Chairman’s
Report
“
The company is growing
strongly in its home market
and is now the candidate
referencing platform of
choice for 30% of the top
50 ASX-traded companies
phone-based, manual procedure into a cloud-based,
electronic process. It is more efficient and reliable,
provides more accurate information, guards against fraud
and protects employers from breaching privacy and
discriminatory regulations. It collects 60% more data and
offers insightful analytics, enabling employers to obtain
detailed references anonymously and directly.
Acceptance of our unique online service has accelerated,
generating dramatic growth since Xref introduced its
product in early 2012. At the end of the 2016 financial year
more than 390 companies used Xref in Australia, New
Zealand, United Kingdom and Europe, North America and
Singapore, supported by our offices in Sydney, London
and Toronto.
Since year-end we have gained several important clients
in the UK and Canada. Our systems developers have
designed, tested and launched a world class product
specifically to meet the differing needs of the UK market
and it is now gaining acceptance, with initial sales made
after June 30. We are confident the Xref system will
I am delighted to be offered and accept the position of
become the standard way that recruiters, hiring managers
non-executive chair of Xref. I have great faith in the team
and HR leaders will check references in the future.
and product, and there are exciting times ahead as we
build revenue and tackle new product opportunities and
international expansion possibilities.
At present most of our clients are in Australia and New
Zealand – a labour market of approximately 12 million
people. In contrast, the market in the UK is 32 million, and
With the benefit of the $4 million capital raising ahead of
in the US and Canada it is 162 million, indicating the scope
Xref’s ASX listing in February through the reverse takeover
for future growth.
of King Solomon Mines, and an $8 million institutional
placement in August, the company has accelerated its
global expansion strategy. Management, led ably by the
joint founders and executive directors, chief executive
officer Lee-Martin Seymour, and chief technical officer
Tim Griffiths, has continued to build the foundations for
rapid international expansion.
There are several revolutionary aspects to Xref:
it
automates the practice of obtaining and verifying
references that job candidates provide. For the first
time, it moves control of the process from employer to
candidate, who has the motivation to encourage timely
responses from his or her referees. Xref transforms the
The company is growing strongly in its home market
and is now the candidate referencing platform of choice
for 30% of the top 50 ASX-traded companies. Demand
is increasing, along with significant contract renewals
by long term supporters, while continued technology
development has enabled us to integrate our service with
other human resources technology systems.
Xref achieved a three-fold increase in net revenue from
$369,000 to $1.3 million in the year to June 30, 2016. This
included a new monthly sales record in May of $325,000.
We are investing in Xref’s growth though globalisation,
integration with partners and technology improvement,
and the reported loss from continuing operations was in
4 / Xref Limited / Annual Report 2016
Chief Executive Officer’s &
Chief Technology Officer’s Report
Justice New South Wales, Mission Australia and Qantas,
with some more than doubling previous purchases. It
is pleasing that our clients are strong advocates of our
services, demonstrated by our 98% account retention
rate.
Our clients include all sizes of business in 32 industry
sectors. Nearly half of our business comes from enterprise
companies. Government clients represent 13% of gross
sales, while small-to-medium size businesses and human
resources agencies each represent 12%. Organisations
in the aged care and not-for-profit sectors, and special
events such as the Gold Coast Commonwealth Games,
are also clients.
Revenue triples, exceeding prospectus
expectations
Growing acceptance among recruiters and corporate HR
managers of Xref’s way of managing job seeker references
has helped us achieve extraordinary year-on-year growth
in revenue. This helps reinforce our confidence that
Australia will yield considerable growth into the future.
Gross sales for the financial year ending 30 June 2016
were $1.7 million, up 143% from $0.7 million in the
previous corresponding period. At the end of the year the
sales average per client was $8,000, which is increasing.
“
It is pleasing that our clients
are strong advocates of our
services
The year in which Xref became an ASX-listed company
was one of transition – taking our unique product to
international markets, while continuing to expand in
Australia.
The $4 million capital raising and listing on 8 February
(ASX code: XF1) helped accelerate our global expansion
strategy to win our first significant international clients. In
the five months to the financial year-end we expanded
sales and customer success teams, made improvements
to the platform and completed an integration of our
Clients purchase Xref credits
for $49.99
(or
the
technology with Oracle Taleo, a complementary system
international equivalent) on a ‘credit-per-candidate’ basis
used in the employment industry.
98% account retention rate
and, once used, the credits are reported as revenue. As
you will see in the income statement in our accounts, our
annual revenue is made up of credits sold (gross sales),
Since listing, we have secured more than 100 new
less an adjustment for credits remaining unredeemed
clients, including Australian Unity, Caltex, Coca Cola
(unearned revenue) at the accounts date.
Amatil, Crown Melbourne, Dentsu Aegis Network, DFP
Recruitment Agency, Department of Justice & Regulation
(Victoria), the Gold Coast 2018 Commonwealth Games
Corporation, HCF, Honda Australia, Inghams Australia and
New Zealand, Lend Lease Bouygues, Melbourne Health,
Volkswagen Australia, Westpac New Zealand, Westpac
Singapore and The World Wide Fund for Nature.
Significant renewals in 2016 included AECOM, AMP,
Aurizon, Hays Specialist Recruitment, Fletcher Building,
Clients’ credit purchase and use increased substantially
during the year, tripling revenue, from $369,000 in the
2015 financial year to $1.3 million in 2016.
Traditionally revenue in the recruitment business is
higher in the second half of the financial year so it is
more accurate to compare each half, or quarter, with the
previous corresponding period, rather than comparing
successive quarters.
6 / Xref Limited / Annual Report 2016
CHIEF EXECUTIVE OFFICER’S & CHIEF TECHNOLOGY OFFICER’S REPORT
In the northern hemisphere the annual sales profile is
responsiveness, a new investor centre, and blog site.
reversed, with the first half of the year the most productive.
Clients benefit from increased scale, a new dashboard
So, as we build sales in the UK, Europe, Canada and the
with more detailed candidate information, video and
US, we expect to gain better balance in our revenue
analytics.
stream throughout the year.
International expansion underway
International offices were expanded with high quality
salespeople and Xref’s chief sales manager recently
moved from Sydney to London to capitalise on our
healthy UK sales activity.
Our systems developers re-engineered the Xref offering
in the UK to meet the needs specific to that market, which
helped us gain several important UK clients after the close
of the 2016 financial year.
Having accumulated data over the past five years, we are
leveraging our database to provide predictive analytics
that enable human resource directors to make data driven
decisions. Selecting and hiring a new employee is fast
becoming a more scientific job.
In the 2016 financial year Xref received an R&D refundable
offset of $173,000 for the year ended 30 June 2015, and
has lodged an R&D refundable offset claim for expenditure
on R&D incurred during the 2016FY.
Creating open platform partnerships
Our Toronto office has made encouraging progress and
We believe the future of human resources technology
we are managing trials for potential clients in Canada.
is in open platforms that allow easy integration of
Our expansion strategy is for Canada to act as an initial
applications. Our strategy is to ensure our technology
beachhead for entry into the US market and early
has the ability to seamlessly mesh in with complementary
responses have been positive.
products that other suppliers provide for different aspects
of clients’ business administration and human resources
R&D continues to finesse Xref’s offering
management.
Many people might classify Xref as a reference taking
business, but we regard it as a data science business.
