,000,000 Shares Directorships held in other listed entities during the three years prior to the current year None Page | 7 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Ms Jia Penny He (Executive Director, CFO) Qualifications, experience and special responsibilities Ms He is a Certified Practising Accountant and a licenced financial adviser. She has over 10 years combined industry experience in accounting, financial planning and mortgage broking. Ms He joined the Group in May 2014 as the Accounting and Tax Adviser and Principal Financial Planner. Ms He was subsequently appointed as the Company’s Chief Financial Officer. Her current role within the Company includes all financial management, tax and reporting functions of the business. Prior to joining the Company, Ms He served as an executive for Cabot Square Chartered Accountants from July 2006 to May 2014. Ms He holds a Master of Accounting degree from Macquarie University and is also an ATO registered tax agent holding a Public Practice Certificate. Interest in Shares and Options 250,000 Shares and 750,000 Options Directorships held in other listed entities during the three years prior to the current year None Mr Tarun Kanji (Non-Executive Director) Qualifications, experience and special responsibilities Mr Kanji has nearly 25 years corporate and consulting experience spanning the US, Europe, Asia, Australia and New Zealand. After completing a Commerce Degree at Auckland University he spent over 10 years with firms spanning corporate advisory, valuation, finance, litigation support, recovery and audit disciplines in New Zealand and Europe. Thereafter Mr Kanji held a number of senior executive roles over 10 years with Fosters Group. international accounting The roles covered a range of disciplines including finance (as a CFO), commercial management, business development, mergers & acquisitions, governance, and strategic development roles. Mr Kanji is currently the independent chairman of Tomizone Limited (ASX:TOM). In addition, Mr Kanhi currently is involved in a number of internationally the commercial globalisation of an evolutionary search technology software company, focused on the US and Asian markets. He has held and holds a range of governance roles: focused ventures which includes  Former Founding Chairman - Bank of India, (New Zealand) Limited (a subsidiary of the Bank of India)  Member - Portfolio Governance Authority (a committee of New Zealand’s department of Inland Revenue)  Chairman - Noske-Kaeser Rail & Vehicles New Zealand  Limited Independent Director - FairWay Resolution Limited (a New Zealand Crown-owned company) Mr Kanji is a Fellow of The NZ Institute of Chartered Accountants Australia and New Zealand as well as a member of the New Zealand Institute of Directors, Certified Practicing Accountant of Australia, New Zealand Institute of Directors, Australian Institute of Directors and New Zealand Asian Leaders. Interest in Shares and Options 1,000,000 Options Directorships held in other listed entities during the three years prior to the current year Independent Chairman – Tomizone Limited (ASX: TOM) Page | 8 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Mr Anand Sundaraj (Company Secretary) Qualifications, experience and special responsibilities Mr Sundaraj is a principal of Whittens McKeough & Sundaraj, a commercial law firm based in Sydney. Prior to joining Whittens, Mr Sundaraj worked at international law firms Allen & Overy, King & Wood Mallesons and Herbert Smith Freehills, as well as for global investment bank Credit Suisse. Mr Sundaraj specialises in providing legal advice on mergers & acquisitions and capital raisings for both publicly listed and privately held entities. He also advises on funds management and general securities law matters including ASX Listing Rules compliance. (ASX:CAT), Tomizone Limited Mr Sundaraj is currently the company secretary of Catapult Group International Limited (ASX:TOM), Disruptive Investment Group Limited (ASX:DVI), Reddam House (operator of independent, co-educational, non-denominational schools) and Lille Fro Foundation (an Australian-based charity which operates in India). Mr Sundaraj holds a Bachelor of Laws (with Honours) and a Bachelor of Science from Monash University and is admitted as a solicitor of the Supreme Courts of New South Wales and Victoria. Interest in Shares and Options 10,000 Shares Directorships held in other listed entities during the three years prior to the current year None Dividends paid or recommended Dividends paid or declared for payment during the financial year are $nil (2015: $nil). Changes in state of affairs On 10 March 2016, N1 Holdings Limited issued 50,000,000 shares to Mr Ren Hor Wong and 6,043,750 to convertible noteholders in exchange for 100% of the issued capital of N1 Loans Pty Ltd. On 18 March 2016 N1 Holdings Limited issued 25,000,000 ordinary shares at $0.20 each to new Shareholders who subscribed shares through the IPO of the company. Principal Activities The principal activities of the Group during the financial year was the provision of mortgage broking services to customers. Review of operations There were no significant changes in the nature of the Group's principal activities during the financial year. Review of operating results During FY16, the Group generated revenue of $3.39m (FY15: $4.02m) delivering a net loss of $1.30m (compared with a net profit of $0.56m for FY15). The Company listed on ASX on 18 March 2016 and most of the expenses incurred post-IPO which have contributed to the growth of business are yet to be evident on the Group’s financial results. This is due to the fact that the Company’s post-IPO operational period accounts for a single quarter and that revenue receipt lead time of three months is common across the mortgage broking industry. Historically, the Company has engaged a number of contractors whose remuneration was based on commission Page | 9 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 to act as consultants. Since undertaking the IPO, the Group has initiated a transition into engaging consultants as full-time employees – this is referred to as the “PAYG consultant” model. The Group’s reduction in revenue during FY16 is a direct result of transitioning from commission-based consultants to PAYG consultants. However, over the longer term, the Group expects the PAYG consultant model to improve the health of cash flow, client retention rate and profitability of the business. The full effect of this transition is yet to be seen due to the Group’s limited post-IPO operational period. Revenues have also declined during FY16 due to the reduction in the recognised net present value (NPV) of the estimated future trail commission. Net future trail commission recognised in FY16 is $427,000 (compared with $919,002 for FY15). FY16 is the second year that N1 has adopted this revenue recognition policy and when the existing trail book ages, its estimated amortisation increases, which results in a reduction in NPV of the future trail commissions. The Group is currently implementing a diversification strategy. Diversification revenue (DR), being revenue that is not related to residential home loan broking, is growing in line with the Group’s strategic plan. Total DR during FY16 was $121,056 (FY15: $51,498). This represents organic growth of 135%. The decline in operating profit is predominantly due to the following factors: — decrease in NPV of future trailing income movement of $492,000; — decrease in upfront commission by $239,000; — decrease in cost of sales by $256,000; — increase in employee costs by $788,000; — employee share options and derivative costs on convertible notes totalling $307,000; — costs associated with listing & being listed totalling $53,000; — marketing costs increased by $223,000 to attract new clients; and — rent & utilities increased by $101,000 for new premise to cover operational needs. During the financial year ended 30 June 2016, the Company used cash and its assets in a form readily convertible to cash that it received under its initial public offering in a way consistent with its business objectives. Review of Financial Position The net assets of the Group have increased from $688,710 as at 30 June 2015 to $5,216,244 in 2016. This increase was mainly due to the proceeds from the IPO and associated share issuance which raised $5,000,000. The Group has reduced its current financial liabilities by $775,378. The Group’s working capital, being current assets less current liabilities, has improved from $118,846 in 2015 to $4,018,691 in 2016. The Directors believe the Group is in a stable financial position to expand and grow their current operations. Prospects for future financial years The Group has initiated a digital plus retail strategy in the FY 2016 and expects to have its first retail presence in Sydney in October 2016, complementing the Group’s web-based lead generation tools chengdai.com.au and loanrobot.com.au and realty related mobile app Snailapp. This marks N1’s strategic move to integrate online and offline capabilities, maximising market exposure, branding and efficient cross sell between N1 entities of complimenting businesses. The Group looks forward to the organic growth momentum and planned acquisitions. N1 aims to become an integrated property and financial services firm with financial services specialisation in property and equipment finance, commercial lending and business loans, as well as property services specialisation in property management and residential sales. In broader terms, n1 offers more than just mortgage broking, it also includes property-related funds and real estate lending – both in residential and commercial nature. The group becomes an integrated one-stop shop that offers end to end value added services from funding of a development through to sales of properties to investors, arranging finance for investors then management of investment properties for investors. Page | 10 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 The Group will continue to execute its diversification strategy in the following ways: — Products diversification — Geographic diversification — Language diversification Events after the Reporting Period On 1 September 2016, N1 Holdings Limited acquired a website (www.1crowd.com.au) owned by N1 Venture Pty Ltd (ACN 602 937 851) at its cost of $50,000 and subsequently acquired N1 Venture at its issued capital of $100. N1 Venture holds an Australian Financial Services Licence. On 31 August 2016, N1 Realty Pty Ltd, a fully owned subsidiary of the Group, entered into an agreement to acquire all the issued shares in Sydney Boutique Property Pty Ltd, a real estate agency business with a cash consideration of $2,000,000. The acquisition has not been completed when this financial report is signed. On 17 August 2016, N1 Loans Pty Ltd acquired loan trail book from Aura Private Wealth Pty Ltd (ACN 158 184 000) with total consideration of $336,661.50 excluding GST. Other than above mentioned events, there has been no matters or events since the end of the financial year which may significantly affect the operation of the Group, the results of those operations or the state of affairs of the Group in the future financial years. Environmental Issues The Group‘s operations are not subject to significant environmental regulation under the law of the Commonwealth and State. Indemnifying Officers or Auditor During or since the end of the financial year, the group has paid premiums to insure each of the directors (as named above) against liabilities for costs and expenses incurred by the defending legal proceedings arising from their conduct while acting in the capacity of directors of the group, other than conduct involving a wilful breach of duty in relation to the group. The premiums for the directors amounted to $15,022.96. The group has not indemnified the auditors. