Rent.com.au Limited
Annual Report 2020

Plain-text annual report

Rent.com.au Limited ABN 25 062 063 692 Financial Report for the year ended 30 June 2020 Rent.com.au Limited Contents 30 June 2020 Contents Corporate Information Director’s Report Auditor's Independence Declaration Independent Auditor’s Report Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to The Financial Statements Directors’ Declaration 3 4 17 18 22 23 24 25 26 60 2 Rent.com.au Limited Corporate Information 30 June 2020 Corporate Information This financial report includes the financial statements and notes of Rent.com.au Limited (‘the Company’) and its controlled entities (‘the Group’). The Group’s functional presentation currency is AUD ($). A description of the Group’s operations and of its principal activities is included in the Review of Operations and Activities in the Directors’ Report on pages 4 to 16. The Directors’ Report is not part of the financial report. Directors Auditors Dr. Garry Garside Mr. John Wood Mr. Sam McDonagh Mr. Philip Warren (Non-Executive Chairman) (Non-Executive Director) (Non-Executive Director) (Non-Executive Director) RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 Joint Company Secretaries Bankers Mr. Jan Ferreira Mr. Steven Wood Registered Office 945 Wellington Street West Perth WA 6005 Commonwealth Bank of Australia 150 St Georges Terrace Perth WA 6000 Solicitors GTP Legal 68 Aberdeen Street Northbridge WA 6003 Principal place of business Stock Exchange 3 Craig Street Burswood WA 6100 Share Registry Automic Registry Services 267 St Georges Terrace Perth WA 6000 Australian Securities Exchange Limited Level 40, Central Park 152-158 St Georges Terrace Perth WA 6000 ASX Code: RNT Website http://investors.rent.com.au 3 Rent.com.au Limited Director’s Report 30 June 2020 Directors Report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'the Group') consisting of Rent.com.au Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled for the year ended 30 June 2020. Directors The following persons were directors of Rent.com.au Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Dr. Garry Garside Mr. John Wood Mr. Sam McDonagh Mr. Philip Warren Principal Activities (Non-Executive Chairman) (Non-Executive Director) (Non-Executive Director) (Non-Executive Director) The Group operates real estate websites focusing on the rental property market. The primary website operated by the Group is www.rent.com.au. Review of Operations The Consolidated Statement of Profit or Loss and Other Comprehensive Income shows a net operating loss after tax of $1,665,215 for the year ended 30 June 2020 (for year ended 30 June 2019: $2,497,183). The net operating loss for the year ended 30 June 2020 included a non-cash share-based payments reversal of $4,372 (30 June 2019 share-based payment reversal: $107,676) associated with the cancellation of performance based convertible securities issued to advisors, shareholders and employees. Earnings Before Interest, Tax, Depreciation, and Amortisation (and excluding non-cash share-based payments) (“EBITDA”) for the year ended 30 June 2020 was a loss of $1,133,541 (30 June 2019: $2,121,568) an improvement of 47%. The Group achieved overall revenue of $2,452,239, growth of 13% for the year ended 30 June 2020 compared with the previous year. Both of its key revenue streams grew. Renter Products grew 7% to $1,312,912 (2019: $1,232,767) and Advertising Sales grew by 27% to $985,346 (2019: $779,907). During the year the Group continued to balance its goals of achieving profitability in the short term with industry disruption over the longer term. As rent.com.au achieves better brand awareness amongst renters, more people visit the website and apps from non-paid means allowing the Group to reduce marketing expenditure by 55% in the year ended 30 June 2020 compared with the prior year. At the same time overall audience grew 19%, with almost three quarters of visitors coming from non-paid sources. The Groups renter app on the Apple and Android platforms continues to perform well and regularly achieves higher customer ratings than other leading real estate sector apps. Existing Renter Products were enhanced during the year. RentCheck now also boasting an Endorsements feature whereby agents can provide a reference which is incorporated into the RentCheck. A 21-day interest and fee free period for RentBond was introduced in order to broaden the appeal of the product, and RentConnect has been overhauled, with a compelling customer offer under an exclusive arrangement with AGL. 4 Rent.com.au Limited Director’s Report 30 June 2020 Review of Operations (continued) The Group also continued its development of RentPay, its first product aimed at renters during their tenancy. $185k of labour costs were incurred in this development during the year and the Novatti Group (ASX:NOV) acquired a 2.5% equity shareholding at a cost of $250,000 in RentPay Technology Pty Ltd which is the subsidiary within the Group which owns the RentPay system. This $250,000 will cover the development of RentPay’s core digital wallet functionality and also the first year’s running costs. Development is almost complete as at the reporting date and a public launch of RentPay is anticipated during the half year ended 31 December 2020. RNT EBITDA FY18 FY19 FY20 ($1,134k) ($2,323k) ($2,122k) Significant changes in the state of affairs During the year, the Group completed the fully underwritten non-renounceable pro-rata rights issue that had been announced on 1 May 2019, resulting in the issue of 41,582,864 shares at an issue price of $0.036 per Share (“Rights Issue”) to raise $1,496,983 before costs. On 20 March 2020, the Group announced that it had completed the placement under ASX Listing Rule 7.1 of 11,555,554 shares (Placement Shares) with existing shareholders to raise $520,000 (before costs). Dividends No dividend has been paid or recommended by the Directors since the commencement of the financial period. Matters Subsequent to the end of the Financial Year The impact of the Coronavirus (COVID-19) pandemic is ongoing and while the impacts on the Group up to 30 June 2020 have not been as significant as initially anticipated it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by State and Federal governments, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. On 14 August 2020, the Group issued 2,916,668 remuneration performance rights to the directors in lieu of directors fees following shareholder approval at its General Meeting. 5 Rent.com.au Limited Director’s Report 30 June 2020 Matters Subsequent to the end of the Financial Year (continued) On 15 September 2020, the Group issued 33,333,333 shares at an issue price of $0.045 per share to sophisticated, professional and other exempt investors under section 708 of the Corporations Act 2001 (Cth), to raise $1.5 million (before costs). Apart from the above, no other matter or circumstance has been arisen since 30 June 2020 that has significantly affected, or maybe significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. Likely Developments and Expected Results The Group continues to invest in expanding its product and service offerings deeper into the tenancy period which it believes will yield significant long-term financial and industry benefits. It’s RentPay rental payments system is the primary product via which the Group seeks to gain market share within the tenancy period. There are approximately 2.5 million rental households (non- government) in Australia which, in the director’s opinion, provides ample scope for further commercialisation of the group’s products. With strong revenue and EBITDA improvement across its rent.com.au products, the Group expects that these additional tenancy period activities will see it achieve its cashflow break even goal in the short term while also setting the Group on the course to greater profitability in the future. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Financial Position The net assets of the Group have increased from $1,415,643 at 30 June 2019 to $1,795,125 at 30 June 2020. Cash reserves increased from $151,534 at 30 June 2019 to $631,771 at 30 June 2020. Information on Directors Dr. Garry Garside – Chairman (Non-Executive), appointed 15 June 2015 Age Qualifications Experience – 63 – MBA (UWA) – Dr. Garside has extensive corporate experience, successfully establishing and operated a variety of significant businesses. He currently manages an emerging property development company and chairs a range of unlisted investment syndicates and companies. Special responsibilities – Chairman Member of the Audit & Risk Committee Member of the Nomination & Remuneration Committee. Interest in shares & options held in Rent.com.au Limited - 6,889,086 Ordinary shares (indirect) 111,413 Ordinary shares Directorships held in other listed entities – None 6 Rent.com.au Limited Director’s Report 30 June 2020 Information on Directors (continued) Mr. Sam McDonagh Age Qualifications Experience – Director (Non-Executive), appointed 15 June 2015 – 49 – Chartered Accountant – Mr. McDonagh has over 20 years’ experience in senior management roles at companies including eBay in Southeast Asia, iiNet Limited and most recently Airbnb Australia and New Zealand Special responsibilities – Member of the Audit & Risk Committee. Interest in shares & options held in Rent.com.au Limited - 818,239 Ordinary shares Directorships held in other listed entities – None Mr. Philip Warren Age Qualifications Experience – Director (Non-Executive), appointed 18 September 2014 – 46 – B. Com, Chartered Accountant – Mr. Warren is a Director of Grange Consulting Group Pty Ltd. He has over 20 years of experience in finance and corporate roles in Australia and Europe, establishing several ASX listed companies during that time. Special responsibilities – Chair of the Audit & Risk Committee Member of the Nomination & Remuneration Committee Interest in shares & options held in Rent.com.au Limited – 479,539 Ordinary shares (indirect) Directorships held in other listed entities – Non-Executive Director of Cassini Resources