Research and development is critical to success. It
enables us to continue providing a great experience for
clients, and to remain the undisputed global leader in the
technology we’ve pioneered.
We have eight integration projects underway for applicant
tracking systems used by enterprise clients to manage
their recruitment process; for industry peer partners that
support other parts of the recruitment process, such as
video interviewing, automated on-boarding and online
testing; and market partners that can add value to Xref.
Ultimately, we continue to
invest
in research and
These are channels through which Xref can expand its
development to constantly upgrade our services and
addressable market while contributing to the productivity
expedite sales growth.
of the recruitment industry.
At 30 June 2016 we employed an experienced team
In May 2016 we passed a significant milestone in this
who are actively developing applications to improve the
regard, completing integration with the Oracle Taleo
candidate journey and experience at all stages of the
applicant tracking system which supports recruitment for
human resource recruitment process - for pre-screening,
6,000 of the world’s largest companies. Oracle Taleo is the
recruitment, candidate on-boarding and review, and off-
most significant system in its field and Xref’s application
board processes.
We have made significant improvements to our portal,
including moving to a new www.xref.global domain. This
domain allows us to add local websites, expediting rollout
as countries ‘go live’. New features include full mobile
can now be accessed directly from its platform. Several
Xref clients, including Qantas and Westpac, are now using
Xref in combination with Oracle Taleo. This capability has
opened up a new sales pipeline for Xref, and will increase
the use of our platform.
Xref Limited / Annual Report 2016 / 7
Directors’
Report
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the ‘consolidated entity’) consisting of Xref Limited, formerly known as King Solomon Mines Limited (referred to hereafter as
the ‘company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2016.
Directors
The following persons were directors of Xref Limited during the whole of the financial year and up to the date of this report,
unless otherwise stated:
Lee-Martin Seymour (appointed 18 January 2016)
Timothy Griffiths (appointed 18 January 2016)
Timothy Mahony (appointed 18 January 2016)
Brad Rosser (appointed 18 August 2016)
Nigel Heap (appointed 18 August 2016)
Simon O’Loughlin (resigned 18 August 2016)
Stephen McPhail (resigned 18 January 2016)
Simon Taylor (resigned 18 January 2016)
Principal activities
During the financial year the principal continuing activities of the consolidated entity were that of software development for
the HR industry.
Dividends
No dividends have been paid by the Company during the financial year ended 30 June 2016, nor have the Directors
recommended that any dividends be paid.
Review of operations
The loss for the consolidated entity after providing for income tax amounted to $830,649 (30 June 2015: $87,807)
Following the Company’s $4 million capital raising and listing through the reverse takeover of King Solomon Mines Limited on
18 January 2016, we have made great progress.
Funds from the raising helped accelerate our global expansion strategy and, by the end of the financial year, more than 390
companies used our services in Australia and New Zealand, United Kingdom and Europe, North America and Singapore. We
operate from offices in Sydney, London and Toronto. Our London office supports the Europe, Middle East and Africa region
and we have already secured UK- and Europe-based clients. Operations in Canada also provide a beachhead supporting US
sales.
Client growth
Since listing, we have secured more than 100 new clients, including Australian Unity, Caltex, Coca Cola Amatil, Crown
Melbourne, Dentsu Aegis Network, DFP Recruitment Agency, Department of Justice & Regulation (Victoria), the Gold Coast
2018 Commonwealth Games Corporation, HCF, Honda Australia, Inghams Australia and New Zealand, Lend Lease Bouygues,
Melbourne Health, Volkswagen Australia, Westpac New Zealand, Westpac Singapore, and The World Wide Fund for Nature.
10 / Xref Limited / Annual Report 2016
DIRECTORS’ REPORT
Significant renewals in 2016 included AECOM, AMP, Aurizon, Hays Specialist Recruitment, Fletcher Building, Justice New
South Wales, Mission Australia and Qantas, some more than doubling previous purchases. It is pleasing that our clients are
strong advocates for our services, demonstrated by our 98% account retention rate.
Our clients span 32 market sectors across all sizes and types of business. Nearly half of our business comes from enterprise
companies. Government clients represent 13% of sales, and small-to-medium size businesses and human resources agencies
each represent 12%. Special events such as the Gold Coast Commonwealth Games, the aged care sector and not-for-profit
organisations are also significant clients.
Integration with human resources technology systems
In May 2016 we completed a significant milestone, completing integration with the Oracle Taleo applicant tracking system
which supports recruitment for 6,000 of the world’s largest companies. Oracle Taleo is the most significant system in its field
and Xref’s application can now be accessed directly from its platform.
Several Xref clients, including Qantas and Westpac, are now using Xref in combination with Oracle Taleo. This capability has
opened up a new sales pipeline for Xref, leading to increased use of our platform.
Market partners represent complementary technologies across the human resources recruitment lifecycle. We have eight
integration projects underway for applicant tracking systems, industry peer partners and market partners. These all represent
channels through which Xref can participate in, and contribute to, human resource management, increasing our addressable
market.
Research and development
In March 2016 we introduced significant improvements to our portal, moving to a new www.xref.global domain. This domain
allows us to add local websites, expediting rollout as countries ‘go live’. New features include full mobile responsiveness
as well as a new investor centre and blog site. Clients benefit from increased scale, a new dashboard with more detailed
candidate information, video and analytics, and we are constantly upgrading our services.
The company continues to invest in research and development to expedite sales growth. Xref received in FY2016 an R&D
offset grant of $173,000 for the year ended 30 June 2015, and has lodged an R&D offset claim for FY2016.
Financial overview – strong sales and revenue growth
Following the raising we expanded our account sales and customer success teams to drive sales. This, together with
improvements to our platform, resulted in substantial client growth, and sales of credits for the financial year ending 30 June
2016 were $1.7 million, up 143% from $0.7 million in the previous corresponding period. This included a new record for a
month’s sales of $325,000 in May 2016.
Clients purchase Xref credits for $49.99 (or the international equivalent) and, once used, the credits are reported as revenue.
Clients’ credit use increased substantially during the year, enabling a more than three-fold increase in revenue. FY2016 revenue
was $1.3 million, up 256% from $369,000 in the previous corresponding period.
Significant changes in the state of affairs
King Solomon Mines Limited (re-named Xref Limited) acquired all the shares in Xref Pty Ltd (re-named Xref (AU) Pty Limited) on
18 January 2016 in exchange for shares and performance rights of Xref Limited. Refer to Notes to the accounts for full detail
of the transaction.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Xref Limited / Annual Report 2016 / 11
DIRECTORS’ REPORT / Continued
Matters subsequent to the end of the financial year
In August 2016 addition capital of $8 million (before costs) was raised from institutional investors.
Apart from the above, no other matter or circumstance has arisen since 30 June 2016 that has significantly affected, or may
significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of
affairs in future financial years.
Likely developments and expected results of operations
We are investing in Xref’s growth though globalisation, integration with partners and technology improvement, and the reported
loss from continuing operations was in line with management expectations. Our growth rate continues to exceed 100% year-
on-year. Xref has made considerable progress through increasing technology and sales resources to drive customer growth
while carefully allocating resources.
We believe the future of human resources technology is in open platforms, which integrate with market places, applications
and applicant tracking systems. Research and development are critical to our business. We have an experienced team who are
actively developing applications to improve the candidate journey and experience at all stages of the HR recruitment process
- for pre-screening, recruitment, candidate on-boarding and review, and off-board processes.