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year. Non-audit Services The Board of Directors, in accordance with advice from the audit committee, is satisfied that the provision of non- audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditors’ independence for the following reasons: — — all non-audit services are reviewed and approved prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor and the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. The following fees were paid or payable to Crowe Horwath for non-audit services provided during the Year ended 30 June 2016: Page | 11 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Taxation services Due diligence investigations Auditor’s independence declaration $ 7,700 12,000 19,700 The lead auditors’ independence declaration for the year ended 30 June 2016 has been received and can be found following the Directors’ Report. Options As at 30 June 2016, the number of unissued ordinary shares in the Company under option are 6,962,500. For details of Options issued to Directors and executives as remuneration, please refer to the Remuneration Report. Meetings of Directors During the financial year, five meetings of Directors were held. Attendance by each director during the year was as follows: Directors' meetings Directors Number eligible to attend Number attended Ren Hor Wong Jia Penny He Tarun Kanji 5 5 5 5 5 5 Remuneration policy Remuneration Report Remuneration Policy The remuneration policy of the Company has been designed to align key management personnel (KMP) objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance in areas affecting the Group‘s financial results. The Board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the high- quality KMP to run and manage the Group, as well as create goal congruence between Directors, executives and Shareholders. The Board’s policy for determining the nature and amount of remuneration for KMP of the Group is as follows: — The remuneration policy is to be developed by the Board and the Board may seek advice on the policy from independent external consultants at its discretion. — All KMP receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits options and performance incentives. — Performance incentives are generally only paid once and conditional on key performance indicators (KPIs) having been met. — Incentives paid in the form of Options or rights are intended to align the interests of the Directors and the Company with those of the Shareholders. In this regard, KMP are prohibited from limiting the risk attached to those instruments by use of derivatives or other means. — The Board reviews KMP packages annually by reference to the Group’s performance, executive performance and comparable information from industry sectors. The performance of KMP is measured against criteria agreed annually with each executive and is based predominantly on the forecast growth of the Group’s profits and Shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes. Any change must be justified by Page | 12 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in Shareholder wealth. KMP receive, at a minimum, the superannuation guarantee contribution required by law, which is currently 9.5% of the individual's ordinary earnings. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation. The Board's policy is to remunerate non-executive Directors at market rates for time, commitment and responsibilities. The Board determines payments to the non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. Fees that can be paid to a non-executive Director is contained in that Directors’ consultancy service agreement. Remuneration structure There have been no significant changes after the Company’s listing on ASX. The table below summarises the remuneration components of KPM of the Group. Remuneration component Fixed remuneration Reward Type Purpose Link to performance Salaries, superannuation and other fixed benefits To provide competitive fixed remuneration set with reference to role, market and experience Company and individual performance are considered during the annual review Short-term incentive Bonus paid in cash Long-term incentive Share options Rewards executives for their contribution to achievement of Group outcome Rewards executives for their contribution to the creation of shareholder value over the longer term Revenue of the Group Vesting of the awards is dependent on absolute total Shareholder return in addition to continuous service vesting conditions. Performance-based Remuneration The KPIs are set annually, with a certain level of consultation with KMP. The measures are specifically tailored to the area each individual involved is in and has a level of control over. The KPIs target areas that the Board believes hold greater potential for Group expansion and profit covering financial and non-financial as well as short and long-term goals. The level set for each KPI is based on budgeted figures for the Group and respective industry standards. Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved. Following the assessment, the KPIs are reviewed by the remuneration committee in light of the desired and actual outcomes, and their efficiency is assessed in relation to achieving the Group’s goals and shareholder value, before the KPIs are set for the following year. In determining whether or not a KPI has been achieved, the Company bases the assessment on audited figures, however, where the KPI involves comparison of the Group or a division within the Group to the market, independent reports are obtained from other research organisations. Relationship between remuneration policy and Company performance The remuneration policy has been tailored to increase goal congruence between Shareholders, Directors and executives. Two methods have been applied to achieve this aim, the first being a performance-based bonus (i.e. based on KPI), and the second being the issue of options to the majority of Directors and executives to encourage the alignment of personal and Shareholder interests. The Company believes this policy has been effective in increasing shareholder value over the past years. Page | 13 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Performance conditions linked to remuneration The Group seeks to emphasise reward incentives for results and continued commitment to the Group through the provision of various cash bonus reward schemes, specifically the incorporation of incentive payments based on the achievement of revenue targets, return on equity ratios, and continued employment with the Group. The performance-related proportions of remuneration (based on KPI targets) are included in the following table. The objective of the reward schemes is to both reinforce the short and long-term goals of the Group and provide a common interest between Management and Shareholders. There has been no alteration to the terms of the bonuses paid since the grant date. The satisfaction of the performance conditions is based on a review of the audited financial statements of the Group and publicly available market indices and as such these figures reduce any risk of contention relating to payment eligibility. The Board does not believe that performance conditions should include a comparison with any other measures or factors external to the Group at this time. The performance-based bonus schedule is detailed below, which has only available to executive Directors since the listing date on 18 March 2016. No bonuses were paid to executive Directors during FY2016. Minimum revenue achieved by the Company for a financial year Bonus Ren Hor Wong Bonus Jia Penny He $4.5 million $5 million $5.5 million + $10,000 $16,000 $20,000 $5,000 $8,000 $10,000 Maximum achievable bonus is used in below calculation. Fixed Remuneration Remuneration linked to Performance 2016 2015 2016 2015 Directors and secretaries Ren Hor Wong 93.75% Jia Penny He Tarun Kanji 92.3% 100% Employment Details of members of KMP 100% 100% 100% 6.25% 7.7% 0% 0% 0% 0% The following tables provide employment details of persons who were, during FY2016, members of KMP of the Group. The table also illustrates the proportion of remuneration that was performance and non-performance based. Positions of KMPs and their employment details Position Held Contract Duration Employment Type Termination Notice Period Directors Ren Hor Wong Jia Penny He Tarun Kanji Chairman, CEO Executive Director, CFO 18/03/2016 - Ongoing 18/03/2016 - Ongoing Permanent 6 months Permanent 6 months Independent Director 18/03/2016 - Ongoing Consultancy agreement 3 months Page | 14 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Key terms of KMP contract Chief Executive Officer — The CEO receives fixed remuneration of $300,000 per annum plus superannuation contributions under the Superannuation Guarantee (Administration) Act 1992 (Cth) and the Superannuation Guarantee Charge Act 1992 (Cth). — In addition to the fixed remuneration, the CEO will be entitled to a bonus on the following terms: Minimum revenue achieved by the Company for a financial year Bonus Ren Hor Wong $4.5 million $5 million $5.5 million + $10,000 $16,000 $20,000 — The Company provide a car benefit to the CEO. — Fixed and incentive remuneration is reviewed and determined annually. — Termination notice period is 6 months during the first 12 months and 3 months thereafter or without notice in the event of breach of services agreement between Mr Wong and the Company or serious misconduct. — Restraint period being up to 24 months. Chief Financial Officer — The CFO receives fixed remuneration of $120,000 per annum plus superannuation contributions under the Superannuation Guarantee (Administration) Act 1992 (Cth) and the Superannuation Guarantee Charge Act 1992 (Cth). — In addition to the fixed remuneration, the CFO will be entitled to a bonus on the following terms: Minimum revenue achieved by the Company for a financial year Bonus Jia Penny He $4.5 million $5 million $5.5 million + $5,000 $8,000 $10,000 — Fixed and incentive remuneration will be reviewed and determined annually. — Termination notice period is 6 months during the first 12 months and 3 months thereafter or without notice in the event of breach of services agreement between Ms He and the Company or serious misconduct. — Restraint period being up to 24 months. Non-Executive Director — The remuneration (Service Fee) of the Non-Executive Director is $40,000 per annum for the first year of service commencing 18 March 2016 and $59,000 per annum for every year thereafter. — 1,000,000 options exercisable at $0.20 issued on 18 March 2016 expiring 2 years after the date of issue. — The Service Fee will be reviewed and determined annually. — Termination notice period is 3 months or 1 month in the event of breach of services agreement between the relevant Non-Executive Director and the Company or serious misconduct. — Restraint period being up to 24 months. Page | 15 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Remuneration of KMP 2016 Short term employee benefits Post-employment benefits Salaries Bonus Other Superannuation (note 1) Long term employee benefits Long service leave Share based payments Total Options Directors Ren Hor Wong Jia Penny He Tarun Kanji $145,451 $105,453 $27,526 - - - $3,783 $13,713 - - $10,044 - $889 $491 - - $163,836 $7,445 $123,433 $38,500 $66,026 2015 Short term employee benefits Post-employment benefits Salaries Bonus Other Superannuation Long term employee benefits Long service leave Share based payments Total Options Directors Ren Hor Wong Jia Penny He Tarun Kanji $36,918 $44,600 - - - - - - - $3,325 $3,958 - $46 $77 - - - - $40,289 $48,635 - Note1: The Company provides car benefits to the CEO. Options and rights granted as remuneration The terms and conditions relating to Options granted as remuneration during the year to KMP are as follows: 2016 Number of Options beginning of the year Granted No. Exercised during the year Lapsed during the year Number of options at the ending of the year Vested Unvested Ren Hor Wong Jia Penny He Tarun Kanji - - - - 750,000 1,000,000 - - - - - - - 750,000 - - - 750,000 1,000,000 1,000,000 - 2015: No Options were granted or outstanding in 2015. The fair value of Options granted as remuneration and as shown in the above table has been determined in accordance with Australian accounting standards and will be recognised as an expense over the relevant vesting period to the extent that conditions for vesting are satisfied. Description of Options/rights issued as remuneration Details of the Options granted as remuneration to those KMP and executives listed in the previous table are as follows: Tranche Grant date Number of options granted Grant Value Exercising Price Vesting date Reason for grant Jia Penny He 1 14/12/2015 750,000 $150,000 $0.2 14/12/2018 Tarun Kanji 2 18/03/2016 1,000,000 $200,000 $0.2 18/03/2016 Employee share option Director option Page | 16 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ REPORT 30 JUNE 2016 Tranche Fair value per option at Granting date Vesting conditions Jia Penny He Tarun Kanji 1 2 $0.0544 $0.0385 Continuous employment with the Group from 14/12/2015 to 14/12/2018 Vested Option values at grant date were determined by applying the Binomial Approximation valuation methodology. KMP shareholdings The number of ordinary shares in the Company held by each KMP of the Group during the financial year is as follows: 2016 Ren Hor Wong (Note 1) Jia Penny He (Note 2) Tarun Kanji Number of Shares beginning of the year 100 - - Received as remuneration during year Received on exercising Options Disposed Number of Shares at the end of the year - - - - - - - - - 50,000,000 250,000 - 2015: The Company was not incorporated in 2015. Note 1: Mr Ren Hor Wong received 50,000,000 Shares in the Company in exchange of his shares in N1 Loans during the IPO. Note 2: Ms Jia Penny He was issued 187,500 Shares from settlement of convertible notes and acquired 62,500 Shares during the IPO. Other equity-related KMP transactions There have been no other transactions involving equity instruments apart from those described in the tables above relating to Options, rights and Shares. Loans to KMP The Group has made an interest free short-term loan to an associated entity of Ren Hor Wong. The total outstanding balance of the loan as at 30 June 2016 was $50,000. The loan had been repaid at the time of reporting. On behalf of the Board Ren Hor Wong Executive Chairman and CEO 29 September 2016 Sydney Page | 17 For personal use only N1 HOLDINGS LIMITED AUDITOR’S INDEPENDENCE DECLARATION 30 JUNE 2016 Page | 18 For personal use only N1 HOLDINGS LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 30 JUNE 2016 For the year ended 30 June 2016 Continuing operations Revenue Consulting and referral fees Gross profit Other income Employee cost IT and technology Sales and marketing Rent and utilities Professional fee Office and administrative expense Finance cost Travel cost Depreciation and amortisation Other operation cost Profit/(Loss) before income tax Income tax benefit/(expense) Net profit/(loss) from continuing operations Other comprehensive income Total comprehensive income/(loss) for the year Earnings per share Basic earnings per share Diluted earnings per share 2016 $ 2015 $ (restated) 3,387,683 4,017,760 (1,463,949) (1,720,237) 1,923,734 2,297,523 70,829 35,318 (1,834,280) (1,046,470) (59,034) (301,658) (3,229) (78,609) (254,099) (143,003) (184,782) (140,772) (282,873) (124,754) (80,887) (26,700) (1,295,276) (10,124) (1,305,400) - (37,143) (38,507) (12,540) (74,122) (57,829) (26,425) 814,964 (255,669) 559,295 - (1,305,400) 559,295 cents (5) (5) cents 559,295 559,295 Note 4 4 5 7 7 The accompanying notes form part of these financial statements. Page | 19 For personal use only N1 HOLDINGS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 JUNE 2016 As at 30 June 2016 2016 $ 2015 $ 2014 $ Note (restated) (restated) ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other financial assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Other financial assets Property, plant and equipment Deferred tax assets Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Other financial liabilities Current tax liabilities Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Other financial liabilities Deferred tax liabilities Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY 8 9 10 9 10 11 15 12 13 14 15 16 14 15 16 17 17 The accompanying notes form part of these financial statements. 3,856,946 1,060,440 94,657 5,012,043 949,010 195,097 182,508 349,246 155,750 1,831,611 647,857 854,167 205,631 1,707,655 716,000 28,500 131,320 64,624 68,599 1,009,043 59,805 409,309 - 469,114 117,327 33,635 166,991 16,635 1,714 336,302 6,843,654 2,716,698 805,416 462,769 33,698 - 496,885 993,352 149,448 477,443 7,167 634,058 343,216 809,076 61,874 374,643 1,588,809 106,029 331,200 1,950 439,179 1,627,410 5,216,244 2,027,988 688,710 5,738,586 94,448 (616,790) 5,216,244 100 - 688,610 688,710 228,611 59,456 27,359 166,111 481,537 137,293 55,499 1,672 194,464 676,001 129,415 100 - 129,315 129,415 Page | 20 For personal use only N1 HOLDINGS LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 30 JUNE 2016 For the year ended 30 June 2016 Share Capital $ Option Reserve $ Retained Earning $ Note Balance at 1 July2014 Opening balance adjustment 2 Restated balance at 1 July 2014 Comprehensive income Profit for the year Total comprehensive income for the year Balance at 30 June2015 / 1 July 2015 Comprehensive income Profit/(loss) for the year Total comprehensive income for the year Transactions with owners, in their capacity as owners, and other transfers Shares issued during the year Total transactions with owners and other transfers Share based payment Balance at 30 June2016 100 - 100 - - 100 - - 5,738,486 5,738,486 - 5,738,586 - - - - - - - - - - 94,448 94,448 The accompanying notes form part of these financial statements. Total $ (84) 129,499 129,415 (184) 129,499 129,315 559,295 559,295 559,295 559,295 688,610 688,710 (1,305,400) (1,305,400) (1,305,400) (1,305,400) - - - 5,738,486 5,738,486 94,448 (616,790) 5,216,244 Page | 21 For personal use only N1 HOLDINGS LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS 30 JUNE 2016 For the year ended 30 June 2016 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Interest received Payments to suppliers and employees Income tax paid Note 2016 $ 2015 $ 3,113,072 26,359 3,512,879 (8,622) (4,378,927) (3,380,081) (74,160) Net cash provided by (used in) operating activities 20 (1,313,656) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Purchase of Intangible assets Loans to Related Party Loans Recovered Cash Received on Disposal of plant and equipment Net cash provided by /(used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Cash paid for capital raising Proceeds from borrowings Loans from related parties Finance liability repaid Net cash provided by (used in) financing activities Net increase in cash held Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 8 The accompanying notes form part of these financial statements. (47,241) (131,578) (41,000) 162,996 105,419 48,596 5,000,000 (618,768) 200,000 - (107,083) 4,474,149 3,209,089 647,857 3,856,946 6,559 130,735 (9,743) (79,300) - - - (89,043) - 767,000 (189,376) (31,264) 546,360 588,052 59,805 647,857 Page | 22 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 These consolidated financial statements and notes represent those of N1 Holdings Limited and its controlled entities (the “consolidated group” or “group”). 1. Summary of significant accounting policies Basis of preparation These general purpose financial statements have been prepared in accordance with the Corporations Act, the Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and the International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under the 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 functional presentation currency is Australian dollars rounded to nearest dollar. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. (a) Principles of consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the Company and all of the subsidiaries. Subsidiaries are entities that the Company controls. The Company 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 23. The assets, liabilities and results of all subsidiaries are fully 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. Inter-company transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Business combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is obtained, at which point the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration is classified as an asset or liability and is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at the acquisition date. All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial instrument, are recognised as expenses in profit or loss when incurred. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. Group reorganisation The Company was incorporated on 24 November 2015. On 10 March 2016, the Company issued 50,000,000 shares to Mr Ren Hor Wong (sole shareholder of both the Company and N1 Loans Pty Ltd) and 6,043,750 shares to convertible noteholders in exchange for 100% of the issued capital of N1 Loans in order to list the Company on ASX. This Group reorganisation did not meet the definition of a business combination in AASB 3 Business Combination. As a result, the financial statements are a continuation of N1 Loans and the predecessor accounting has been used for the Group reorganisation as follows: — — — — Retained earnings and other equity balances at acquisition date are those of N1 Loans. The equity structure in the financial statements (the number of equity instrument issued) at the date of the acquisition reflects the equity structure of the Company, including Shares issued to effect the acquisition of N1 Loans. The result for FY2016 comprises the consolidated results for the year of N1 Loans, the result of the Company from 24 November 2015 to 30 June 2016 and other controlled entities from their incorporation dates during the year to 30 June 2016. The comparative figures represent the results and balances of N1 Loans only. Page | 23 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 1. Summary of significant accounting policies (continued) (b) Income Tax The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled and their measurement also reflects the manner in which Management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. (c) 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 maximum 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). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. (d) Plant and Equipment Plant and equipment is measured at cost less accumulated depreciation and any accumulated impairment. In the event that the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount. Impairment losses are recognised in profit or loss. Page | 24 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 1. Summary of significant accounting policies (continued) Depreciation The depreciable amount of all plant and equipment and is depreciated on a straight-line basis over the asset’s useful life commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. Currently the depreciation rate is in the range of 10% to 20%. (e) Finance Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset (but not the legal ownership) are transferred to entities in the consolidated group, are classified as finance leases. Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. (f) Financial instruments Recognition and initial measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the entity commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transactions costs except where the instrument is classified at fair value through profit or loss in which case transaction costs are expensed to profit or loss immediately. Classification and subsequent measurement Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost. Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss. (i) Financial assets at fair value through profit or loss Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by KMP on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying amount being included in profit or loss. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. Page | 25 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 1. Summary of significant accounting policies (continued) (iv) Available-for-sale investments Available-for-sale investments are non-derivative financial assets that are either not capable of being classified into other categories of financial assets due to their nature or they are designated as such by Management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. They are subsequently measured at fair value with any re-measurements other than impairment losses and foreign exchange gains and losses recognised in other comprehensive income. When the financial asset is de recognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit or loss. (v) Financial liabilities Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is de recognised. Impairment A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a loss event) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified into profit or loss at this point. In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if Management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account. When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered. Derecognition Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party where by the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non- cash assets or liabilities assumed, is recognised in profit or loss. (g) Impairment of assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’ s fair value less costs of disposal and value in use, to the asset’ s carrying amount. Any excess of the asset’ s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of revalued asset is treated as a revaluation decrease in accordance with that other standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for intangible assets with indefinite lives and intangible assets not yet available for use. Page | 26 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 1. Summary of significant accounting policies (continued) (h) Intangibles other than goodwill Website and IT System Acquired website and computer software licences are capitalised on the basis of costs incurred to acquire them. These costs are amortised over their estimated useful lives. Costs associated with maintaining computer software programs are recognised as an expense as incurred. Amortisation Amortisation is recognised in profit and loss on a straight line basis over the estimated useful life of the intangible assets from the date that they are suitable for use. The estimated useful life of intangible assets is as follows: — Website and IT system and software: 5 years (i) Foreign currency transactions and balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the Company’s functional currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non- monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non- monetary items are recognised directly in other comprehensive income to the maximum extent that the underlying gain or loss can be recognised in other comprehensive income, otherwise the exchange difference is recognised in the profit or loss. (j) Employee benefits Retirement benefit obligations All employees of the Group other than those that receive defined benefit entitlements receive defined contribution superannuation entitlements, for which the Group pays the fixed superannuation guarantee contribution (currently 9.5% of the employee’s average ordinary salary) to the employee‘s superannuation fund of choice. All contributions in respect of employees’ defined contribution entitlements are recognised as an expense when they become payable. The Group’ s obligation with respect to employees’ defined contribution entitlements is limited to its obligations for any unpaid superannuation guarantee contributions at the end of the reporting period. All obligations for unpaid superannuation guarantee contributions are remeasured at the (undiscounted) amounts expected to be paid when the obligation is settled and are presented as current liabilities in the Group’ s statement of financial position. Equity-settled compensation The Group operates an employee share and option plan. Share-based payments to employees are remeasured at the fair value of the instruments issued and amortised over the vesting periods. Share-based payments to non- employees are remeasured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined that the fair value of the goods or services cannot be reliably measured, and are recorded at the date that the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of Options is determined using the Binomial Approximation valuation methodology. The number of Shares and Options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. Page | 27 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 1. Summary of significant accounting policies (continued) (k) Goods and services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the ATO. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. (l) Comparative figures When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Group retrospectively applies an accounting policy, makes a retrospective restatement or reclassifies items in its financial statements, an additional (third) statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statement is presented. (m) New and amended accounting policies adopted by the Group The Group has adopted all of the new and revised standards and interpretations, including amendments to the existing standards issued by the Australian accounting standards Board (the AASB) that are relevant to their operation and effective for the current reporting period. The adoption of these amendments and new standards has not resulted in any significant changes to the Group’ s accounting policies or any significant effect on the measurement or disclosure of the amounts reported for the current or prior reporting period. (n) Critical accounting estimates and judgements The Directors evaluations, estimates and judgments that are incorporated into the financial statements are based on historical knowledge and the best available current information. These estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Measurement of Share base payments The share base payment is measured at fair value at the grant date of the Options. The fair value at grant date is independently determined using an adjusted form of the Binomial Approximation valuation methodology that takes into account the exercise price, the term of the Option, the impact of dilution (where material), the Share price at grant date and expected price volatility of the underlying Share, the expected dividend yield, the risk free interest rate for the term of the Option and the correlations and volatilities of the peer group companies. NPV of trailing commission receivable The Group receives trailing commissions from lenders on settled loans over the life of the loan based on the loan book balance outstanding. The Group is entitled to the