Limited, Jupiter Energy Limited and Family Zone Cyber Safety Limited Mr. John Wood Age Qualifications Experience – Director (Non-Executive) appointed 15 June 2015 – 54 – N/A – Mr. Wood was most recently the Managing Director of National Lifestyle Villages (NLV) a company he founded in 1999. He was awarded the prestigious Telstra WA Business of the Year award in 2007 and the Rothwell’s Young Entrepreneur Award and the West Australian Young Achievers Award. Special responsibilities – Chair of the Nomination & Remuneration Committee. Interest in shares & options held in Rent.com.au Limited – 1,089,391 Ordinary shares 14,140,305 Ordinary shares (indirect) Directorships held in other listed entities – None 7 Rent.com.au Limited Director’s Report 30 June 2020 Directors’ Meetings The number of directors’ meetings held, and the number of meetings attended by each of the directors of the Group for the time the director held office for the period ended 30 June 2020: Board Meetings Audit & Risk Management Committee Meetings Nomination & Remuneration Committee Meetings Garry Garside Sam McDonagh Philip Warren John Wood A 12 12 12 12 B 12 12 12 12 A 3 3 3 B 3 3 3 n/a n/a A 0 B 0 n/a n/a 0 0 0 0 A – meetings eligible to attend B – meetings attended Company Secretaries Jan Ferreira was appointed as company secretary from 15 June 2015. Jan is a CPA (Australia) and has a Certificate in Governance Practice from the Governance Institute of Australia. He has more than 15 years’ experience within ASX listed businesses, having previously been Chief Financial Officer and Company Secretary at ThinkSmart Limited and a Financial Controller at Alinta Limited. Steven Wood was appointed as company secretary effective 18 September 2014. Steven specialises in corporate advisory, company secretarial and financial management services. Steven is a Chartered Accountant and has previously been involved in various private and seed capital raisings as well as successful ASX listings, whilst also providing company secretarial and financial management services to both ASX and unlisted public and private companies. Performance Rights Upon the achievement of the applicable performance milestone, the Performance Rights convert into Ordinary Shares at a ratio of 1 Ordinary Share for every 1 Performance Right held. No payment is necessary to exercise a Performance Right. As at the date of this report, Performance Rights on issue are as follows: Tranche Date Granted Expiry Date 7 8 01 May 2020 14 August 2020 30 November 2020 30 November 2020 Number 3,863,337 2,916,668 The vesting conditions of the various tranches of performance shares on issue are outlined below: • Tranche 7 – will vest upon continuous employment with the Group until 31 October 2020 • Tranche 8 – will vest upon continuous employment with the Group until 30 November 2020 8 Rent.com.au Limited Director’s Report 30 June 2020 Shares under Option Unissued ordinary shares of Rent.com.au Limited under option at the date of this report are as follows: Date Options Granted Expiry Date Tranche Issue Price of Share Number Under Option 22 February 2016 22 February 2021 22 February 2016 22 February 2021 22 February 2016 22 February 2021 9 September 2016 9 September 2021 9 September 2016 9 September 2021 9 September 2016 9 September 2021 4 5 6 7 8 9 Total $0.30 $0.30 $0.30 $0.25 $0.35 $0.50 580,0002 580,0002 580,0002 1,250,0001 1,250,0001 1,250,0001 5,490,000 1. Employee options have vested and are exercisable. 2. Employee options vest upon: • • • Tranche 4 – vest upon the VWAP of shares trading at greater than $0.30 over 20 consecutive trading days. Tranche 5 – vest upon the VWAP of shares trading at greater than $0.40 over 20 consecutive trading days. Tranche 6 – vest upon the VWAP of shares trading at greater than $0.60 over 20 consecutive trading days. Shares issued on the exercise of options There were no ordinary shares of Rent.com.au Limited issued during the year ended 30 June 2020, and up to the date of this report, on the exercise of options. Indemnification of officers During the financial period, the Group entered into a policy to indemnify directors and officers against certain liabilities incurred as a director or officer, including costs and expenses associated in successfully defending legal proceedings. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or an auditor of the Group or of any related body corporate against a liability incurred as such an officer or auditor. Proceedings on behalf of the Group No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings. Officers of the Group who are former partners of RSM Australia Partners There are no officers of the Group who are former partners of RSM Australia Partners. Auditor RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001. 9 Rent.com.au Limited Director’s Report 30 June 2020 Non-Audit Services Details of the amounts paid or payable to the auditor for non-audit services provided by the auditor are outlined in Note 20 to the financial statements. The Board is satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Board is of the opinion that the services as disclosed in Note 20 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: ● ● all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the Group or jointly sharing economic risks and rewards. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. Audited Remuneration Report The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration B. Details of remuneration C. Share-based compensation D. Additional information A. Principles used to determine the nature and amount of remuneration The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The Board has elected to establish a Nomination and Remuneration Committee in accordance with its Corporate Governance Policy. The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives and for developing and facilitating a process for Board and Director evaluation. The key management personnel of the Group consisted of the following directors: • Dr. Garry Garside (Non-Executive Chairman) • Mr. John Wood (Non-Executive Director) • Mr. Sam McDonagh (Non-Executive Director) • Mr. Philip Warren (Non-Executive Director) 10 Rent.com.au Limited Director’s Report 30 June 2020 And the following executives: • Mr Greg Bader (Chief Executive Officer) • Mr. Jan Ferreira (Chief Financial Officer and Company Secretary) In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate. Non-Executive Director Remuneration Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the Nomination and Remuneration Committee. Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $350,000 per annum and was approved at a previous annual general meeting. Executive Remuneration The executive remuneration framework has the following components: ▪ ▪ ▪ base pay and benefits, including superannuation; short-term performance incentives; and long-term incentives provided as share-based payments. The combination of these comprises the executive’s total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the Group and comparable market remunerations. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the Group and provides additional value to the executive. The short-term incentives ('STI') program is designed to align the targets of the Group with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators ('KPI's') being achieved. Long term incentives have been provided to directors and employees through the issue of performance shares, employee options and performance rights pursuant to the Long-Term Incentive Plan (‘LTIP’) approved by shareholders at the May 2015 Annual General Meeting. Voting and comments made at the Group's 2019 Annual General Meeting ('AGM') At the 2019 AGM, 88.6% of the eligible votes received supported the adoption of the remuneration report for the year ended 30 June 2019. The Group did not receive any specific feedback at the AGM regarding its remuneration practices. 11 Rent.com.au Limited Director’s Report 30 June 2020 B. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. Details of remuneration for the year ended 30 June 2020 KMP Garry Garside Sam McDonagh Phillip Warren John Wood Greg Bader Jan Ferreira Total Base Fee $ STI Payment $ Super- annuation $ Performance Rights $ Options1 $ Total $ 32,083 23,333 23,333 23,333 220,000 215,000 537,082 - - - - 1,250 2,500 3,750 - - - - 21,019 20,741 41,760 - - - - - - - - - - - - - - 32,083 23,333 23,333 23,333 242,269 238,241 582,592 1. Options include both share based payments and advisor options. Details of remuneration for the year ended 30 June 2019 KMP Garry Garside Sam McDonagh Phillip Warren John Wood Greg Bader Jan Ferreira Total Base Fee $ STI Payment $ Super- annuation $ Performance Rights $ Options1 $ Total $ 27,500 20,000 20,000 20,000 220,000 215,000 522,500 - - - - 1,250 1,250 2,500 - - - - 21,019 20,544 41,563 72 121 - 38 1,463 68 1,762 - - - - - - - 27,572 20,121 20,000 20,038 243,732 236,862 568,325 1. Options include both share based payments and advisor options. The proportion of remuneration linked to performance and the fixed proportion are as follows: Name 2020 2019 2020 2019 2020 2019 Fixed remuneration At risk - STI At risk - LTI Non-Executive Directors: Garry Garside Sam McDonagh Phillip Warren John Wood 100.0% 100.0% 100.0% 100.0% 99.7% 99.4% 100.0% 99.8% - - - - - - - - Other Key Management Personnel: Greg Bader Jan Ferreira 99.5% 99.0% 98.9% 99.4% 0.5% 1.0% 0.5% 0.5% 0% 0% 0% 0% 0.0% 0.0% 0.3% 0.6% 0.0% 0.2% 0.6% 0.0% 12 Rent.com.au Limited Director’s Report 30 June 2020 B. Details of remuneration – continued Service Agreements Remuneration and other terms of employment for the Chief Executive Officer and other Key Management Personnel are formalised in employment contracts. The major provisions of the agreements relating to remuneration are set out below: Greg Bader, Chief Executive Officer (commenced 23 August 2016) • Mr. Bader’s Executive Services Agreement for the position of Chief Executive Officer has no fixed period and may be terminated by provision of six months’ prior written notice by either party. • Mr. Bader