Having accumulated data over the past five years, we are leveraging our database to provide predictive analytics which enable
human resource directors to make data-driven decisions. We are also developing products tailored for the UK market and
managing trials for potential clients in Canada.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under New Zealand or Australian
Commonwealth or State law.
Information on directors
Name:
Title:
Lee-Martin Seymour
Chief Executive Officer
Qualifications:
None
Experience and expertise:
Lee-Martin Seymour is a co-founder of Xref. As a cloud evangelist and
professional recruiter, Mr Seymour is passionate about driving process
innovation within the recruitment and employment sector. A Fellow of the
Recruitment and Consulting Services Association (RCSA), he has more than 17
years’ experience within the industry.
Other current public directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Member of the Remuneration Committee
Interests in shares:
Interests in options:
24,038,062 ordinary shares
None
Contractual rights to shares:
25,000,000 performance rights
12 / Xref Limited / Annual Report 2016
DIRECTORS’ REPORT / Continued
Name:
Title:
Timothy Griffiths
Chief Technology Officer
Qualifications:
MBA
Experience and expertise:
Timothy Griffiths is a co-founder of Xref. Mr Griffiths, has over 20 years’
experience in technology, advising companies, including Virgin and SkyTV.
He worked for Benchmark Capital providing technical diligence for high
tech start-up investment and was co-founder of media company a2a plc,
which floated on the UK stock market. More recently Mr Griffiths was CIO
for Jcurve Solutions, an Australian cloud NetSuite ERP provider, and is the
founder of Answer42, a Sydney based cloud consultancy.
Other current public directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Member of the Audit Committee
Interests in shares:
Interests in options:
24,038,062 ordinary shares
None
Contractual rights to shares:
25,000,000 performance rights
Name:
Title:
Tim Mahony
Non-Executive Director
Qualifications:
BFinAdmin
Experience and expertise:
Timothy Mahony spent 17 years in investment banking, specialising in capital
markets and debt trading, and the last seven of those years as a director of
Fay Richwhite Australia. Mr Mahony has been involved, as investor or founder,
in a number of technology start ups, either successfully exiting the business
or growing the business to a mature growth phase.
He is a founder and director of Globalx Information, a digital information
company providing information, software and services to the legal, corporate
and spatial markets throughout Australia and the UK.
Other current public directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Member of the Audit and Remuneration Committees
Interests in shares:
Interests in options:
Contractual rights to shares:
1,650,000 ordinary shares
900,000
None
Xref Limited / Annual Report 2016 / 13
DIRECTORS’ REPORT / Continued
Name:
Title:
Nigel Heap
Non-Executive Director
Qualifications:
LLB,AMP
Experience and expertise:
Mr Nigel S. C. Heap has been UK & Ireland Managing Director and Chairman
of The Asia Pacific Business at Hays plc since 25 April 2012. Mr Heap has
been with Hays for 25 years. He served as Managing Director of Asia Pacific at
Hays plc. He joined Hays in 1988 and over the last 19 years has successfully
led the growth of the Asia-Pacific business. He has been a Non-Executive
Director of Xref Limited since 18 August 2016. Mr Heap serves as a Director
of Hays Specialist Recruitment (Australia) Pty Limited and Hays Specialist
Recruitment (Australia) Pty Limited New Zealand Branch. He has completed
INSEAD's Advanced Management Program and holds a Bachelor of Laws from
Manchester University.
Other current Public directorships:
Hays UK Ltd
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to shares:
Potential options
Name:
Title:
Qualifications:
Experience and expertise:
None
None
None
None
None
As part of Mr Heap’s appointment as a non-executive director he has
been offered 900,000 options which will be put to the 2016 AGM to ask
shareholders to approve it. If approved, the options will be issued under ASX
Listing Rule 10.
Brad Rosser
Chairman
BCom, MBA
Brad is a serial entrepreneur with interests in businesses in Australia, the UK
and the US. Businesses include assisting and funding startups through The
BSF Group, Real Estate, Fitness and Health and Online businesses. A speaker
and has published the book 'Better Stronger Faster: The Entrepreneurs Guide
to Success in Business'. Also a director of Sydney TIE, the largest Not for
Profit Entrepreneurial Organisation in the World and mentor for the ANZ
Innovyz program.
Other current public directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to shares:
None
None
None
None
None
None
Name:
Title:
Qualifications:
Special responsibilities:
Interests in shares:
Interests in options:
Simon O’Loughlin (resigned on 18 August 2016)
Former Non-Executive Chairman
BA (Acc)
Former Member of the Nomination and Remuneration Committee and the
Audit and Risk Committee
Not applicable as no longer a director
Not applicable as no longer a director
Contractual rights to shares:
Not applicable as no longer a director
14 / Xref Limited / Annual Report 2016
DIRECTORS’ REPORT / Continued
Name:
Title:
Qualifications:
Special responsibilities:
Interests in shares:
Interests in options:
Stephen McPhail (resigned on 18 January 2016)
Former Managing Director
BSc, MBA
Former Member of the Nomination and Remuneration Committee and the
Audit and Risk Committee
Not applicable as no longer a director
Not applicable as no longer a director
Contractual rights to shares:
Not applicable as no longer a director
Name:
Title:
Qualifications:
Special responsibilities:
Interests in shares:
Interests in options:
Simon Taylor (resigned on 18 January 2016)
Former Non-Executive Director
BSc, MAIG
Former Member of the Nomination and Remuneration Committee and the
Audit and Risk Committee
Not applicable as no longer a director
Not applicable as no longer a director
Contractual rights to shares:
Not applicable as no longer a director
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Company secretary
Mr Robert Waring, BEc, ACA, FCIS, ASIA, FAICD
Mr Waring has more than 40 years of experience in financial and corporate roles, including more than 25 years in company
secretarial roles for ASX-listed companies. He is a director of Oakhill Hamilton Pty Ltd, a company that provides secretarial
and corporate advisory services to a range of listed and unlisted companies. He is also the Company Secretary of ASX-listed
companies Aeris Environmental Ltd, Brain Resource Limited, Intec Ltd, Nanosonics Limited and Vectus Biosystems Limited.
Meetings of directors
The number of meetings of the Company’s Board of Directors (the Board) and of each Board committee held during the year
ended 30 June 2016, and the number of meetings attended by each director were:
Full board
Nomination and Remuneration
Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
Lee-Martin Seymour
Timothy Griffiths
Timothy Mahony
Simon O’Loughlin
Stephen McPhail
Simon Taylor
3
3
3
5
2
2
3
3
3
5
2
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
1
1
-
-
-
1
1
1
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant
committee.
Xref Limited / Annual Report 2016 / 15
DIRECTORS’ REPORT / Continued
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Companies Act 1993 New Zealand and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of
reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good reward
governance practices:
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for
its directors and executives. The performance of the consolidated entity depends on the quality of its directors and executives.
The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
The reward framework is designed to align executive reward to shareholders’ interests. The Board have considered that it
should seek to enhance shareholders’ interests by:
having economic profit as a core component of plan design
focusing on sustained growth in shareholder wealth through growth in share price, and delivering constant or
increasing return on assets as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives
Additionally, the reward framework should seek to enhance executives’ interests by:
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive Director
remuneration is separate.