trailing commissions without having to perform further services. The Group also makes trailing commission payments to commission based consultants when trailing commission is received from lenders. The fair value of trailing commissions receivable from lenders and the corresponding amounts payable to the commission based consultants is determined by using a discounted cash flow valuation. These calculations require the use of assumptions which are determined by Management with the assistance of external actuaries. Key assumption used and the related sensitivity test have been given in note 25 in this financial report. Clawback – Receivable and Provision There is potential for origination commissions to be clawed back by lenders after loans have settled. When commissions are clawed back by lenders, the Group will claw back the corresponding commissions from its agents at the same time. As a result, the Group assesses the probability of the clawbacks and determines both provision for clawbacks (note 16) and clawback receivable from agents (note 9) at each reporting date. The provision is based on the historical record of actual clawback and recovery. The probability used in estimate of the clawbacks is 16.7% (2015: 10.2%) Page | 28 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 1. Summary of significant accounting policies (continued) Taxation The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation. Management establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. (o) New accounting standards for application in future periods Accounting standards issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below: AASB 9: financial instruments and associated amending standards (applicable to annual reporting periods beginning on or after 1January 2018). The standard will be applicable retrospectively (subject to the provisions on hedge accounting outlined below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and de recognition requirements for financial instruments and simplified requirements for hedge accounting. The key changes that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, upfront accounting for expected credit loss, and their revocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non- financial items. Should the Company elect to change its hedge policies in line with the new hedge accounting requirements of the standard, the application of such accounting would be largely prospective. The directors anticipate that the adoption of AASB 9 will have no significant impact on the Group’ s financial instruments. AASB 15: revenue from Contracts with customers (applicable to annual reporting periods beginning on or after 1 January 2018, as deferred by AASB 2015-8: Amendments to Australian accounting standards – effective Date of AASB 15). When effective, this standard will replace the current accounting requirements applicable to revenue with a single, principles- based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non- monetary exchange s between entities in the same line of business to facilitate sales to customers and potential customers. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provided the following five-step process: — identify the contract(s) with a customer; — identify the performance obligations in the contract(s); — determine the transaction price; — allocate the transaction price to the performance obligations in the contract(s); and — recognise revenue when (or as) the performance obligations are satisfied. Page | 29 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 1. Summary of significant accounting policies (continued) The transitional provisions of this standard permit an entity to either: restate the contracts that existed in each prior period presented per AASB 108: accounting Policies, changes in accounting estimates and Errors (subject to certain practical expedients in AASB 15); or recognise the cumulative effect of retrospective application to incomplete contracts on the date of initial application. There are also enhanced disclosure requirements regarding revenue. Whilst the Directors anticipate that the adoption of AASB 15 may have an impact on the Group’s financial statements, the Directors consider that it is impracticable at this stage to provide a reasonable estimate of such impact. AASB 16: leases (applicable to annual reporting periods beginning on or after 1 January2019). When effective, this standard will replace the current accounting requirements applicable to leases in AASB 117: leases and related interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. The main changes introduced by the new standard include: — recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets); — depreciation of right-to-use assets in line with AASB 116: Property, plant and Equipment in profit or loss and unwinding of the liability in principal and interest components; — variable lease payments that depend on an index or a rate are included in the initial measurement of the lease liability using the index or rate at the commencement date; — by applying a practical expedient, a lessee is permitted to elect not to separate non- lease components and instead account for all components of a lease; and — additional disclosure requirements. The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the standard to comparatives in line with AASB 108or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. Although the Directors anticipate that the adoption of AASB 16 will impact the Group’s financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact. AASB 2014-3: Amendments to Australian accounting standards – accounting for acquisitions of interests in Joint Operations (applicable to annual reporting periods beginning on or after 1 January2016). This standard amends AASB 11: Joint arrangements to require the acquirer of an interest (both initial and additional) in a joint operation in which the activity constitutes a business, as defined in AASB 3: business combinations, to apply all of the principles on business combinations accounting in AASB 3 and other Australian accounting standards except for those principles that conflict with the guidance in AASB 11; and disclose the information required by AASB 3 and other Australian accounting standards for business combinations. The application of AASB 2014-3 will result in a change in accounting policies for the above described transactions, which were previously accounted for as acquisitions of assets rather than applying the acquisition method per AASB 3. The transitional provisions require that the standard should be applied prospectively to acquisitions of interests in joint operations occurring on or after 1 January 2016. As at 30 June 2016, Management is not aw are of the existence of any such arrangements that would impact the financial statements of the entity going forward and as such is not capable of provided a reasonable estimate at this stage of the impact on initial application of AASB 2014-3. AASB 2014-10: Amendments to Australian accounting standards – Sale or contribution of assets between an Investor and its Associate or joint venture (applicable to annual reporting periods beginning on or after 1 January 2018, as deferred by AASB 2015-10: Amendments to Australian accounting standards – effective Date of Amendments to AASB 10 and AASB 128). This standard amends AASB 10: consolidated financial statements with regards to a parent company losing control over a subsidiary that is not a " business " as defined in AASB 3 to an associate or joint venture, and requires that: — A gain or loss (including any amounts in other comprehensive income (OCI)) be recognised only to the extent of the un related invest or’ s interest in that associate or joint venture; — The remaining gain or loss be eliminated against the carrying amount of the investment in that associate or joint venture; and — Any gain or loss from remeasuring the remaining investment in the former subsidiaries at fair value also be Page | 30 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 recognised only to the extent of the joint venture. The remaining gain or loss should be eliminated against the carrying amount of un related invest or’ s interest in the associate or the remaining investment. The application of AASB 2014-10 will result in a change in accounting policies for transactions of loss of control over subsidiaries (involving an associate or joint venture) that are businesses per AASB 3 for which gains or losses were previously recognised only to the extent of the unrelated investor’s interest. The transitional provisions require that the standard should be applied prospectively to sales or contributions of subsidiaries to associates or joint ventures occurring on or after 1 January 2018. Although the Directors anticipate that the adoption of AASB 2014-10 may have an impact on the Group’s financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact. 2. Change of accounting policies The Group has changed the accounting policy in relation to the recognition of its trailing income receivable during FY2016. The Group started to recognise the NPV of all the future trailing income as an asset on the balance sheet when the entitlement is established in accordance with Australian Accounting Standards. As a result of the change, each of the affected financial statement line items have been restated for the prior periods as follows. Balance Sheet (extract) 30 June 2014 Increase 30 June 2014 (restated) 30 June 2015 Increase 30 June 2015 (restated) 341,638 184,998 526,636 466,167 1,104,000 1,570,167 Trade and other receivable Deferred tax liability Net assets Retained earning Total equity - (84) (184) (84) 55,499 129,499 129,499 129,499 55,499 129,415 129,315 129,415 - (84,090) (84,190) (84,090) 331,200 772,800 772,800 772,800 Profit or Loss and other comprehensive income(extract) 2015 Profit Increase Revenue Profit/(loss) before tax Income tax expense/(benefit) Profit/(loss) after tax 3. Segment Information 3,130,158 (104,038) (20,032) (84,006) 919,002 919,002 275,701 643,301 The Group has not identified any reporting segments under AASB 8 during the current and prior financial year. 4. Revenue and Other Income (a) Revenue Origination commission Fair value of Trail commission Other service (b) Other income Bank Interest Other Note 2 Consolidated Group 2015 (restated) 2016 2,945,367 3,086,335 427,000 15,316 919,002 12,423 3,387,683 4,017,760 26,359 44,470 70,829 3,918 31,400 35,318 Page | 31 331,200 688,710 688,610 688,710 2015 (restated) 4,049,160 814,964 255,669 559,295 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. When the inflow of consideration is deferred it is treated as the provision of financing and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Commission Revenue The Group provided loan origination services and receives origination commission on the settlement of loans. Additionally, the lender normally pays a trailing commission over the life of the loan. Commission revenue is recognised as follows: (i) Origination commission Origination commission are recognised upon the loan being settled. (ii) Trailing commissions The Group receives trailing commissions from lenders on loans they have settled that were originated by the Group. The trailing commissions are received over the life of the loans based on the individual loan balance outstanding. On initial recognition, trailing commission revenue and receivables are recognised at fair value, being the expected future trailing commission receivables discounted to their net present value. Subsequent to initial recognition, the trailing commission asset are measured at amortised cost. The carrying amount of the trailing commission asset are adjusted to reflect net present value of revised estimated future cash flows at the original effective interest rate. The resulting adjustment is recognised as income or expense in the consolidated statement of profit or loss and other comprehensive income. (iii) Render of other service Revenue from contracts to provide other services is recognised by reference to the stage of completion of the contracts. 