receives a base salary of $220,000 per annum, plus statutory superannuation entitlements. • Mr. Bader is eligible to participate in the Long-Term Incentive Plan and has been issued 3,750,000 Employee Options and 1,600,001 unexpired Performance Rights issued in lieu of salaries reduced for 6 months. • Mr. Bader is also eligible to participate in a Short-Term Incentive (“STI”) scheme which the Group has implemented. The Board determines a percentage of base salary that may be payable to Mr. Bader on the achievement of key performance indicators to be set having regard to the financial position and performance of the Group. Jan Ferreira, Chief Financial Officer and Company Secretary (commenced 28 April 2014) • Mr. Ferreira’s Executive Services Agreement for the position of Chief Financial Officer and Company Secretary has no fixed period and may be terminated by provision of six months’ prior written notice by either party. • Mr. Ferreira receives a base salary of $215,000 per annum, plus statutory superannuation entitlements. • Mr. Ferreira is eligible to participate in the Long-Term Incentive Plan and has been issued 883,334 unexpired Performance Rights in lieu of salaries reduced for 6 months. • Mr. Ferreira is also eligible to participate in a Short-Term Incentive scheme which the Group has implemented. The Board determines a percentage of base salary that may be payable to Mr. Ferreira on the achievement of key performance indicators to be set having regard to the financial position and performance of the Group. The non-executive directors are subject to service agreements which cover relevant provisions including term, fees, independence, re-election and the role requirements. C. Share based compensation Other than outlined above, Rent.com.au Limited paid no share-based compensation to KMP during the year and there were no new performance rights or options granted to KMP for the year ended 30 June 2020. 13 Rent.com.au Limited Director’s Report 30 June 2020 D. Additional Information Financial Performance Information The earnings of the Group for the five years to 30 June 2020 are summarised below: 2020 $ 2019 $ 2018 $ 2017 $ 2016 $ Sales revenue EBITDA* 2,452,239 2,164,192 2,324,880 1,654,395 748,495 (1,133,540) (2,121,568) (2,322,710) (5,822,425) (7,216,670) Loss after income tax (1,665,215) (2,497,183) (2,822,539) (8,513,631) (12,820,585) * excluding non-cash share-based payments, R&D income, government grant and loss on disposal of asset. The factors that are considered to affect total shareholders return ('TSR') are summarised below: Share price at financial year end ($) Total dividends declared (cents per share) 2020 0.033 - 2019 0.035 - 2018 0.086 - 2017 0.065 - 2016 0.160 - Basic loss per share (cents per share) (0.57) (1.05) (1.38) (4.72) (12.42) Equity instruments held by Key Management Personnel 1. Ordinary Shares The number of ordinary shares in Rent.com.au Limited held by each KMP of the Group during the year ended 30 June 2020 is as follows: Balance at beginning of the year Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year Balance at 30 June 2020 5,714,410 818,238 222,321 12,743,087 14,870,556 734,528 35,103,140 - - - - - - - - - - - - - - 1,286,089 7,000,499 1 257,218 2,486,609 1,530,155 818,239 479,539 15,229,696 16,400,711 265,552 1,000,080 5,825,624 40,928,764 30 June 2020 Garry Garside Sam McDonagh Philip Warren John Wood Greg Bader Jan Ferreira Total 2. Options The number of options over ordinary shares in Rent.com.au Limited held by each KMP of the Group during the year ended 30 June 2020 is as follows: 30 June 2020 Garry Garside Sam McDonagh Philip Warren John Wood Greg Bader Jan Ferreira Total Balance at start of the year Granted as remuneration during the year Exercised during the year Other changes during the year Balance at 30 June 2020 950,000 1,600,000 1,012,500 500,000 3,750,000 900,000 8,712,500 - - - - - - - 14 - - - - - - - (950,000) (1,600,000) (1,012,500) (500,000) - - - - - 3,750,000 (900,000) - (4,962,500) 3,750,000 Rent.com.au Limited Director’s Report 30 June 2020 3. Performance Rights The number of performance rights in Rent.com.au Limited held by each KMP of the Group during the year ended 30 June 2020 is as follows: 30 June 2020 Balance at start of the year Received as Remuneration Performance Rights Converted Other Movements Balance at 30 June 2020 Vested and Exercisable at 30 June 2020 Unvested at 30 June 2020 Garry Garside 111,413 Sam McDonagh 187,642 John Wood 58,638 - - - Greg Bader 3,283,741 1,600,001 Jan Ferreira 105,549 883,334 Total 3,746,983 2,483,335 - - - - - - (111,413) (187,642) (58,638) - - - (3,283,741) 1,600,001 (105,549) 883,334 (3,746,983) 2,483,335 - - - - - - - - - 1,600,001 883,334 2,483,335 4. Performance Shares Performance shares were issued as consideration to the shareholders of Rent.com.au (Operations) Pty Ltd who were shareholders prior to the acquisition by Select Exploration Limited (renamed Rent.com.au Limited). The number of performance shares in Rent.com.au Limited held by each KMP of the Group during the year ended 30 June 2020 is as follows: 30 June 2020 Balance at start of the year Received as Remuneration Performance Shares Converted Other Movements Balance at 30 June 2020 Vested and Exercisable at 30 June 2020 Unvested at 30 June 2020 Garry Garside 290,691 Sam McDonagh 18,803 John Wood 3,953,608 Jan Ferreira 4,538 Total 4,267,640 Other KMP Transactions - - - - - - - - - - (290,691) (18,803) (3,953,608) (4,538) (4,267,640) - - - - - - - - - - - - - - - Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred with related parties: Transactions: Office outgoings and others – Watersun Property Pty Ltd[1] Cleaning expenses – Servco Pty Ltd[1] Interest expense[1] Amortisation of right of use asset[1] 2020 $ 126,049 5,912 10,593 77,576 15 Rent.com.au Limited Director’s Report 30 June 2020 Other KMP Transactions (continued) Balances: Amount owing to Watersun Property Pty Ltd[1] Amount owing to Servco Pty Ltd[1] Right of use asset[1] Lease liability[1] Directors fee accrual[2] 2020 $ 109,170 1,102 96,970 102,354 29,168 [1] Garry Garside is a director and shareholder of both Watersun Property Pty Ltd & Servco Pty Ltd. [2] Directors fees will be repaid via the issue of performance rights in lieu of fees. The issue of performance rights were approved by shareholders on 14 August 2020. All transactions were made on normal commercial terms and conditions and at market rates. This concludes the remuneration report, which has been audited. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors _________________________ Dr. Garry Garside Non-executive Chairman Perth, 25 September 2020 16 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Rent.com.au Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS Perth, WA Dated: 25 September 2020 ALASDAIR WHYTE Partner INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RENT.COM.AU LIMITED Opinion We have audited the financial report of Rent.com.au Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial performance for the year then ended; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How our audit addressed this matter Revenue Recognition Refer to Note 1 and 3 in the financial statements The Group generates revenue through its role as an operator of a real estate website focusing on the rental property market. The major revenue streams are: • Fees from agents and landlords; • Rental products revenue; and • Advertising sales. Revenue was considered a key audit matter because it is the most significant account balance in the consolidated statement of profit or loss and other comprehensive income and the process of revenue recognition is complex due to multiple revenue streams rendered. for services or products transactions are high Furthermore, volume and of low value. The revenue recognition of each revenue stream is subject to management judgements. These include: the revenue • Determination of the accounting policy in relation to each revenue stream; and • Determining the revenue recognised is for an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. Our audit procedures included: • • • • • • Obtaining a detailed understanding of each of the revenue streams and the process for calculating and recording revenue; the revenue recognition Assessing whether policies comply with Australian Accounting Standards; Performing substantive testing on each revenue stream on a sample basis; Reviewing the deferred revenue calculation for revenue received in advance; Reviewing revenue transactions before and after year-end to ensure that revenue is recognised in the correct financial period; and Reviewing the appropriateness of disclosure in the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2020, but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors' report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Rent.com.au Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS Perth, WA Dated: 25 September 2020 ALASDAIR WHYTE Partner Rent.com.au Limited Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2020 Note Consolidated Revenue Other income Total Income Administration charges Consulting & business development costs 3 4 2020 $ 2,452,239 357,390 2,809,629 (404,657) (22,595) Depreciation and amortisation expense 8,9,10 (882,943) 2019 $ 2,164,192 81,520 2,245,712 (526,949) (81,775) (566,750) Employee benefit expenses Finance costs Information technology costs Share based payment expenses Sales and marketing expenses Others (1,859,402) (1,955,014) (10,593) (385,610) 4,372 (398,092) (515,324) (455) (416,953) 107,676 (887,044) (415,631) 17 Loss before income tax expense (1,665,215) (2,497,183) Income tax expense 5 - - Loss after income tax expense for the year (1,665,215) (2,497,183) Other comprehensive income - - Total comprehensive loss for the year (1,665,215) (2,497,183) Total comprehensive income for the year is attributable to: Non-controlling interest Owners of Rent.com.au Limited (230) - (1,664,985) (2,497,183) Total comprehensive loss for the year (1,665,215) (2,497,183) Earnings Per Share Cents Cents Basic and diluted (loss) per share 21 (0.57) (1.05) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 22 Rent.com.au Limited Consolidated Statement of Financial Position As at 30 June 2020 Assets Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Plant and equipment Right-of-use assets Intangible assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Lease liabilities Employee benefits Total current liabilities Non-current liabilities Borrowings Lease Liabilities Total non-current liabilities Total liabilities Net Assets Equity Issued capital Share based payments reserve Other reserve Accumulated losses Equity attributable to the owners of Rent.com.au Ltd Non-controlling interest Total equity Note Consolidated 2020 $ 631,771 381,542 1,013,313 19,400 96,970 1,523,357 1,639,727 2019 $ 151,534 313,905 465,439 36,254 - 1,707,567 1,743,821 2,653,040 2,209,260 556,823 8,602 80,988 184,403 830,816 5,734 21,365 27,099 593,177 8,602 - 177,503 779,282 14,335 - 14,335 857,915 793,617 1,795,125 1,415,643 37,114,067 6,314,856 243,726 35,313,752 6,319,226 - (41,883,534) (40,217,335) 1,789,115 1,415,643 6,010 - 1,795,125 1,415,643 6 7 8 9 10 11 12 13 14 12 13 15 16 16 18 19 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 23 Rent.com.au Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2020 Issued capital Consolidated $ Share based payment reserves $ Other Reserve Accumulated loss Non Controlling Interest Total equity $ $ $ $ Balance at 1 July 2019 Adjustment for Impact of AASB 16 [note 1] Restated Balance Loss after income tax expense for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners: Shares issued Changes in ownership Share based payments Share issue costs Balance at 30 June 2020 35,313,752 6,319,226 - - 35,313,752 6,319,226 - - 2,016,984 - - (216,669) - - - - (4,370) - - - - - - - 243,726 - - (40,217,335) (1,214) (40,218,549) - - - 1,415,643 (1,214) 1,414,429 (1,664,985) (230) (1,665,215) (1,664,985) (230) (1,665,215) - - - - - 2,016,984 6,240 - - 249,966 (4,370) (216,669) 37,114,067 6,314,856 243,726 (41,883,534) 6,010 1,795,125 Issued capital Consolidated $ Share based payment reserves $ Other Reserve Accumulated loss Non Controlling Interest Total Equity $ $ $ $ Balance at 1 July 2018 Loss after income tax expense for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners: Share issues Share issue costs Share based payments Balance at 30 June 2019 34,912,935 6,426,905 - - 500,003 (99,186) - - - - - (107,679) 35,313,752 6,319,226 - - - - - - - (37,720,152) (2,497,183) (2,497,183) - - - (40,217,335) - - - - - - - 3,619,688 (2,497,183) (2,497,183) 500,003 (99,186) (107,679) 1,415,643 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 24 Rent.com.au Limited Consolidated Statement of Cash flows For the year ended 30 June 2020 Cash flows from operating activities Note Consolidated 2020 $ 2019 $ Receipts from customers (inclusive of GST) 2,704,473 2,436,335 Payments to suppliers and employees (inclusive of GST) (3,810,099) (4,428,233) Other income Interest received Interest and other finance costs paid (1,105,626) (1,991,898) 355,437 1,952 (10,593) 71,283 10,237 (455) Net cash used in operating activities 27 (758,830) (1,910,833) Cash flows from investing activities Payments for plant and equipment Payments for intangible assets (net) Proceeds from disposal of plant and equipment Proceeds from disposal of investment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of share capital Share issue costs Proceeds from borrowings Repayment of borrowings Net cash provided by financing activities (3,354) (477,163) 100 - (13,724) (594,639) 4,785 - (480,417) (603,578) 2,016,981 (216,703) 2,850 (83,644) 1,719,484 500,000 (99,186) - (24,472) 376,342 Net decrease in cash and cash equivalents 480,237 (2,138,069) Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 151,534 2,289,603 631,771 151,534 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 25 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 This financial report of Rent.com.au Limited (‘the Company’) and its controlled entities (‘the Group’) for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of the Directors on 25 September 2020. Rent.com.au Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. Note 1. Significant Accounting Policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Going concern These financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. As disclosed in the financial statements, the Group incurred a loss of $1,665,215 and had net cash outflows from operating and investing activities of $758,830 and $480,417 respectively for the year ended 30 June 2020. As at that date the Group had net current assets of $182,497. The Directors believe that it is reasonably foreseeable that the Group will continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report after consideration of the following factors: • The ability to issue additional shares under the Corporations Act 2001 to raise further working capital; As disclosed at Note 25, subsequent to year end the Group issued 33,333,333 shares to raise approximately $1.5 million (before costs); and The Group has the ability to scale down its operations in order to curtail expenditure, in the event insufficient cash is available to meet projected expenditure. • • New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the Group: AASB 16 Leases The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for lessees eliminates the classifications of operating leases and finance leases. Except for short- term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs) in the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced. 26 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) New or amended Accounting Standards and Interpretations adopted (continued) by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. Impact of adoption AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The impact of adoption on opening accumulated losses as at 1 July 2019 was as follows: Operating lease commitments as at 1 July 2019 (AASB 117) Finance lease commitments as at 1 July 2019 (AASB 117) Low-value assets leases not recognised as a right-of-use asset (AASB 16) Accumulated depreciation as at 1 July 2019 (AASB 16) Right-of-use assets (AASB 16) Lease Liabilities – current (AASB 16) Lease Liabilities – non-current (AASB 16) Reduction in opening accumulated losses as at 1 July 2019 1 July 2019 $ 187,475 22,936 (22,936) (12,929) 174,546 (73,407) (102,353) (1,214) When adopting AASB 16 from 1 July 2019, the Group has applied the following practical expedients: - - - - - applying a single discount rate to the portfolio of leases with reasonably similar characteristics; accounting for leases with a remaining lease term of 12 months as at 1 July 2019 as short- term leases; excluding any initial direct costs from the measurement of right-of-use assets; using hindsight in determining the lease term when the contract contains options to extend or terminate the lease; and not apply AASB 16 to contracts that were not previously identified as containing a lease. Basis of Preparation These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or 27 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Basis of Preparation (continued) loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivatives financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed within these financial statements. The presentation currency is Australian dollars. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Rent.com.au Limited as at 30 June 2020 and the results of all subsidiaries for the year then ended. Rent.com.au Limited and its subsidiaries together are referred to in these financial statements as the “Group”. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. 28 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Board (the Chief Operating Decision Makers ('CODM') of the business). The Board is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation The financial statements are presented in Australian dollars, which is Rent.com.au Limited's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Revenue Recognition The Group recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Sale of goods Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Rendering of services Revenue from a contract to provide services is recognised over time as the services are rendered based on either a fixed price or an hourly rate. Interest Interest revenue is recognised as interest accrues using the effective interest method. 29 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Revenue Recognition (continued) Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Government Grants Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Income Tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Rent.com.au Limited and its wholly-owned Australian subsidiaries have formed an income tax group under the tax consolidation regime. The head entity and each subsidiary in the tax group continue to account for their own current and deferred tax amounts. The tax group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax group. 30 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Income Tax (continued) Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non- current. Deferred tax assets and liabilities are always classified as non-current. Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position. Trade and Other Receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Plant and equipment Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their expected useful lives as follows: • • Computer equipment Furniture and fittings 2-4 years 4 years 31 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Plant and equipment (continued) Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred or dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the lease asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subjected to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Intangible assets IT development and software Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. These intangible assets have finite lives and are subject to amortisation on a straight-line basis. The useful lives for these assets are as follows: • Software 4 years Research and development Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved services) are recognised as intangible assets when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of direct overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. 