16 / Xref Limited / Annual Report 2016
DIRECTORS’ REPORT / Continued
Non-executive directors remuneration
Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non-executive
directors’ fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and
Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure
non-executive directors’ fees and payments are appropriate and in line with the market. The chairman’s fees are determined
independently to the fees of other Non-Executive Directors based on comparative roles in the external market. The Chairman
is not present at any discussions relating to the determination of his own remuneration.
ASX listing rules require the aggregate Non-Executive Directors’ remuneration be determined periodically by a general meeting.
In the Prospectus dated 7th December 2015, noted on Page 19 the current maximum annual aggregate remuneration for
directors was shown as $200,000. This has not changed and a resolution will be put to the 2016 AGM to ask shareholders to
approve an annual amount in aggregate for the 2017 financial year
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has four components:
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive’s total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of
the consolidated entity and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive.
The short-term incentives (‘STI’) program is designed to align the targets of the business units with the performance hurdles of
executives. STI payments can be granted to executives based on specific annual targets and key performance indicators (‘KPI’s’)
being achieved. KPI’s include profit contribution, customer satisfaction, leadership contribution and product management.
The long-term incentives (‘LTI’) include long service leave and share-based payments. Shares are awarded to executives over
a period of three years based on long-term incentive measures. These include increase in shareholders value relative to the
entire market and the increase compared to the consolidated entity’s direct competitors.
The company’s 2015 Annual General Meeting (‘AGM’)
Because the Company is a New Zealand company it was not required to have a Remuneration Report for the year ended 30
June 2015, and accordingly a resolution was not required on this matter at the 2015 AGM. The Company did not receive any
specific feedback at the 2015 AGM regarding its remuneration practices. Because shareholders have approved the move
of domicile to Australia and because a Remuneration Report will be required for the 2017 Annual Report, with audited 2016
comparatives, a Remuneration Report has been prepared for the 2016 year and a resolution will be put to the 2016 AGM to
ask shareholders to approve it.
Xref Limited / Annual Report 2016 / 17
DIRECTORS’ REPORT / Continued
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
The key management personnel of the consolidated entity consisted of the following directors of Xref Limited:
Simon O’Loughlin – Non-Executive Chairman
Timothy Mahony – Non-Executive Director (appointed 18 January 2016)
Stephen McPhail – Managing Director (resigned 18 January 2016)*
Simon Taylor – Non-Executive Director (resigned 18 January 2016)
Lee-Martin Seymour – Managing Director & Chief Executive Officer (appointed 18 January 2016)**
Timothy Griffiths – Executive Director & Chief Technology Officer (appointed 18 January 2016)**
* Stephen McPhail since resignation from the board has continued to be paid until 30 June 2016.
** Lee-Martin Seymour and Timothy Griffiths, as directors of Xref (AU) Pty Limited have been paid since July 2015.
And the following persons:
Robert Waring – Company Secretary
James Solomons – Chief Financial Officer (appointed 11 April 2016)
Changes since the end of the reporting period:
Simon O’Loughlin resigned as a Non-Executive Chairman on 18 August 2016.
Nigel Heap was appointed as Non-Executive Director on 18 August 2016
Brad Rosser was appointed as Non-Executive Chairman on 18 August 2016
18 / Xref Limited / Annual Report 2016
DIRECTORS’ REPORT / Continued
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-based
payments
Cash
salary and
fees
$
30,000
20,833
16,450
248,807
2016
Non-Executive
Directors:
Simon O’Loughlin
(Chairman)***
Tim Mahony**
Simon Taylor*
Executive
Directors:
Lee-Martin
Seymour***
Timothy Griffiths***
248,807
Other Key
Management
Personnel:
James
Solomons****
Robert Waring
Fu La
Stephen
McPhail*****
16,962
96,173
36,000
63,000
777,032
Cash
bonus
Non-
monetary
Super-
annuation
Long
service
leave
Equity-
settled
shares
Equity-
settled
options
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
10,962
10,962
1,611
-
-
-
23,535
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
Total
$
$
15,300
21,588
45,300
42,421
12,750
29,300
-
-
259,769
259,769
-
-
-
18,573
96,173
36,000
12,750
75,750
62,388
862,955
* Represents remuneration from 1 July 2015 to 18 January 2016
** Represents remuneration from 18 January 2016 to 30 June 2016
*** Represents remuneration from 1 July 2015 to 30 June 2016
**** Represents remuneration from 11 April 2016 to 30 June 2016
***** Represents remuneration from 1 July 2015 to 30 June 2016 as both Director & Non-Director
Xref Limited / Annual Report 2016 / 19
DIRECTORS’ REPORT / Continued
Short-term benefits
Post-
employment
benefits
Cash
salary and
fees
Cash
bonus
Non-
monetary
Super-
annuation
Long-
term
benefits
Long
service
leave
Share-based
payments
Equity-
settled
shares
Equity-
settled
Options
2015
$
$
Non-Executive
Directors:
Simon
O’Loughlin
(Chairman)
Simon Taylor
Chris Castle
Fu La
Executive
Directors:
Stephen
McPhail
Other Key
Management
Personnel:
Robert Waring
-
-
-
-
22,500
22,500
8,607
28,000
41,056
25,063
147,726
-
-
$
-
-
-
-
-
-
$
-
-
-
-
$
-
-
-
-
$
-
-
13,125
14,000
$
-
-
-
1,715
Total
$
22,500
22,500
21,732
43,715
14,000
1,715
56,771
-
-
-
-
10,000
-
35,063
51,125
3,430
202,281
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
2016
2015
2016
2015
2016
2015
Fixed remuneration
At risk - STI
At risk - LTI
Non-Executive
Directors:
Simon O’Loughlin
Timothy Mahony
Simon Taylor
Executive Directors:
Lee-Martin Seymour
Timothy Griffiths
Stephen McPhail
Other Key
Management
Personnel:
James Solomons
Robert Waring
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20 / Xref Limited / Annual Report 2016
DIRECTORS’ REPORT / Continued
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Share-based compensation
Options
Lee-Martin Seymour
Managing Director and Chief Executive Officer
1 July 2015
No fixed term
Base salary for the year ending 30 June 2017 of $230,000pa, plus
superannuation, to be reviewed annually by the Nomination and
Remuneration Committee. 1 month termination notice by either party.
Discretionary bonus may be paid as per Nomination and Remuneration
Committee approval and KPI achievement. Non-solicitation and non-
compete clauses exist.
Timothy Griffiths
Executive Director and Chief Technology Officer
1 July 2015
No fixed term
Base salary for the year ending 30 June 2017 of $230,000pa, plus
superannuation, to be reviewed annually by the Nomination and
Remuneration Committee. 1 month termination notice by either party.
Discretionary bonus may be paid as per Nomination and Remuneration
Committee approval and KPI achievement. Non-solicitation and non-
compete clauses exist.
James Solomons
Chief Financial Officer
11 April 2016
No fixed term
Base salary for the year ending 30 June 2017 of $180,000pa, pro-rata for
2/3 days per week plus superannuation, to be reviewed annually by the
Nomination and Remuneration Committee. 1 month termination notice
by either party. Discretionary bonus may be paid as per Nomination and
Remuneration Committee approval and KPI achievement along with ability to
receive options in Xref Limited. Non-solicitation and non-compete clauses
exist.