5. Tax expense (a) The components of tax expense (income) comprise: Current tax Deferred tax Note 15 (b) The prima facie tax on profit from ordinary activities before income tax is reconciled to income tax as follows: Profit/(loss) before income tax At 30% (2015:30%) Tax effect of: Permanent differences Net deferred tax as a result of IPO impact Tax to equity Income tax (benefit)/expense Consolidated Group 2015 (restated) 2016 (221,779) 231,903 10,124 27,958 227,711 255,669 (1,295,276) 814,964 (388,583) 244,490 278,891 11,179 156,943 (37,127) 10,124 255,668 As at 30 June 2016, the tax loss carried forward for the company is $259,386 (2015: nil) Page | 32 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 6. Auditor’s Remuneration Remuneration of the auditor Crowe Horwath Sydney for: auditing or reviewing the financial report taxation services due diligence services 7. Earnings per share (a) Reconciliation of earnings to profit or loss Profit/(loss) – from continuing activities Earnings/(loss) used to calculate basic EPS & dilutive (b) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS Weighted average number of dilutive options outstanding Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS (c) Earnings/(loss) per share – basic Earnings/(loss) per share – dilutive 8. Cash and cash equivalents Cash at bank and on hand Short-term bank deposits Consolidated Group 2015 2016 55,000 7,700 12,000 74,700 36,000 - - 36,000 Consolidated Group 2015 (restated) 2016 (1,305,400) 559,295 (1,305,400) 559,295 24,253,895 100 2,988,818 27,242,713 - - cents (5) (5) cents 559,295 559,295 Note Consolidated Group 2016 2015 2,856,946 647,857 1,000,000 - 24 3,856,946 647,857 The effective interest rate on the short-term bank deposits was 2.90% at 30 June 2016. These deposits have an average maturity of less than 3 months. Page | 33 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 9. Trade and other receivables Current Commission receivables Agent commission clawback receivable Net present value of future trailing commission receivable Non-Current Net present value of future trailing commission receivable Consolidated Group Note 2016 2015 (restated) 2 2 285,359 193,091 304,988 161,179 581,990 388,000 1,060,440 854,167 949,010 716,000 949,010 716,000 Management’s estimate of agent commission clawback and NPV of future trailing commission are detailed in Note 1(n) in this financial report. Credit risk The Group has no significant concentration of credit risk with respect to any single counter party or group of counter parties. On a geographic basis, the Group has significant credit risk exposures in Australia only. The Group has assessed that there are no trade and other receivables that are impaired at year end (30 June 2015: nil). As at 30 June 2016, all trade and other receivables but $19,578 are not past due (2015: $150). 10. Other financial assets Current Rental Deposit Loan receivable - director Loan receivable - other entity Other Non-Current Rental deposit Consolidated Group 2016 2015 24,990 - 50,000 19,667 94,657 33,635 155,886 16,110 - 205,631 195,097 195,097 28,500 28,500 Page | 34 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 11. Plant and Equipment Office equipment At cost Accumulated Depreciation on office equipment Motor vehicles At cost Accumulated Depreciation on motor vehicles Furniture & Fittings At cost Accumulated Depreciation on Furniture & Fittings Consolidated Group 2016 2015 31,834 (17,543) 14,291 142,123 (9,707) 132,416 45,753 (9,952) 35,801 18,858 (9,928) 8,930 194,665 (79,148) 115,517 11,488 (4,615) 6,873 Total plant and equipment 182,508 131,320 Movements in Carrying amounts Movements in carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year. Office Equipment Motor Vehicles Furniture &Fittings Total Balance at 1 July 2014 Additions Depreciation expense Balance at 30 June 2015 Additions Disposals Depreciation expense Balance at 30 June 2016 6,477 7,758 (5,305) 8,930 154,022 - (38,505) 115,517 6,492 1,985 166,991 9,743 (1,604) (45,414) 6,873 131,320 12,977 142,123 34,265 189,365 - (101,717) - (101,717) (7,616) 14,291 (23,507) 132,416 (5,337) (36,460) 35,801 182,508 The motor vehicles are acquired via finance lease. 12. Intangible assets Website and IT system Cost Accumulated amortisation Total intangibles Consolidated Group 2015 2016 213,106 (57,356) 155,750 81,527 (12,928) 68,599 Page | 35 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 Balance at 1 July 2014 Additions Amortisation Balance at 30 June 2015 Additions Amortisation Balance at 30 June 2016 IT system 1,714 79,300 (12,415) 68,599 131,578 (44,427) 155,750 Intangible assets have finite useful lives. The current amortisation charges for intangible assets are included under depreciation and amortisation expense per the statement of profit or loss. 13. Trade and other payables Trade payables Employee payables Other creditors and accruals 14. Other financial liabilities Current Other financial liabilities Convertible Debt Non-Current Other financial liabilities As at 1 July 2014 Borrowed Settled As at 30 June 2015 Borrowed Derivative expense Settled As at 30 June 2016 Consolidated Group 2015 2016 160,286 167,405 135,078 462,769 134,355 137,603 71,258 343,216 Consolidated Group 2015 2016 33,698 - 33,698 42,076 767,000 809,076 149,448 149,448 106,029 106,029 Convertible Note - 767,000 - 767,000 200,000 241,750 (1,208,750) - The convertible debt was originally due to be repaid in April 2016. As a result of successful IPO of the Group, the convertible notes have been converted through issuance of 6,043,750 shares of N1 Holdings Limited according to the Secured Convertible Note Deed Poll dated 14 April 2015. Page | 36 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 15. Tax Current Income tax payable Non-Current Deferred tax liabilities 2015 Trail commission receivable Balance at 30 June 2015 2016 Trail commission receivable Intangible Asset Balance at 30 June 2016 Deferred tax assets 2015 Commission clawback Other temporary differences Balance at 30 June 2015 2016 Clawback and accrued Tax Losses IPO costs Other temporary differences Balance at 30 June 2016 16. Provisions Current Employee provision Provisions for Clawback Non-Current Long service leave Consolidated Group 2015 2016 - - 61,874 61,874 Opening balance (restated) Charged to income statement Closing balance 55,499 55,499 331,200 - 331,200 275,701 275,701 128,100 18,143 146,243 331,200 331,200 459,300 18,143 477,443 Opening balance Charged to income statement Charged to equity Closing balance 14,845 1,790 16,635 50,681 - - 13,943 64,624 35,836 12,153 47,989 27,598 77,816 - 30,704 136,118 - - - - - 148,504 - 148,504 50,681 13,943 64,624 78,279 77,816 148,504 44,647 349,246 Consolidated Group 2015 2016 42,863 454,022 496,885 44,526 330,117 374,643 7,167 7,167 1,950 1,950 Page | 37 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 As at 1 July 2015 New provisions during the year Payment of clawbacks during the year Under-provision prior year As at 30 June 2016 Movement in clawback provision 330,117 390,157 (251,611) (14,641) 454,022 Provision for clawback Provision for clawback represented the estimate of commission to be clawed back by the lenders after loans are terminated before their maturity. In the event a lender claws back the commission, a corresponding clawback will be deducted from the authorised brokers contracted by the Group. The estimate is based on the historical record of clawback. 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. 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. The probability of long service leave being taken is based on historical data. 17. Capital and reserve Fully paid ordinary shares Option reserve Ordinary Shares Consolidated Group 2015 2016 5,738,586 94,448 5,833,034 100 - 100 As at beginning of the year Issuance of new shares Capital raising costs Defer tax benefit for capital raising cost Consolidated Group 2016 $ 100 6,208,750 (618,768) 148,504 5,738,586 2016 Number of Shares 100 81,043,650 - - 81,043,750 2015 $ 100 - - - 100 2015 Number of Shares 100 - - - 100 On 18 March 2016, the Company issued 25,000,000 ordinary shares at $0.20 each to new shareholders who subscribed for Shares in the Company through the IPO. On 10 March 2016, the Company issued 50,000,000 shares to Mr Ren Hor Wong and 6,043,750 to convertible noteholders in exchange for 100% of the issued capital in N1 Loans. Ordinary Shareholders participate in dividends and the proceeds on winding-up of the parent entity in proportion to the number of shares held. At the Shareholders' meetings each ordinary Share is entitled to one vote when a poll is called; otherwise each Shareholder has one vote on a show of hands. Page | 38 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 Option Reserve As at beginning of the year Share based payment Consolidated Group 2016 - 94,448 94,448 2015 - - - Details in relation to the options issued during the year are disclosed in note 21 in this financial statements. Capital management Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital include ordinary share capital, convertible notes and other financial liabilities, supported by financial assets. The Group is not subject to any externally imposed capital requirements. Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. No debt has been retired during the current year. 18. Lease commitments (a) Operating Lease Commitments Payable — minimum lease payments Not later than 12 months Between 12 months and 5 years Later than 5 years Consolidated Group 2016 2015 154,909 177,152 472,457 596,566 - - 627,366 773,718 The major property lease is a non-cancellable lease with a five-year term, with rent payable monthly in advance. Contingent rental provisions within the lease agreement require that lease payments shall be increased by 4% per annum. (b) Finance Lease Within 12 months Between 12 months and 5 years Total Less: future finance lease charge Net commitment recognised as a liability (c) Capital Expenditure Commitments There were no capital expenditure commitments as at 30 June 2016 (2015: nil) Consolidated Group 2016 29,795 164,013 193,808 (20,749) 173,059 2015 42,076 125,505 165,581 (17,477) 148,104 Page | 39 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 19. Contingent liabilities and Contingent assets There are no contingent liabilities or contingent assets as at 30 June 2016 (2015: nil). 20. Cash flow information Reconciliation of Cash Flows from Operating Activities with Profit/(Loss) after Income Tax Profit/(loss) after income tax Depreciation & Amortisation Gain on sales of motor vehicle Finance cost – convertible note discount Share option scheme Consolidated Group 2015 2016 (1,305,400) 559,295 80,887 (3,703) 241,750 94,448 57,829 - - - (Increase)/decrease in trade and other receivables (439,283) (854,884) Increase in other current assets Increase in other financial assets Increase/(decrease) in trade payables and accruals Increase/(decrease) in provisions (Increase)/decrease in deferred tax assets or liabilities (Decrease)/increase in tax payable Cash flows from operating activities 26,255 (191,587) 119,554 127,459 10,124 (74,160) (1,313,656) - - 65,759 75,024 227,712 - 130,735 21. Share-based payments (a) Employee Option Plan The establishment of the Employee Option Plan was approved by the board of directors on 14 December 2015. The Employee Option Plan is designed to provide long-term incentives for senior managers and above (including executive directors) to deliver long-term shareholder returns. Under the plan, participants are granted Options which only vest if certain performance standards are met. Participation in the plan is at the board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Once Options are vested, the Options remain exercisable for a period of two years. Options are granted under the plan for no consideration and carry no dividend or voting rights. When exercisable, each Option is convertible into one ordinary Share. Options granted under the employee option plan: As at 30 June 2015 Granted during the year Exercised during the year Forfeited during the year As at 30 June 2016 2016 Average exercise price per Option - 0.20 - 0.20 0.20 Number of Options - 5,977,500 - (15,000) 5,962,500 2015 Average exercise price per Option Number of Options - - - - - - - - - - Page | 40 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 Options outstanding under the employee option plan at the end of the year have the following expiry date and exercise prices: Grant Date Expiry Date Exercise price Fair value at grant date Options 30 June 16 Options 30 June 15 14 December 2015 14 December 2018 18 March 2016 18 March 2018 0.20 0.20 0.054 0.0385 4,962,500 1,000,000 - - Remaining contractual life of options outstanding at end of period (b) Other share options 2.33 years N/A On 18 March 2016, the Company granted 1,000,000 options to Bellaire Capital Pty Ltd, an entity controlled by parties associated with the lead manager of the IPO. Below are its Options outstanding at the end of the year and their expiry date and exercise prices: Grant Date 18 March 2016 Weighted average remaining contractual life of options outstanding at end of period Expiry Date Exercise price Fair value at grant date Share options 30 June 16 Share options 30 June 15 18 March 2018 0.30 0.006685 1,000,000 1.75 years - N/A (c) Fair value of the Options granted The fair value of the Options granted is considered to represent the value of the services received over the vesting period. The weighted average fair value of Options granted during the year was $236,819 (2015: N/A). The value was calculated using the Binomial Approximation valuation methodology applying the following inputs: Weighted average exercise price： $0.21 Weighted average life of the Option: 2.71 years Expected share price volatility: 30% 1.92% Risk-free interest rate: Historical share price volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future volatility. The life of the Options is based on the historical exercise patterns, which may not eventuate in the future. Options included under employee benefits expense in the statement of profit or loss amount to $66,022 and relate to equity settled share based payment transactions (2015: nil). 22. Events after the reporting period On 1 September 2016, the Company acquired a website (www.1crowd.com.au) owned by N1 Venture Pty Ltd (ACN 602 937 851) at its cost of $50,000 and subsequently acquired N1 Venture at its issued capital of $100. N1 Venture holds an Australian Financial Services Licence. On 31 August 2016, N1 Realty Pty Ltd, a fully owned subsidiary of the Group, entered into an agreement to acquire all the issued shares in Sydney Boutique Property Pty Ltd, a real estate agency business with a cash consideration of $2,000,000. The acquisition has not been completed when this financial report is signed. On 17 August 2016, N1 Loans acquired loan trail book from Aura Private Wealth Pty Ltd (ACN 158 184 000) with total consideration of $336,661.50 excluding GST. Other than above mentioned events, there has been no matters or events since the end of the financial year which may significantly affect the operation of the Group, the results of those operations or the state of affairs of the Group in the future financial years. Page | 41 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 23. Related party transactions Related Parties Parent Entities (a) The Company is the parent entity of the Group. The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. 2016 2015 STATEMENT OF FINANCIAL POSITION ASSETS Current Assets Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Non-current Liabilities TOTAL LIABILITIES EQUITY Issued Capital Accumulated loss Option reserve TOTAL EQUITY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Total loss after tax & total comprehensive loss 3,732,432 12,855,317 16,587,750 15,042 865,676 880,719 15,725,272 112,689 94,448 15,707,031 112,689 - - - - - - - - - - - During the reporting period, N1 Holdings Limited has not entered into any financial guarantee arrangement. At 30 June 2016, N1 Holdings Limited has no contingent liabilities. At 30 June 2016, N1 Holdings Limited has no contractual commitments. Subsidiaries (b) Information about principal subsidiaries The subsidiaries listed below have share capital consisting solely of ordinary shares or ordinary units which are held directly by the Group. The proportion of ownership interests held equals the voting rights held by Group. Each subsidiary’s principal place of business is also its country of incorporation. Ownership interest held by the Group 2016 (%) 2015 (%) Name of subsidiary Principal place of business Australia Australia Australia N1 Loans Pty Ltd (i) N1 Migration Pty Ltd (ii) 9c N1 Reality Pty Ltd (iii) 9c 0 The financial statements of subsidiaries used in the preparation of these consolidated financial statements were also prepared as at the same reporting date as the Group’s financial statements. (i) N1 Loans was incorporated on 25 February 2010 and was initially owned by Mr Ren Hor Wong. Upon the completion of the IPO on 18 March 2016, the company became fully owned by the Company. N1 Migration Pty Ltd was incorporated on 14 September 2015 and is fully owned by the Group since 11 April 2016. 100% 100% 100% N/A N/A N/A (ii) (iii) N1 Realty was incorporated on 3 May 2016 and, since then, has been fully owned by the Group. Page | 42 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 (c) Key management personnel: Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether executive or otherwise) of that entity are considered KMP. KMP Compensation Please refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s KMP for the year ended 30 June 2016. The total of remuneration paid to or payable to KMP of the Group during the year was: Short-term employee benefits Post-employment benefits Other long-term benefit Share-based options Total KMP compensation 2016 282,213 23,757 1,380 45,945 353,295 2015 81,517 7,283 123 - 88,923 Short-term employee benefits These amounts include fees and benefits paid to non-executive directors as well as all salary, paid leave benefits, fringe benefits and cash bonuses awarded to executive directors and other key management personnel. Post-employment benefits These amounts are the current year’s estimated costs of provided for the Group’s superannuation contributions made during the year. Other long-term benefits These amounts represent long service leave benefits accruing during the year. Share-based payments These amounts represent the expense related to the participation of KMP in equity-settled benefit schemes as measured by the fair value of the options granted. (d) Other Related Parties Other related parties include entities controlled by the ultimate parent entity and entities over which key management personnel have joint control. Transactions with other related parties: Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred with other related parties: Purchases of services/goods from other related parties 2016 2015 N1 Consultants Group Sdn Bhd - Malaysia N1 Forex Pty Ltd V1 Finance Pty Ltd Seekahome Pty Ltd Loan to related parties - balance N1 Venture Pty Ltd – receivable Ren Hor Wong – (payable)/receivable 55,542 111,569 - - 64,118 - 72,000 - 2016 50,000 2015 16,110 (964) 155,886 Page | 43 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 As at 1 July 2014 Drawdown Repayment As at 30 June 2015 Drawdown Repayment As at 30 June 2016 Loan to N1 Venture Pty Ltd - 31,882 (15,772) 16,110 41,000 (7,110) 50,000 Loan to Ren Hor Wong 17,380 201,322 (28,056) 155,886 8,117 (164,967) (964) 24. Financial risk management The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, other payables and other financial liabilities. The totals for each category of financial instruments, measured in accordance with AASB139 financial instruments: recognition and measurement as detailed in the accounting policies to these financial statements, are as follows: Financial Assets Current Cash and cash equivalents Trade and other receivables Rental deposit Loan receivable – other entity Non-current Trade and other receivables Rental deposit Financial Liabilities Financial liabilities at amortised cost