32 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Intangible assets (continued) Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as an intangible asset and amortised from the point at which the asset is ready for use on a straight-line basis over its useful life of 4 years. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and Other Payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. 33 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the 34 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Employee benefits (continued) grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: • • during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period. from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. 35 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Fair value measurement (continued) Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the Group. Business Combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued, or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and 36 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Business Combinations (continued) the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non- controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at either amortised cost or fair value depending on their 37 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) Investments and other financial assets (continued) classification. Classification is determined based on the purpose of the acquisition and subsequent reclassification to other categories is restricted. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it’s carrying value is written off. Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the Group intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Impairment of financial assets The Group recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2020. The Group's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below. 38 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 1. Significant Accounting Policies (continued) New Accounting Standards and Interpretations not yet mandatory or early adopted (continued) Conceptual Framework for Financial Reporting (Conceptual Framework) The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards. Where the Group has relied on the existing framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the Group may need to review such policies under the revised framework. At this time, the applications of the Conceptual Framework is not expected to have a material impact on the Group’s financial statements. Note 2. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates in relation to assets, liabilities, contingent liabilities, revenue and expenses. judgements and estimates its Management bases its judgements, estimates and assumptions on historical experience and on various other factors, including expectations of future events which management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific notes, there does not appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share- based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact statement of profit or loss and other comprehensive income and equity. 39 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 2. Critical accounting judgements, estimates and assumptions - continued Revenue from contracts with customers involving sale of products When recognising revenue in relation to the sale of products to customers, the key performance obligation of the Group is considered to be the point of delivery of the products to the customer, as this is deemed to be the time that the customer obtains control of the promised products and therefore the benefits of the unimpeded access. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience, historical collection rates, the impact of Coronavirus (COVID-19) pandemic and forward-looking information that is available. The allowance for expected credit losses, as disclosed in note 10, is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower. Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability, Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered maybe include the importance of the asset to the Group’s operations, comparison of terms and conditions to prevailing market rates; Incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Note 3. Revenue Consolidated 30 June 2020 Consolidated Timing of revenue recognition 30 June 2020 Goods transferred at a point in time Services transferred over a period of time Total $ $ $ Fees from agents and landlords 28,996 124,986 153,982 Renter Products Revenue 1,110,884 202,027 1,312,911 Advertising Sales 228,707 756,639 985,346 Other Revenue Total - - - 1,368,587 1,083,652 2,452,239 40 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 3. Revenue (Continued) Consolidated 30 June 2019 Consolidated Timing of revenue recognition 30 June 2019 Goods transferred at a point in time Services transferred over a period of time Total $ $ $ Fees from agents and landlords 28,933 122,585 151,518 Renter Products Revenue 958,915 273,852 1,232,767 Advertising Sales 190,121 589,786 779,907 Other Revenue Total - - - 1,177,969 986,223 2,164,192 Consolidated 30 June 2020 Geographical regions Australia Note 4. Other Income R&D Incentive recognised in income Interest income Government grants Note 5. Income Tax a) The components of tax expense comprise: Current tax Deferred tax Total income tax expense Consolidated 2020 $ 2019 $ 2,452,239 2,164,192 Consolidated 2020 $ 193,438 1,952 162,000 357,390 2019 $ 71,283 10,237 - 81,520 Consolidated 2020 $ 2019 $ - - - - - - b) The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows: 41 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 5. Income Tax (continued) Consolidated 2020 $ 2019 $ Prima facie tax payable on loss from ordinary activities before income tax at 27.5% (457,934) (686,725) Tax effect of: Share based payments Tax losses not recognised Timing differences not recognised Other Total income tax expense (1,202) 480,258 49,857 (70,979) - (29,611) 819,389 (78,488) (24,565) - c) Deferred tax assets at 30 June 2020 not brought to account are: Revenue tax losses Other Total Deferred tax asset not recognised 5,742,422 24,382 5,766,804 5,316,186 110,099 5,426,285 The benefit for tax losses will only be obtained if: • • • • the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised; and the losses are transferred to an eligible entity in the Group; and the Group continues to comply with the conditions for deductibility imposed by tax legislation; and no changes in tax legislation adversely affect the consolidated in realising the benefit from the deduction for the losses. Note 6. Cash and Cash Equivalents Cash at bank and in hand Term Deposits Total cash and cash equivalents Reconciliation to cash and cash equivalents at the end of the financial year Consolidated 2020 $ 611,506 20,265 631,771 2019 $ 131,534 20,000 151,534 Balance as per statement of cash flows 631,771 151,534 42 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 6. Cash and Cash Equivalents (continued) Cash at bank and in hand earns interest at floating rates based on daily bank rates. The effective interest rate on short-term bank deposits was 0.84% (2019: 0.84%). The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. Note 7. Trade and Other Receivables Trade debtors Less: Allowance for expected credit losses Prepayments GST receivable Total trade and other receivables Consolidated 2020 $ 332,397 (2,815) 329,582 51,960 - 381,542 2019 $ 221,965 (7,549) 214,416 95,465 4,024 313,905 Allowance for expected credit losses The Group has recognised a loss of $10,274 (2019: $17,884) in profit or loss in respect of the expected credit losses for the year ended 30 June 2020. The ageing of the expected credit losses provided for above are as follows: 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue Consolidated 2020 $ - 2,815 - 2,815 Movement in the allowance for expected credit losses are as follows: Opening balance Additional provisions recognised Receivables written off during the year as uncollectable Closing Balance Consolidated 2020 $ 7,549 10,274 (15,008) 2,815 2019 $ - 3,000 4,549 7,549 2019 $ 13,706 17,884 (24,041) 7,549 As at 30 June 2020 there were no customers with balances past due but without provision for impairment. 43 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 7. Trade and Other Receivables (continued) Credit Risk – Trade and Other Receivables The Group has no significant concentration of credit risk with respect to any single counter party other than Australian Taxation Office. The class of assets described as trade and other receivables is considered to be the main source of credit risk related to the Group. Other than as noted above, all trade and other receivables are within initial trade terms and considered to be of high credit quality. Note 8. Plant and Equipment Plant and equipment at cost Less: accumulated depreciation Consolidated 2020 $ 207,744 (188,344) 19,400 2019 $ 204,390 (168,136) 36,254 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated 2020 $ 36,254 3,354 (20,208) - 19,400 Consolidated 2020 $ 174,546 (77,576) 96,970 2019 $ 22,149 37,430 (23,031) (294) 36,254 2019 $ - - - Balance at the beginning of the year Additions Depreciation Disposals Written down balance at end of year Note 9. Right-of-use asset Building – right of use Less: accumulated depreciation Additions to assets during the year was $174,546. 