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Grant date
Vesting date and
exercisable date
Expiry date
Exercise
price
Fair value per
option at grant
date
1 February 2016
1 February 2016
1 February 2019
$0.23
$0.151
Options granted carry no dividend or voting rights.
Xref Limited / Annual Report 2016 / 21
DIRECTORS’ REPORT / Continued
The number of options over ordinary shares granted to and vested by directors and other key management personnel as part
of compensation during the year ended 30 June 2016 are set out below:
Name
Simon O’Loughlin
Tim Mahony
Simon Taylor
Stephen McPhail
Number
of options
granted
during the
year 2016
Number
of options
granted
during the
year 2015
Number
of options
vested during
the year 2016
Number
of options
vested during
the year 2015
300,000
900,000
250,000
250,000
-
-
-
-
300,000
300,000
250,000
250,000
-
-
-
-
Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as
part of compensation during the year ended 30 June 2016 are set out below:
Name
Simon O’Loughlin
Tim Mahony
Simon Taylor
Stephen McPhail
Value of
options
granted
during the
year
Value of
options
exercised
during the
year
Value of options
lapsed during the
year
Remuneration
on consisting of
options for the
year
$
15,300
45,900
12,750
12,750
$
-
-
-
-
$
-
-
-
-
%
34%
51%
44%
17%
22 / Xref Limited / Annual Report 2016
DIRECTORS’ REPORT / Continued
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at the
start of the
year
Received as part
of remuneration
Additions
Disposals/
other
Balance at
the end of the
year
Ordinary shares
Non-Executive Directors:
Simon O’Loughlin
Timothy Mahony
Simon Taylor
Executive Directors:
Lee-Martin Seymour
Timothy Griffiths
Stephen McPhail
Other Key Management
Personnel:
James Solomons
Robert Waring
Associate
Fu La
Option holding
300,000
-
300,000
-
-
310,000
-
213,885
347,134
1,471,019
-
-
-
-
-
-
-
-
-
-
250,000
1,650,000
-
-
550,000
1,650,000
150,000
(250,000)
200,000
24,038,462
-
24,038,462
24,038,462
-
24,038,462
-
-
-
-
(172,000)
138,000
-
-
-
-
213,885
347,134
50,126,924
(422,000)
51,175,943
The number of options over ordinary shares in the Company held during the financial year by each director and other members
of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at the
start of the
year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
Options over ordinary shares
Stephen McPhail
Simon Taylor
Simon O’Loughlin
Tim Mahony
Fu La
16,000
250,000
-
-
-
-
16,000
32,000
250,000
300,000
900,000
-
1,700,000
-
-
-
-
-
-
-
-
-
-
-
266,000
250,000
300,000
900,000
16,000
1,732,000
Xref Limited / Annual Report 2016 / 23
DIRECTORS’ REPORT / Continued
Other transactions with key management personnel and their related parties
During the financial year;
Payments for legal services from O’Loughlins Lawyers (director related entity of Simon O’Loughlin) of $165,930 (exc GST) were
made.
Reimbursements of travel costs from Yoix Pty Limited (director related entity of Simon O’Loughlin) of $5,171 (exc GST) were
made.
Payments for IT consulting services from Answer42 (director related entity of Tim Griffiths) of $17,692 (exc GST) were made.
Payments for accounting services from Aptus Accounting & Advisory (related entity of James Solomons) of $28,500 (ex GST)
were made.
$4,000 payment of interest on convertible notes to Biatin Pty Ltd (director related entity of Timothy Mahony) was made.
Payments for office rent & reimbursement of minor costs from Bodhi Svaha Trust (director related entity of Stephen McPhail)
of $3,673 (exc GST) were made.
All transactions were made on normal commercial terms and conditions and at market rates.
This concludes the remuneration report, which has been audited.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of
the company against a liability to the extent permitted by the Companies Act 1993 New Zealand. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under Companies Act New Zealand 1993 for leave to bring proceedings on behalf of the
company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf
of the company for all or part of those proceedings.
Auditor
Crowe Horwath New Zealand continues in office in accordance with the Companies Act New Zealand 1993.
24 / Xref Limited / Annual Report 2016
Financial
Statements
Statement of comprehensive income
OPERATING ACTIVITIES
Sales - Credits Sold in Current Year
Less adjustment for Unearned Revenue
Revenue
Employee expenses
Overheads and administrative expenses
Depreciation, amortisation and impairment expenses
Notes
Group
2016
2015
Restated
$
$
1,734,426
673,202
(421,250)
(304,574)
9
1,313,176
368,628
10
11
1,912,737
477,011
2,144,376
150,770
17,310
4,389
4,074,423
632,170
Operating profit/ (loss)
(2,761,247)
(263,542)
OTHER INCOME
Other income
Profit/(loss) before income tax from continuing
activities
13
1,916,721
175,735
(844,526)
(87,807)
Income tax expense/ (credit)
14
716
-
Profit/(loss) for the year from continuing activities
(845,242)
(87,807)
DISCONTINUED OPERATIONS
Profit/ (loss) for the year from discontinued operations
8
(2,354)
-
Loss attributable to the shareholders of the Company
(847,596)
(87,807)
OTHER COMPREHENSIVE INCOME MOVEMENTS
Movements that will be reclassified to profit or loss in subsequent periods:
Exchange differences on translation of foreign operations
Total other comprehensive income movements
16,947
16,947
-
-
Total comprehensive loss for the year
(830,649)
(87,807)
26 / Xref Limited / Annual Report 2016
FINANCIAL STATEMENTS / For the Year Ended 30 June 2016
Statement of comprehensive income (continued)
EARNINGS PER SHARE
From continuing and discontinuing operations
24
Notes
Group
2016
$
2015
$
Basic (cents per share)
Diluted (cents per share)
From continuing operations
Basic (cents per share)
Diluted (cents per share)
From discontinuing operations
Basic (cents per share)
Diluted (cents per share)
24
24
(0.02)
(878.07)
(0.02)
(878.07)
(0.02)
(0.02)
(878.07)
(878.07)
0.00
0.00
0.00
0.00
These financial statements should be read in conjunction with the notes to the financial statements.
Xref Limited / Annual Report 2016 / 27
FINANCIAL STATEMENTS / For the Year Ended 30 June 2016
Statement of financial position
ASSETS
Current
Cash and cash equivalents
Trade debtors and other receivables
Prepayments
Assets of disposal group classified as held for sale
Total current assets
Non-current
Property, plant and equipment
Rental bond
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current
Trade creditors and other payables
Employee entitlements
Superannuation payable
Rent Incentives
Liabilities included in disposal group classified as held for sale
Total current liabilities
Non-current
Unearned Revenue
Rent Incentives
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issue share capital
Retained earnings
Other equity reserves
TOTAL SURPLUS / (DEFICIT) in EQUITY
Notes
2016
Group
2015
Restated
$
$
15
16
8
2,270,832
81,076
944,060
267,612
52,132
2,342
333,814
-
3,600,838
351,030
17
139,944
10,257
48,467
-
188,411
10,257
3,789,249
361,287
18
19
8
530,929
119,246
62,922
57,679
21,470
333,812
8,788
14,223
-
-
1,006,812
142,257
20
903,566
482,316
44,615
-
948,181
482,316
1,954,993
624,573
1,834,256
(263,286)
21
22
25,042,977
100
(1,110,982)
(263,386)
(22,097,739)
-
1,834,256
(263,286)
These financial statements should be read in conjunction with the notes to the financial statements.