Current Trade and other payables Convertible debt Finance lease payables Non-current Finance lease payables Note 8 9 10 13 Consolidated Group 2016 2015 3,856,946 1,060,440 24,990 50,000 647,857 854,167 33,635 171,996 949,010 195,097 716,000 28,500 462,769 - 33,698 343,216 767,000 42,076 149,448 106,029 Specific financial risk exposures and management The main risks the Group are exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk and foreign exchange risk. Financial risks are identified, measured and managed in accordance with the Group’s policies and risk objectives. The Company has a risk governance framework which is reviewed and updated by the Board constantly. There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and processes for managing or measuring the risks from the previous period. Page | 44 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 (a) Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. Credit risk is managed through the maintenance of procedures (such as the utilisation of systems for the approval, granting and renewal of credit limits, regular monitoring of exposures against such limits and monitoring of the financial stability of significant customers and counterparties), ensuring to the maximum extent possible that customers and counter parties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment. Credit terms are generally not more than 60 days from the invoice date. Credit risk exposures The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period, is the carrying amount and classification of those financial assets (net of any provisions) as presented in the statement of financial position. The Group has no significant concentration of credit risk with any single counterparty or Group of counterparties. However, on a geographic basis, the Group has significant credit risk exposures to Australia given the substantial operations in those regions. Details with respect to credit risk of trade and other receivables is provided in Note1. Trade and other receivables that are neither past due or impaired are considered to be of high credit quality. Aggregates of such amounts are as detailed at Note 9. Credit risk related to balances with banks and other financial institutions is managed by the Board. All the Group’s cash assets are deposited with Australian major banks and their credit ratings are between A-to AA based on Standard & Poor. The majority of outstanding receivables are commissions (including NPV of future trailing commissions) owed from Finsure Finance and Insurance Pty Ltd ABN 72 068 153 926 (Finsure), Spectrum Wealth Advisers Pty Ltd ABN 57 134 661 706 (Spectrum Wealth Advisers) and lenders who make commission payments directly to the Group. Finsure is an aggregator of retailing loan brokers and acts as an intermedia between the Group and the lenders (financial institutions) to pass through the commission paid by those lenders to the Group. Spectrum Wealth Advisers is a dealer group who pays financial planning commissions to the Group on behalf of financial institutions. The financial institutions which are owing commissions to the Group through Finsure and Spectrum Wealth Advisers are rated between B and AA+. (b) Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group managed this risk through maintaining sufficient liquid assets (mainly cash and cash equivalents and borrowing facilities). The table below reflects an undiscounted contractual maturity analysis for financial liabilities. Cash flows realised from financial assets reflect Management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. Financial liability maturity analysis No more than 1 year 1-2 years 2-5 years More than 5 years 462,769 - - 29,794 29,795 134,219 492,563 29,795 134,219 - - - 2016 Trade and other payables Finance lease liabilities 2015 Trade and other payables Convertible debt Finance lease liabilities Total contractual cash flows 462,769 193,808 656,577 Total contractual cash flows 343,216 767,000 148,105 No more than 1 year 343,216 767,000 148,105 1,275,797 1,275,797 1-2 years 2-5 years More than 5 years - - - - - - - - - - - - Page | 45 For personal use only N1 HOLDINGS LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2016 Market risk (c) Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period where by a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The financial instruments that primarily expose the Group to interest rate risk to cash and cash equivalents. Fixed rate instrument Term deposit Consolidated Group 2016 1,000,000 2015 - Sensitivity Analysis: As interest rate are low at present 2.90%, a movement in the rate by 1% would be $10,000 either way. Foreign currency risk At the reporting date the Group held cash assets dominated in USD (2016: US$738,000, 2015: nil). The foreign exchange rate was at 0.7435 (AUD/USD). A movement in the rate by 5% would be $27,435 either way in the revaluation of the USD to AUD equivalent. 25. Fair value measurement AASB13: fair value measurement requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input which is significant to the measurement can be categorized into as follows: Level 1 Level 2 Level 3 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Measurements based on unobservable inputs for the asset or liability. Fair value of financial assets and liabilities that are measured at fair value on a recurring basis. The Group does not have any assets or liabilities recognised and subsequently measured at fair value on a recurring basis. Fair value of financial assets and liabilities that are not measured at fair value (but fair value disclosures are required) Future trailing commission receivables are initially recognized at fair value and subsequently carried at amortised cost. Valuation techniques and unobservable inputs used to measure Level 3 fair value The fair value of the trailing commission receivables is initially recognised using a discounted cash flow methodology. The following table provided quantitative information regarding the significant unobservable inputs, the ranges of those inputs and the relationships of unobservable inputs to the fair value estimate: Input Underlying assumptions Estimated sensitivity of fair value measurement to changes in unobservable inputs Weighted average life 2.05 years N/A Discount rate (risk adjusted) – 8% 8% Weighted average run-off rates 15% If discount rate is 2% higher/lower, the fair value would decrease/increase by $55,000/$60,000 (2015: $42,000/$45,000) If run-off rate is 1% higher/lower, the fair value would decrease/increase by 43,000/45,000 (2015: $42,000/$44,000) Page | 46 For personal use only N1 HOLDINGS LIMITED DIRECTORS’ DECLARATION 30 JUNE 2016 Directors’ Declaration In accordance with a resolution of the Directors of the Company, the Directors of the Company declare that: 1. 2. 3. The financial statements and notes of the Company, as set out on pages 19 to 46, are in accordance with the Corporations Act and: comply with Australian Accounting Standards (including the Australian Accounting Interpretations) (a) and the Corporations Regulations 2001 (Cth); and give a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of (b) the performance for the year ended on that date. The financial statements and notes also comply with International Financial Reporting Standards as described in Note 1 to the financial statements. 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. The Directors have been given the declarations required by section 295A of the Corporations Act from the Chief Executive Officer and Chief Financial Officer. On behalf of the board Ren Hor Wong Executive Chairman and CEO 29 September 2016 Sydney Page | 47 For personal use only N1 HOLDINGS LIMITED SHAREHOLDER INFORMATION 30 JUNE 2016 Page | 48 For personal use only N1 HOLDINGS LIMITED SHAREHOLDER INFORMATION 30 JUNE 2016 Page | 49 For personal use only N1 HOLDINGS LIMITED SHAREHOLDER INFORMATION 30 JUNE 2016 Additional information required by the Australian Securities Exchange Ltd (ASX) and not disclosed elsewhere in this report is set out below. The information is current as at 16 September 2016. 1. a. b. c. Shareholding Distribution of Shareholders Category (size of holding) Number of shares % 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Total 1,000 40,638 1,062,501 6,761,325 73,178,376 81,043,750 0.00% 0.05% 1.31% 8.34% 90.29% The number of shareholdings held in less than marketable parcels is 4. Number of holders 1 11 107 209 54 382 % 0.26% 2.88% 28.01% 54.71% 14.14% The names of the substantial shareholders listed in the holding company’s register are: Shareholder REN H WONG PTY LTD TIN FAMILY SMSF PTY LTD THE THREE HORSESHOES PTY LTD JIANRONG SUN YOKE MENG CHAN Total d. 20 Largest Shareholders — Ordinary Shares Shareholder Number of Ordinary Fully Paid Shares Held 50,000,000 4,250,000 3,750,000 1,250,000 975,266 60,225,266 % Held of Issued Ordinary Capital 61.70% 5.24% 4.63% 1.54% 1.20% 74.31% Number of Ordinary Fully Paid Shares Held % Held of Issued Ordinary Capital 1. 2. 3. 4 5 6 7 8 9 10 11 12 13 MUN CHING WANG 14 15 16 17 MANNI FU 18 HUEY CHARNG WONG 19. BNP PARIBAS NOMS PTY LTD 20. YUEXIAN ZHAO 50,000,000 REN H WONG PTY LTD 4,250,000 TIN FAMILY SMSF PTY LTD 3,750,000 THE THREE HORSESHOES PTY LTD 1,250,000 JIANRONG SUN 975,266 YOKE MENG CHAN 829,215 TONG CHAI TAN MXJ PTY LTD 625,000 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 556,000 AUSTRALIA WIDE DEVELOPMENT GROUP PTY LTD 500,000 500,000 TONG CHAI TAN 500,000 VEN TAN PTY LTD 500,000 LC FAMILY SUPER PTY LTD 500,000 487,500 425,000 418,750 375,000 350,000 320,000 306,188 IPOH YAP SMSF CO PTY LTD ZHAOJIA HE SILIAN ZHAO 61.70% 5.24% 4.63% 1.54% 1.20% 1.02% 0.77% 0.69% 0.62% 0.62% 0.62% 0.62% 0.62% 0.60% 0.52% 0.52% 0.46% 0.43% 0.39% 0.38% Total 67,417,919 83.19% Page | 50 For personal use only N1 HOLDINGS LIMITED SHAREHOLDER INFORMATION 30 JUNE 2016 e. Escrowed shares Name 1. 2. 3. 4. REN H WONG PTY LTD JIANRONG SUN TIN FAMILY SMSF PTY LTD MXJ PTY LTD Total Number of Escrowed Fully Paid Shares Held 50,000,000 1,250,000 1,250,000 625,000 53,125,000 % Held of Issued Ordinary Capital 61.70% 1.54% 1.54% 0.77% 65.55% f. Vested Options 1,000,000 options exercisable at $0.20 and expiring on 18 March 2018 are held by Value Creation Holdings Limited, an entity controlled by Non-Executive Director Tarun Kanji. 1,000,000 options exercisable at $0.30 and expiring on 18 March 2018 are held by Bellaire Capital Pty Ltd, an entity controlled by parties associated with the lead manager of the IPO. g. 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. There are no other classes of equity securities. Page | 51 For personal use only N1 HOLDINGS LIMITED SHAREHOLDER INFORMATION 30 JUNE 2016 Page | 52 For personal use only 

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