44 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 10. Intangible Assets Consolidated 2020 $ 2019 $ Software and website development at cost 5,483,416 4,882,467 Less: accumulated amortisation (3,960,059) (3,174,900) 1,523,357 1,707,567 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at the beginning of the year Additions Amortisation Written down balance at end of year Note 11. Trade and Other Payables Trade creditors Other payables GST Payable Total Trade and Other Payables Consolidated 2020 $ 1,707,567 600,949 (785,159) 1,523,356 2019 $ 1,656,648 594,638 (543,719) 1,707,567 Consolidated 2020 $ 257,832 293,882 5,109 556,823 2019 $ 314,801 278,376 - 593,177 Trade payables are non-interest bearing and are normally settled on 30 to 60-day terms. Note 12. Borrowings Finance lease liability – current Finance lease liability – non-current Total Borrowings Consolidated 2020 $ 8,602 5,734 14,336 2019 $ 8,602 14,335 22,937 These are finance leases for computer equipment with an average remaining term of 20 months. The interest rates and repayments are fixed. 45 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 13. Lease liability Lease liability – current Lease liability – non-current Total Lease liability Note 14. Employee Benefits Annual leave Long service leave Total Employee Benefits Consolidated 2020 $ 80,988 21,365 102,353 Consolidated 2020 $ 153,226 31,177 184,403 2019 $ - - - 2019 $ 135,795 41,708 177,503 Expected to be settled within 12 months 184,403 177,501 Expected to be settled after 12 months - - The Group encourages employees to take leave when due and accordingly expects that the leave accruals above will be utilised during the next 12 months. Note 15. Issued Capital Consolidated 2020 $ 2019 $ Ordinary shares fully paid 37,114,067 35,313,752 Ordinary shares fully paid Movements in ordinary share capital Shares Shares 302,635,759 249,497,272 Details Shares Issue price $ Opening Balance – 1 July 2018 236,339,309 34,912,935 Issue of shares – performance shares 31 Jan 2019 69 $0.048 3 Issue of shares – share purchase plan 7 May 2019 13,157,894 $0.038 500,000 Conversion of performance rights during year Share issue transaction costs - Closing Balance – 30 June 2019 249,497,272 (99,186) 35,313,752 46 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 15. Issued Capital (continued) Details Shares Issue price $ Opening Balance – 1 July 2019 249,497,272 35,313,752 Issue of shares – July and August 2019 41,582,864 $0.036 1,496,983 Issue of shares – March 2020 11,555,554 $0.045 519,999 Issue of shares – performance shares 31 Jan 2019 69 $0.048 3 Share issue transaction costs - Closing Balance – 30 June 2020 302,635,759 (216,670) 37,114,067 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Group in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Group does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Capital management Capital risk management The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company's share price at the time of the investment. The Group is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the prior financial year. 47 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 16. Reserves Consolidated 2020 $ 2019 $ Share based payment reserve 6,314,856 6,319,226 Other reserve 243,726 - Share Based Payment Reserve The share-based payment reserve recognises options, performance rights and performance shares that have been issued as share based payments. Other reserve This reserve is used to recognise the change in the share of the non-controlling interest. Note 17. Share Based Payments The Rent.com.au Limited Long-Term Incentive Plan (“LTIP”) was established following approval by shareholders on 20 May 2015. All employees, directors and consultants are eligible to participate in the LTIP. The LTIP provides for the issue of: • • Performance Rights which, upon a determination by the Board that the performance conditions attached to the Performance Rights have been met, will result in the issue of one ordinary Share in the Group for each Performance Right; and Plan Options which, upon a determination by the Board that the vesting conditions attached to the Plan Options have been met, will result in the Plan Options vesting and being able to be exercised into Shares by payment of the exercise price. The key features of the Plan are as follows: • • • The Board will determine the number of Performance Rights and Plan Options (Plan Securities) to be granted to Eligible Employees (or their Affiliates) and the vesting conditions, expiry date of the Plan Securities and the exercise price of the Plan Options in its sole discretion. The Plan Securities are not transferable unless the Board determines otherwise or the transfer is required by law and provided that the transfer complies with the Corporations Act. Subject to the Corporations Act and the Listing Rules and restrictions on reducing the rights of a holder of Plan Securities, the Board will have the power to amend the Plan as it sees fit. 48 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 17. Share Based Payments (continued) a) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period were as follows: Performance rights issued/(reversed) under LTIP Performance shares issued to shareholders Options issued under LTIP Consolidated 2020 $ (4,373) 3 - 2019 $ (114,313) 3 6,634 Total share-based payments (reversal)/expense (4,370) (107,676) b) Options All options granted to key employees, consultants and advisors of the Group are for ordinary shares in Rent.com.au Limited which confer a right of one ordinary share for every option held. Grant Date Expiry Date Exercise Price Balance at start of year Granted during the year Exercised during the year Expired/ forfeited/ other Balance at end of the year Vested & exercisable at end of the year Number Number Number Number Number Number 2020 17 Jun 2015 17 Jun 2020 $0.25 19,000,000 17 Jun 2015 17 Jun 2020 $0.30 13,385,000 23 Jun 2015 22 Jun 2020 $0.30 7,000,000 13 Aug 2015 13 Aug 2020 $0.30 400,000 22 Feb 2016 22 Feb 2021 $0.30 1,740,000 09 Sep 2016 09 Sep 2021 $0.25 1,250,000 09 Sep 2016 09 Sep 2021 $0.35 1,250,000 09 Sep 2016 09 Sep 2021 $0.50 1,250,000 45,275,000 - - - - - - - - - - - - - - - - - - (19,000,000) (13,385,000) (7,000,000) - - - - - - - - - - - 400,000 266,666 1,740,000 - 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 (39,385,000) 5,890,000 4,016,666 Weighted average exercise price $0.28 n/a n/a n/a $0.34 $0.25 There were no new options granted during the financial year ending on 30 June 2020. Grant Date Expiry Date Exercise Price Balance at start of year Granted during the year Exercised during the year Expired/ forfeited/ other Balance at end of the year Vested & exercisable at end of the year Number Number Number Number Number Number 2019 17 Jun 2015 17 Jun 2020 $0.25 19,000,000 17 Jun 2015 17 Jun 2020 $0.30 14,185,000 23 Jun 2015 22 Jun 2020 $0.30 7,000,000 13 Aug 2015 13 Aug 2020 $0.30 400,000 22 Feb 2016 22 Feb 2021 $0.30 1,830,000 09 Sep 2016 09 Sep 2021 $0.25 1,250,000 09 Sep 2016 09 Sep 2021 $0.35 1,250,000 09 Sep 2016 09 Sep 2021 $0.50 1,250,000 46,165,000 - - - - - - - - - - - - - - - - - - 19,000,000 14,500,000 (800,000) 13,385,000 8,923,334 - - 7,000,000 7,000,000 400,000 266,666 (90,000) 1,740,000 - - - - 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 (890,000) 45,275,000 34,440,000 Weighted average exercise price $0.28 n/a n/a n/a $0.28 $0.29 49 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 17. Share Based Payments (continued) c) Performance Shares/Rights Performance shares and performance rights do not have an exercise price. Upon satisfaction of the relevant performance vesting condition they convert to ordinary shares in the ratio of one ordinary share for every one performance share / performance right. Grant Date Expiry Date Balance at start of year Granted during the year Exercise d during the year Expired/ forfeited/ other Balance at end of the year Vested & exercisable at end of the year Number Number Number Number Number Number 2020 Performance Shares 17 Jun 20152 31 Dec 2019 8,160,771 Performance Rights 17 Jun 20152 31 Dec 2019 701,899 13 Aug 20152 31 Dec 2019 22 Feb 20162 31 Dec 2019 46,666 80,000 09 Sep 20162 31 Dec 2019 3,183,741 - - - - - 01 May 20203 30 Nov 2020 - 3,863,337 12,173,077 3,863,337 - - - - - - - (8,160,771) (701,899) (46,666) (80,000) (3,183,741) - - - - - - 3,863,337 (12,173,077) 3,863,337 2019 Performance Shares 17 Jun 20151 31 Dec 2018 17 Jun 20152 31 Dec 2019 8,160,771 8,160,771 Performance Rights 17 Jun 20151 31 Dec 2018 17 Jun 20152 31 Dec 2019 13 Aug 20151 31 Dec 2018 13 Aug 20152 31 Dec 2019 22 Feb 20161 31 Dec 2018 22 Feb 20162 31 Dec 2019 09 Sep 20161 31 Dec 2018 09 Sep 20162 31 Dec 2019 795,720 795,720 46,667 46,666 80,000 80,000 3,283,741 3,283,741 24,733,797 - - - - - - - - - - - (69) (8,160,702) - - - - - - - - - - - 8,160,771 (795,720) - (93,821) 701,899 (46,667) - - 46,666 (80,000) - - 80,000 (3,283,741) - - 3,183,741 (69) (12,460,651) 12,173,077 - - - - - - - - - - - - - - - - - - 1 Class B Performance Shares/rights – these performance shares will vest on the achievement of greater than $10,000,000 in revenue by the Group in any 12 month period on or before 31 December 2018. Expire 14 days after the release of the audited financial report for the period ended 31 December 2018. 2 Class C Performance Shares/rights – these performance shares will vest upon the achievement of greater than $3,000,000 in EBITDA by the Group in any 12 month period on or before 31 December 2019. Expire 14 days after the release of the audited financial report for the period ended 31 December 2019. 3 Tranche 7 performance rights- these performance rights will vest upon continuous employment with the Group until 31 October 2020. 