28 / Xref Limited / Annual Report 2016
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Xref Limited / Annual Report 2016 / 29
FINANCIAL STATEMENTS / For the Year Ended 30 June 2016
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30 / Xref Limited / Annual Report 2016
FINANCIAL STATEMENTS / For the Year Ended 30 June 2016
Statement of cash flows
Notes
Cash flow from operating activities
Cash was provided from/(applied to):
Receipts from customers
Interest received
Other Income
Payments to suppliers and employees
Income Tax Paid
Net cash from/(used in) operating activities
27
Cash flow from investing activities
Cash was provided from/(applied to):
Proceeds from sale of property, plant and equipment
Proceeds from Acquisition of King Solomon Mines Limited
Ltd
Purchase of property, plant and equipment
Net cash from/(used in) investing activities
Cash flow from financing activities
Cash was provided from/(applied to):
Proceeds from issue of convertible notes
Transaction costs paid in relation to share capital issued
Dividends paid to equity holders of the parent
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Net foreign exchange differences
Less cash included in disposal group
2016
$
Group
2015
$
1,772,066
671,775
16,412
22
965
570
(3,666,643)
(577,112)
(716)
-
(1,878,859)
96,198
271
3,770,054
(146,404)
3,623,921
-
-
(7,408)
(7,408)
550,000
(51,730)
-
-
-
(12,000)
498,270
(12,000)
2,243,332
76,790
81,076
4,286
(48,101)
(5,475)
-
-
Cash and cash equivalents at end of the year
15
2,270,832
81,076
These financial statements should be read in conjunction with the notes to the financial statements.
These financial statements have been authorised for issue by the Board of Directors on 23 September 2016.
Xref Limited / Annual Report 2016 / 31
Notes to the
Financial Statements
1. Reporting entity
XREF Limited previously named King Solomon Mines (‘the Company’) is a limited liability company incorporated on 28
January 2003 and domiciled in New Zealand. The address of its registered office is 242 Marine Parade, Otaki Beach, Otaki,
5512.
The Company and its subsidiary (together ‘the Group’) were incorporated with the purpose of exploring and developing
gold, copper and other metallic deposits in China and are profit oriented entities.
The Company ceased exploration activities in March 2013 as the Group and the Company were no longer deemed to be
a going concern. Since that time, the Group sought to rationalise core assets and raise further share capital to maximise
shareholder value.
The Directors actively assessed options available in and out of China to maximise shareholder value and on 18th January
2016 acquired Xref Pty Ltd. after which the company changed its name to Xref Ltd.
Xref Pty Ltd is a human resources technology company that automates the candidate reference process for employers.
The company was in effect a shell company acquiring an operating company at which time control passed from the
company to the former shareholders of Xref Pty Ltd. The accounting policies to be applied in this situation require the
financial statements to be presented as if Xref Pty Ltd had acquired the assets and liabilities of King Solomon Mines Ltd and
the financial statements show Xref Pty Ltd comparatives.
These consolidated financial statements were authorised for issue by the Board of Directors on the date stated on page 32.
2. Basis of preparation
The consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Practice in
New Zealand. The consolidated financial statements of the Group comply with New Zealand equivalents to International
Financial Reporting Standards (“NZ IFRS”,) interpretations and other applicable Financial Reporting Standards. They are in
compliance with International Financial Reporting Standards. The consolidated financial statements have been prepared in
accordance with the requirements of the Companies Act 1993 and Financial Reporting Act 2013 and have been prepared
under the historical cost convention.
Xref Limited is a company registered under the Companies Act 1993 and is an FMC reporting entity under Part 7 of the
Financial Markets Conduct Act 2013. The financial statements of the Group have been prepared in accordance with the
requirements of Part 7 of the Financial Markets Conduct Act 2013 and the ASX Listing Rules. In accordance with the
Financial Markets Conduct Act 2013 because group financial statements are prepared and presented for Xref Limited and its
subsidiaries, separate financial statements for Xref Limited are no longer required to be prepared and presented.
a. Basis of measurement
The financial statements have been prepared on a historical cost basis, except for assets and liabilities as disclosed below
that have been measured at fair value.
The accrual basis of accounting has been used unless otherwise stated and the financial statements have been prepared on
a going concern basis.
32 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
b. Comparatives
The comparative financial period is 12 months. Comparatives have been reclassified from that reported in the 30 June
2015 financial statements where appropriate to ensure consistency with the presentation of the current year’s position and
performance.
3. Summary of significant accounting policies
The accounting policies of the Group been applied consistently to all years presented in these financial statements.
The significant accounting policies used in the preparation of these financial statements are summarised below:
a. Basis of consolidation
The Group financial statements consolidate the financial statements of the Parent and all entities over which the Parent
is deemed to have controlling relationship (defined as “subsidiaries”). An entity is defined as a subsidiary when the Group
is exposed, or has rights, to variable returns from its relationship with the entity and has the ability to affect those returns
through its power over the entity.
When the Group has less than a majority of the voting power or similar rights of another entity, the Group considers all
relevant facts and circumstances in assessing whether it has power over the other entity.
The Group re-assesses whether or not it controls another entity if facts and circumstances indicate that there are changes
in one or more of the three elements of control. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
The Chinese subsidiary classified for sale has a 31 December balance date. However all other subsidiaries have a 30 June
balance date and consistent accounting policies are applied.
The consolidation of the Parent and subsidiary entities involves adding together like terms of assets, liabilities, income and
expenses on a line-by-line basis. All significant intra-group balances are eliminated on consolidation of Group financial
position, performance and cash flows.
A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity
transaction - that is, as transactions with owners in their capacity as owners, recorded in the statement of movements in
equity.
If the Group loses control over a subsidiary, it:
derecognises the assets (including goodwill) and liabilities of the subsidiary;
derecognises the carrying amount of any non-controlling interest;
derecognises the cumulative carrying amount of foreign currency translation; differences recorded in reserves;
recognises the fair value of the consideration received;
recognises the fair value of any investment retained;
recognises any surplus or deficit in profit or loss; and
reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss,
or retained earnings as appropriate.
Interests in subsidiaries are held at cost less impairment in the Parent.
Xref Limited / Annual Report 2016 / 33
NOTES TO THE FINANCIAL STATEMENTS / continued
b. Foreign currency translation
Functional and presentation currency
The Group financial statements are presented in Australian dollars (AUDs), which is also the functional currency of the
Parent.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the Parent, using exchange rates prevailing at
the dates of the transactions (i.e. the spot exchange rate). Foreign exchange gains and losses resulting from the settlement
of such transactions and from measurement of monetary items denominated in foreign currency at year-end exchange
rates are recognised in the reported profit or loss.
Non-monetary items measured at historical cost are not re-translated at each year-end, instead they are only translated
once using the exchange rate at the transaction date. Non-monetary items measured at fair value are translated using the
exchange rates at the date when the year-end fair value was determined.
The net balance of foreign exchange gains and losses that relate to monetary items (such as borrowings, cash and cash
equivalents) are presented in the Statement of Comprehensive Income within “finance income” or “finance costs”. All other
foreign exchange gains and losses are presented in the Statement of Comprehensive Income within “Other gains/(losses)”.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit and
loss are recognised in the Statement of Comprehensive Income as part of the fair value gain or loss. Translation differences
on non-monetary financial assets, such as equities classified as available for sale, are included in fair value movements
disclosed within other comprehensive income.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other
than AUDs are translated into AUDs upon consolidation.
The results and financial position of subsidiaries are translated into the presentation currency as follows:
i. assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that
statement of financial position;
ii. income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
iii. all resulting exchange differences are recognised in other comprehensive income.
The assets and liabilities of foreign operations, including any goodwill, are translated to AUDs at exchange rates at the
reporting date. The income and expenses of foreign operations, are translated to AUDs at exchange rates at the dates of the
transactions.
Foreign currency differences are recognised on other comprehensive income, and presented in the foreign currency
translation reserve within equity.
When a foreign operation is disposed of such that control is lost, the cumulative amount of the translation reserve related to
the foreign operation is reclassified to the reported surplus or deficit as part of the gain or loss on disposal.
c. Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held on call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts.
34 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.
d. Trade debtors and other receivables
Trade debtors are amounts due from customers for goods sold and services performed in the ordinary course of business.
If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current
assets.
Trade debtors and other receivables are measured initially at fair value and subsequently measured at amortised cost using
the effective interest method, less provision for any impairment.
An allowance for impairment is established where there is objective evidence the Group will not be able to collect all
amounts due according to the original terms of the receivable.
e. Trade creditors and other payables
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Creditors are classified as current liabilities if payment is due within one year or less. If not, they are presented as
non-current liabilities.
Trade creditors and other payables are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method.
f. Assets available for sale
When the Group intends to sell non-current assets or groups of assets, and if the sale is highly probable to be carried out
within 12 months, the asset or group of assets is classified as “held for sale” and presented as such in the statement of
financial position.
Non-current assets classified as “held for sale” are measured at the lower of their carrying amounts, immediately prior to
their classification as held for sale and their fair value less costs to sell. However, some “held for sale” assets such as financial
assets or deferred tax assets continue to be measured in accordance with the Group’s accounting policy for those assets.
No assets classified as “held for sale” are subject to depreciation or amortisation subsequent to their classification as “held
for sale”.
g. Property, plant and equipment
Except for land and buildings, items of property, plant and equipment are measured at cost, less accumulated depreciation
and any impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Additions and subsequent costs
Subsequent costs and the cost replacing part of an item of property, plant and equipment is recognised as an asset if, and
only if, it is probable that future economic benefits or service potential will flow to the Group and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognised.
In most instances, an item of property, plant and equipment is recognised at its cost. Where an asset is acquired at no cost,
or for a nominal cost, it is recognised at fair value at the acquisition date.
All repairs and maintenance expenditure is charged to profit or loss in the year in which the expense is incurred.
Disposals
When an item of property, plant or equipment is disposed of, the gain or loss recognised in the profit or loss is calculated as
the difference between the net sale proceeds and the carrying amount of the asset.
Xref Limited / Annual Report 2016 / 35
NOTES TO THE FINANCIAL STATEMENTS / continued
Depreciation
Depreciation is charged on a straight value (SL) basis on all property, plant and equipment over the estimated useful life of the
asset. Depreciation is charged to profit or loss and disclosed within “overheads and administrative” expenses. The following
depreciation rates have been applied at each class of property, plant and equipment:
Computer Equipment
Office Equipment
Office Furniture
Office Fitout
3-5 years
3-12 years
3-12 years
3-6 years
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining life of the
improvements, whichever is shorter.
The residual value and useful life of property, plant and equipment is reassessed annually.
h. Intangible assets
Internally developed intangible assets
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is
recognised in the reported profit or loss when incurred.
Development activities include a plan or design for the production of new or substantially improved products. Development
expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and
commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to
complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour
and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure
is recognised in the reported surplus and deficit when incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and any impairment losses.
i. Leased assets
Leases where the Group assumes substantially all the risks and rewards incidental to ownership of the leased assets, are
classified as finance leases. All other leases are classified as operating leases.
Upon initial recognition finance leased assets are measured at an amount equal to the lower of its fair value and the
present value of minimum leased payments at inception of the lease. A matching liability is recognised for minimum lease
payment obligations excluding the effective interest expense. Subsequent to initial recognition, the asset is accounted for in
accordance with the accounting policy applicable to the asset.
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease.
Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Associated
costs, such as maintenance and insurance, are expensed as incurred.
j.
Impairment of non-financial assets
At each reporting date, the carrying amounts of tangible and intangible assets are reviewed to determine whether there is
any indication of impairment. If any such indication exists for an asset, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss.
Goodwill and other intangible assets with indefinite useful life are tested for impairment annually.
An impairment loss is recognised whenever the carrying amount of an asset exceeds is recoverable amount. Impairment
losses directly reduce the carrying amount of assets and are recognised in the reported profit or loss.
36 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
The estimated recoverable amount of an asset is the greater of their fair value less costs to sell and value in use. Value in
use is determined by estimating future cash flows from the use and ultimate disposal of the asset and discounting to their
present value using a pre-tax discount rate that reflects current market rates and risks specific to the asset. For an asset that
does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to
which the asset belongs.
An impairment loss in respect of goodwill is not reversed. Other impairment losses are reversed when there is a change in
the estimates used to determine the recoverable amount. An impairment loss on property carried at fair value is reversed
through the relevant reserve. All other impairment losses are reversed through profit or loss.
Any reversal of impairments previously recognised is limited so that the carrying amount of the asset does not exceed
its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years.
k. Financial instruments
A financial instruments is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument in another entity.
Financial instruments are comprised of trade debtors and other receivables, cash and cash equivalents, other financial assets,
trade creditors and other payables, borrowings, other financial liabilities and derivative financial instruments.
Initial recognition and measurement
Financial assets and financial liabilities are recognised initially at fair value plus transaction costs attributable to the
acquisition, except for those carried at fair value through profit or loss, which are measured at fair value.
Financial assets and financial liabilities are recognised when the Parent and Group becomes a party to the contractual
provisions of the financial instrument.
Derecognition of financial instruments
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or if the
Group transfers the financial asset to another party without retaining control or substantial all risks and rewards of the asset.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Subsequent measurement of financial assets
The subsequent measurement of financial assets depends on their classification, which is primarily determined by the purpose
for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition
into one of four categories defined below, and re-evaluates this designation at each reporting date.
All financial assets except for those classified as fair value through profit or loss are subject to review for impairment at least
at each reporting date. Different criteria to determine impairment are applied to each category of financial assets, which are
described below.
The classification of financial instruments into one of the four categories below, determines the basis for subsequent
measurement and the whether any resulting movements in value are recognised in the reported profit/ loss or other
comprehensive income.
Xref Limited / Annual Report 2016 / 37
NOTES TO THE FINANCIAL STATEMENTS / continued
i. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. After initial recognition these are measured at amortised cost using the effective interest method, less
provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash
equivalents, trade and most other receivables fall into this category of financial instruments.
Individually significant receivables are considered for impairment when they are past due or when other objective evidence
is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are
reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and
other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default
rates for each identified group.
ii. Financial assets at fair value through profit and loss
Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or that
meet certain conditions and are designated at fair value through profit or loss upon initial recognition. All derivative financial
instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge
accounting requirements apply.
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of non-
derivative financial instruments are determined by reference to active market transactions or using a valuation technique
where no active market exists.
iii. Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity
other than loans and receivables. Investments are classified as held-to-maturity if the Group have the intention and ability
to hold them until maturity. The Group currently hold listed bonds designated into this category.