50 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 17. Share Based Payments (continued) For the performance rights granted during the financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date 1 May 2020 Number of performance rights Share price at grant date Total fair value at grant date 3,863,337 $0.03 $115,900 Type Rights Underlying share price Probability %* Value ($) Performance Rights 3,863,337 3,863,337 $0.03 $0.03 100% 115,900 - 115,900 * The probability estimated by the management is over the expiry date of the performance shares/rights. Note 18. Accumulated Losses Consolidated 2020 $ 2019 $ Accumulated losses at the beginning of the financial year (40,217,335) (37,720,152) Adjustment for change in accounting Loss after income tax for the year (1,214) - (40,218,549) (37,720,152) (1,664,985) (2,497,183) Accumulated losses at the end of the financial year (41,883,534) (40,217,335) Note 19. Non-controlling interest Issued Capital Accumulated losses Consolidated 2020 $ 6,240 (230) 6,010 2019 $ - - - The non-controlling interest relates to Novatti Group holding a 2.5% equity holding in RentPay Technology Pty Ltd. Note 20. Auditor’s Remuneration The Group’s sole auditor is RSM Australia Partners. The following amounts were paid or payable to RSM Australia Partners for the services set out below: Auditing or reviewing the financial reports Taxation services Research & Development Grant services Total auditor’s remuneration 51 Consolidated 2020 $ 48,000 9,870 26,217 84,087 2019 $ 48,000 8,100 23,788 79,888 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 21. Earnings per Share Loss after income tax Non-controlling interest Loss after income tax attributable to the owners of Rent.com.au Limited Weighted average number of ordinary shares used in calculating basic loss per share Adjustments for calculation of diluted earnings per share: Options over ordinary shares Basic and diluted (loss) per share Consolidated 2020 $ 2019 $ (1,665,215) (2,497,183) 230 - (1,664,985) (2,497,183) Number Number 291,564,581 238,285,985 - - 291,564,581 238,285,985 Cents (0.57) Cents (1.05) Options have not been included in the calculation of dilutive loss per share as the options are anti- dilutive. Note 22. Dividends Paid or Proposed The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report. Note 23. Operating Segments Identification of reportable operating segments The Group operates as a single operating segment with different revenue streams. The Board (the Chief Operating Decision Makers ('CODM') of the business) reviews performance of the Group as a whole. The Board evaluates Group performance by reference to revenue and profit and loss which are measured consistently with these consolidated financial statements. In addition, the Board evaluates EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the Board are consistent with those adopted in the financial statements. The information is reported to the Board monthly. 52 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 24. Commitments Operating lease commitments Future minimum rentals payable under non-cancellable office leases are as follows: Within one year After one year but not more than five years Total operating lease commitments Consolidated 2020 $ - - - 2019 $ 156,300 195,375 351,675 Finance lease commitments Future minimum payments payable under non-cancellable finance leases are as follows: Consolidated Within one year After one year but not more than five years Total finance lease commitments Total commitment Less: future finance charges Net commitment recognised as borrowings Note 25. Events After the Reporting Period 2020 $ 8,602 5,734 14,336 14,336 - 14,336 2019 $ 8,602 14,335 22,937 22,937 - 22,937 The impact of the Coronavirus (COVID-19) pandemic is ongoing and while the impacts on the Group up to 30 June 2020 have not been as significant as initially anticipated it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by State and Federal governments, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. On 14 August 2020, the Group issued 2,916,668 remuneration performance rights to the directors in lieu of directors fees following shareholder approval at its General Meeting. On 15 September 2020, the Group issued 33,333,333 shares at an issue price of $0.045 per share to sophisticated, professional and other exempt investors under section 708 of the Corporations Act 2001 (Cth), to raise $1.5 million (before costs). Apart from the above, no other matter or circumstance has been arisen since 30 June 2020 that has significantly affected, or maybe significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. 53 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 26. Controlled Entities All controlled entities are included in the consolidated financial statements. The Group does not guarantee to pay the deficiency of its controlled entities in the event of a winding up of any controlled entity. The financial year ends of the controlled entities are the same as that of the Company, being 30 June. Parent Entity Rent.com.au Limited Name of controlled entity Rent.com.au (Operations) Pty Ltd Lease.com.au Pty Ltd RentPay Technology Pty Ltd* Country of Incorporation Principal Activity Percentage Owned 2020 2019 Australia Investment/Parent Australia Australia Australia Information Technology Information Technology Information Technology 100% 100% 97.5% 100% 100% - *incorporated by the Group on 17 September 2019. The Group financial statements incorporate the assets, liabilities and result of the following subsidiary with non-controlling interests in accordance with the accounting policy described in note 1: Country of Incorporation Parent Non-controlling interest Ownership interest 2020 % Ownership interest 2019 % Ownership interest 2020 % Ownership interest 2019 % Name RentPay Technology Pty Ltd* Australia 97.5% - 2.5% - * the non-controlling interests hold 2.5% of the voting rights of RentPay Technology Pty Ltd Summarised financial information Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated entity are set out below: Summarised statement of financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets 54 RentPay Technology Pty Ltd 2020 $ 2019 $ 103,677 455,275 558,952 1,513 317,017 318,530 240,422 - - - - - - - - Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 26. Controlled Entities (Continued) Summarised statement of profit or loss and other comprehensive income Revenue Expenses Loss before income tax expense Income tax expense Loss after income tax expense Other comprehensive income Total comprehensive income Statement of cash flows Net cash from operating activities Net cash used in investing activities Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Other financial information Loss attributable to non-controlling interests Accumulated non-controlling interests at the end of reporting period Note 27. Cashflow Information RentPay Technology Pty Ltd 2020 $ 2019 $ 63,368 (72,571) (9,203) - (9,203) - (9,203) 39,277 (63,750) 32,725 8,252 (230) 6,010 - - - - - - - - - - - - - a) Reconciliation of Cash Flow from Operations with Loss after Income Tax (Loss) after income tax - Share based payments - Depreciation and amortisation - Provision for doubtful debts - Interest expense Changes in assets and liabilities: - trade and other receivables - trade payables and accruals - employee benefits Consolidated 2020 $ 2019 $ (1,665,215) (2,497,183) (4,372) 882,943 15,008 12,878 29,384 (36,358) 6,902 (107,676) 566,750 6,157 - 114,873 72,941 (66,695) Cash flows used in operations (758,830) (1,910,833) 55 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 28. Non-cash investing and financing activities Acquisition of plant and equipment by means of finance leases Total non-cash investing and financing activities Note 29. Changes in liabilities arising from financing activities Finance lease liability Balance at the beginning of the year Net cash used in financing activities Acquisition of plant and equipment by means of finance leases Balance at the end of the year Lease liability Balance at the beginning of the year Lease liability recognised Net cash used in financing activities Balance at the end of the year Note 30. Related Party Transactions The Group’s main related parties are as follows: Consolidated 2020 $ 2,850 2,850 Consolidated 2020 $ 22,937 (11,451) 2,850 14,336 - 175,761 (73,408) 102,353 2019 $ 25,803 25,803 2019 $ 21,606 (24,472) 25,803 22,937 - - - - (i) Entities exercising control over the Group: The ultimate parent entity that exercises control over the Group is Rent.com.au Limited, which is incorporated in Australia. (ii) 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 key management personnel. For details of disclosures relating to key management personnel, refer to Note 29. (iii) Entities subject to significant influence by the Group: An entity that has the power to participate in the financial and operating policy decisions of an entity, but does not have control over those policies, is an entity which holds significant influence. Significant influence may be gained by share ownership, statute or agreement. (iv) Other related parties: Other related parties include entities controlled by the ultimate parent entity and entities over which key management personnel have joint control. 56 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 30. Related Party Transactions (continued) Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred with related parties: Consolidated Transactions: Advisory and capital issue costs - Grange Consulting1 Outgoings and others – Watersun Property Pty Ltd2 Cleaning – Servco Pty Ltd2 Interest expense2 Amortisation of right of use asset2 Total Related Party Transactions Balances owing to related parties at 30 June 2020: Watersun Property Pty Ltd2 Servco Pty Ltd2 Directors’ fees3 Right of use asset2 Lease liability2 2020 $ - 126,049 5,912 10,593 77,576 2019 $ 15,000 115,562 7,200 - - 220,130 137,762 Consolidated 2020 $ 109,170 1,102 29,168 96,970 102,353 338,763 2019 $ 86,101 600 - - - 86,701 1 2 3 Philip Warren is a director and shareholder of Grange Consulting Group Pty Ltd. Garry Garside is a director of Watersun Property Pty Ltd and Servco Pty Ltd. Directors’ fees will be repaid with performance rights in lieu of fees. The issue of performance rights to the directors was approved by the shareholders on 14 August 2020. Note 31. Interests of Key Management Personnel Compensation of Key Management Personnel (KMP) The aggregate compensation made to key management personnel of the Group is set out below: Consolidated 2020 $ 540,833 41,760 - 582,593 2019 $ 525,000 41,563 1,762 568,325 Short-term employee benefits Post-employment benefits Share-based payments Total KMP remuneration 57 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 32. Financial Risk Management The Group’s financial instruments consist mainly of deposits with banks and accounts payable. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows: Note 6 7 11 12 13 Consolidated 2020 $ 631,771 329,582 961,353 Consolidated 2020 $ 551,714 14,336 102,353 668,403 2019 $ 151,534 214,416 365,950 2019 $ 593,177 22,937 - 616,114 Cash and cash equivalents Trade and other receivables Total Financial Assets Trade and other payables* Borrowings Lease liability Total Financial Liabilities * Excluding GST and prepayment. Financial Risk Management Policies The Board of Directors are responsible for monitoring and managing financial risk exposures of the Group. The Board monitors the Group’s financial risk management policies and approves financial transactions. It also reviews the effectiveness of internal controls relating to counterparty credit risk, financing risk and interest rate risk. The Board’s overall risk management strategy seeks to assist the Group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of the credit risk policies and future cash flow requirements. Specific Financial Risk Exposures and Management The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk and foreign currency risk. 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 procedures include 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 extent possible, that customers and counterparties to 58 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 32. Financial Risk Management (continued) transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment. Credit terms are generally 30 days from the invoice date. Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating. Credit risk exposures The maximum exposure to credit risk by class of recognised financial assets at reporting date is equivalent to the carrying value 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, except the Australian Taxation Office. Trade and other receivables that are neither past due nor impaired are considered to be of high credit quality. Credit risk related to balances with banks and other financial institutions is managed by the board in accordance with approved board policy. The following table provides information regarding the credit risk relating to cash and money market securities based on Standard & Poor’s counterparty credit ratings. Cash and cash equivalents Note Consolidated 2020 $ 2019 $ 631,771 151,534 - - - - 6 631,771 151,534 AA- Rated A+ Rated Unrated 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 manages this risk through the following mechanisms: • preparing forward looking cash flow analysis in relation to its operational, investing and financing activities; obtaining funding from a variety of sources; • • maintaining a reputable credit profile; • managing credit risk related to financial assets; • • only investing surplus cash with major financial institutions; and comparing the maturity profile of financial liabilities with the realisation profile of financial assets. The tables below reflect 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. The timing of cash flows 59 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 32. Financial Risk Management (continued) b) Liquidity Risk (continued) presented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward. Financial liabilities due for payment Within 1 year 1 to 5 Years Total Weighted average effective interest rate % - - Trade and other payables Borrowings 2020 2019 2020 2019 2020 2019 $ $ 551,714 593,177 $ - $ - $ $ 551,714 593,177 8,602 8,602 5,734 14,335 14,336 22,937 Lease liability 7.43 80,989 - 21,364 - 102,353 - Financial assets realisable cash flows Within 1 year 1 to 5 Years Total Weighted average effective interest rate 2020 2019 2020 2019 2020 2019 % $ $ 0.50% 631,771 151,534 - 329,582 214,416 $ - - $ - - $ $ 631,771 151,534 329,582 214,416 Cash and cash equivalents Trade and other receivables c) Market Risk Interest rate risk (i) Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group does not have material exposure to interest rate risk at reporting date. (ii) Price risk The Group currently has no exposure to equity securities price risk arising from investments held by the Group and classified in the statement of financial position as fair value through profit or loss. (iii) Foreign Currency Risk Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations. The Group does not have any foreign currency exposure. (iv) Fair value measurement Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. 60 Rent.com.au Limited Notes to the Financial Statements 30 June 2020 Note 33. Contingent Liabilities There are no contingent liabilities for the year ended 30 June 2020 (30 June 2019: nil). Note 34. Parent Information The following information has been extracted from the accounting records of the parent entity and has been prepared in accordance with the Australian Accounting Standards. Statement of profit or loss and other comprehensive income (Loss) for the year Total comprehensive (loss) for the year (1,423,786) (2,497,183) (1,423,786) (2,497,183) 2020 $ 2019 $ Statement of financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Equity Issued capital Share-based payment reserve Accumulated losses Total equity 1,134 1,858,301 1,018 1,451,826 1,859,435 1,452,844 (70,319) (70,319) (37,201) (37,201) 75,119,623 9,701,691 (83,032,198) 73,317,991 9,706,064 (81,608,412) 1,789,116 1,415,643 Contingent Liabilities and Capital expenditure There are no contingent liabilities for the parent entity for both financial periods ended 30 June 2020 and 30 June 2019. The parent entity did not have capital expenditure commitments for the acquisition of property, plant and equipment contracted but not provided for. Guarantees During the reporting period, Rent.com.au Limited had not entered into any guarantees in relation to the debts of its subsidiaries. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 1, except for the following: • • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity; Investments in associates are accounted for at cost, less any impairment, in the parent entity; and • Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may indicate the need to adjust the carrying value of the investment. 61 Rent.com.au Limited Directors’ Declaration 30 June 2020 In the directors' opinion: • • • • the attached financial statements and notes comply with the Corporations Act 2001, the Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2020 and of its performance for the financial year ended on that date; there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors _________________________ Dr. Garry Garside Non-executive Chairman Perth, 25 September 2020 62 Rent.com.au Limited Additional ASX Information 30 June 2020 ASX Additional Information Additional information required by the ASX Limited Listing Rules not disclosed elsewhere in this Annual Report is set out below. 1. Holdings The issued capital of the Company as at 17 September 2020 includes the following securities: Equity Class Fully paid ordinary shares Performance Rights Unlisted options (exp 6 Feb 2022, ex $0.042) Employee Options Number of holders Total on issue 989 12 1 11 335,969,092 6,780,005 5,982,028 5,310,000 All issued fully paid ordinary shares carry one vote per share. 2. Distribution of Ordinary Shares as at 17 September 2020 Range 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-and over Total Holders 154 29 118 416 272 989 Units 8,220 91,208 1,024,490 16,506,112 % 0.00% 0.03% 0.30% 4.91% 318,339,062 94.75% 335,969,092 100.00% There were 251 holders of less than a marketable parcel of ordinary share, and 30 holders from overseas holding 5,800,053 shares. 3. Substantial shareholder notices lodged with the Company Name S G Hiscock and Company Number* 28,981,683 % 8.63% Mr Jason Alan Carroll 8.52% * Number of shares held at 17 September 2020 where known, otherwise number of shares is at date of substantial shareholder notice lodged with the Company 28,638,023 4. Voting Rights See note 15 of the financial statements. 5. Restricted securities subject to escrow period There are currently no securities that are subject to escrow periods. 6. On-market buy back There is currently no on-market buyback program for any of Rent.com.au Limited’s listed securities. 63 Rent.com.au Limited Additional ASX Information 30 June 2020 7. Top 20 Largest Holders of Ordinary Shares as at 17 September 2020 Name 1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2 MR JASON ALAN CARROLL 3 BADER SMSF PTY LTD 4 CS THIRD NOMINEES PTY LIMITED 5 AJAVA HOLDINGS PTY LTD 6 MR MARK WOSCHNAK 7 MR MARK DANIEL NEEDHAM & MRS PIENGJAI NEEDHAM 8 AUSTCORP NO 214 PTY LTD 9 TEFIG PTY LTD 10 CITICORP NOMINEES PTY LIMITED 11 MR ANTHONY BRENDON COPE & MRS AMANDA GAY COPE 12 POTTER SUPER PTY LTD 13 DR GARRY DESMOND & MRS FRANCES SAMBRAILO GARSIDE 14 REEFBAY HOLDINGS PTY LTD 15 BFB HOLDINGS PTY LTD 16 MR BENJAMIN PATRICK SANDEMAN 17 TREASURE ISLAND HIRE BOAT 18 ALTOR CAPITAL MANAGEMENT 19 RIVERVIEW CORPORATION PTY LTD 20 CORNELA PTY LTD Total Top 20 Others Number 43,382,568 28,379,555 16,050,711 12,300,000 10,850,657 10,025,000 7,400,000 6,411,036 5,779,546 5,668,242 4,792,785 4,733,333 4,163,636 4,017,805 3,977,814 3,863,358 3,706,662 3,385,792 3,359,889 3,240,195 185,488,584 150,480,508 % 12.91% 8.45% 4.78% 3.66% 3.23% 2.98% 2.20% 1.91% 1.72% 1.69% 1.43% 1.41% 1.24% 1.20% 1.18% 1.15% 1.10% 1.01% 1.00% 0.96% 55.21 44.79 Total Ordinary Shares on Issue 335,969,092 100.00 8. Unquoted Securities The names of the security holders holding more than 20% of an unlisted class of security are listed below: Novatti Pty Ltd Mr Greg Bader Total other holders Total Total holdings over 20% Other holders Unlisted Options $0.042 6 Feb 2022 Performance Rights Employee Options 5,982,028 - - 5,982,028 1 0 - 1,600,001 5,180,004 6,780,005 1 11 - 3,750,000 1,560,000 5,310,000 1 10 64 

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