Held-to-maturity investments are measured subsequently at amortised cost using the effective interest method. If there
is objective evidence that the investment is impaired, determined by reference to external credit ratings, the financial asset
is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment,
including impairment losses, are recognised in profit or loss.
iv. Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not
qualify for inclusion in any of the other categories of financial assets. The Group’s available-for-sale financial assets include
listed securities and debentures, and certain other equity investments.
Equity investments are measured at cost less any impairment charges, where the fair value cannot currently be estimated
reliably.
All other available-for-sale financial assets are measured at fair value. Gains and losses are recognised in other
comprehensive income and reported within the “available-for-sale revaluation reserve” within equity, except for impairment
losses which are recognised in profit or loss.
When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognised in other
comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment
within other comprehensive income. Any associated interest income or dividends are recognised in profit or loss within
“finance income”.
38 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
Available-for-sale financial instruments are reviewed at each reporting date for objective evidence that the investment or
group investment is impaired. Objective evidence would include a significant or prolonged decline in the fair value of the
investment below its cost.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement
of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is
an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
l. Provisions
A provision is recognised for a liability when the settlement amount or timing is uncertain; when there is a present legal or
constructive obligation as a result of a past event; it is probable that expenditures will be required to settle the obligation;
and a reliable estimate of the potential settlement can be made. Provisions are not recognised for future operating losses.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are
lower that the unavoidable cost of meeting its obligation under the contract.
Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and
implemented, or management has at least announced the plan’s main features to those affected by it.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable
evidence available at the reporting date, including the risks and uncertainties associated with the present obligation.
Provisions are discounted to their present values, where the time value of money is material. The increase in the provision
due to the passage of time is recognised as an interest expense.
All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
m. Employee entitlements
Short- term employee benefits
Employee benefits, previously earned from past services, that the Group expect to be settled within 12 months of reporting
date are measured based on accrued entitlements at current rate of pays.
These include salaries and wages accrued up to the reporting date and annual leave earned, but not yet taken at the
reporting date.
The Group recognises a liability and an expense for bonuses where they are contractually obliged or where there is a past
practice that has created a constructive obligation.
Termination benefits
Termination benefits are recognised as an expense when the Group is committed without realistic possibility of withdrawal,
to terminate employment, or to provide termination benefits as a result of an offer made to encourage voluntary
redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer
of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated
reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to their present value.
Long-term benefits
The Group’s net obligation is respect of long service leave is the amount of future benefit that employees have earned in
return for their services in the current and prior years. The obligation is calculated using the projected unit credit method
and is discounted to its present value. Any actuarial gains and losses are recognised in profit or loss in the year in which they
arise. No long service leave has been recognised as no employee has been with the company for over 3 years.
Xref Limited / Annual Report 2016 / 39
NOTES TO THE FINANCIAL STATEMENTS / continued
Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received
in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting
conditions (for example, profitability). Non-market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. At each reporting date, the entity revises its estimates of the number of
options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the
statements of comprehensive income, and a corresponding adjustment to equity over the remaining vesting period. If the
options lapse or expire, the accumulated balance will be reclassified to retained earnings.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) when
the options are exercised.
n. Revenue
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Group and revenue can
be reliably measured. Revenue is measured at the fair value of consideration received, excluding GST, rebates, and trade
discounts.
The Group assesses its revenue arrangements against specific criteria to determine if it is acting as the principal or agent
in a revenue transaction. In an agency relationship only the portion of revenue earned on the Group’s own account is
recognised as gross revenue in the Statement of Comprehensive Income.
The Parent often enters into sales transactions involving a range of products and services (multiple components). The Group
applies the revenue recognition criteria set out below to each separately identifiable component of the sales transaction
in order to reflect the substance of the transaction. The consideration received from these transactions is allocated to the
separately identifiable component by taking into account the relative fair value of each component.
The following specific recognition criteria must be met before revenue is recognised:
Rendering of services
Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction
at the reporting date. The stage of completion is assessed by reference to surveys of work performed. Under this method,
revenue is recognised in the accounting periods in which the services are provided.
Interest income
Interest income is recognised as it accrues, using the effective interest method.
o. Finance costs
Finance costs recorded in the Statement of Comprehensive Income comprise the interest expenses charged on borrowings
and the unwinding of discounts used to measure the fair value of provisions.
p. Profit and loss from discontinued activities
A discontinued operation is a component of the entity that either has been disposed of, or is classified as held for sale, and:
represents a separate major line of business or geographical area of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business; or geographical area of
operations; or
is a subsidiary acquired exclusively with a view to resale.
40 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
The disclosures for discontinued operations in the prior year relate to all operations that have been discontinued by the
reporting date for the latest year presented. Where operations previously presented as discontinued are now regarded as
continuing operations, prior year disclosures are correspondingly re-presented.
q. Income tax
The income tax expense recognised in profit or loss comprises the sum of deferred tax movements and current tax not
recognised in other comprehensive income or directly in equity.
Current income taxes
Current tax is the amount of income tax payable based on the taxable surplus for the current year, plus any adjustment to
income tax payable in respect of prior years. Current tax is calculated using tax rates (and tax laws) that have been enacted
or substantially enacted at the reporting date.
Deferred tax
Deferred tax is the amount of income tax payable or recoverable in future years in respect of temporary differences and
unused tax losses (if any). Temporary differences are differences between the carrying amount of asset and liabilities in the
financial statements and the corresponding tax bases used in the consumption of taxable surpluses.
Deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability, unless
the related transaction is a business combination or affects the tax or accounting profit. Deferred tax on temporary
differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary
differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.
Deferred tax assets are recognised to the extent that it is probable that taxable surpluses will be available in future years,
against which the deductible temporary differences or tax losses can be utilised.
Deferred tax is measured at the tax rates that are expected to apply when the asset is realised or the liability settled, based on
tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. The measurement of deferred
tax reflects the tax consequences that would follow from the manner in which the Group expects to recover the carrying
amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and
liabilities from the same taxation authority.
Changes in deferred tax assets or liabilities are recognised as a component of income tax in profit or loss, except where they
relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred
tax is also recognised in other comprehensive income or equity, respectively.
r. Goods and Services Tax (GST)
All amounts in these financial statements are shown exclusive of GST, except for receivables and payables that are stated
inclusive of GST.
The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) or tax offices in other
jurisdictions is included as part of receivables and / or payables in the Statement of Financial Position. GST balances from
different countries are not offset.
s. Share capital
Share capital represents the consideration received for shares that have been issued. All transaction costs associated with
the issuing of shares are recognised as a reduction in equity, net of any related income tax benefits.
Xref Limited / Annual Report 2016 / 41
NOTES TO THE FINANCIAL STATEMENTS / continued
Convertible preference shares
Convertible preference shares are separated into liability and equity components based on the terms of
the contract.
On issuance of the convertible preference shares, the fair value of the liability component is determined using
a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability
measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption.
The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity.
Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the
conversion option is not re-measured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the convertible preference
shares based on the allocation of proceeds to the liability and equity components when the instruments are
initially recognised.
t. Dividend distribution
Dividend distributions to the parent’s shareholders are recognised as a liability in the Group’s financial statements in the
period in which the dividends are approved by the Parent Directors.
u. Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the Parent by the weighted average number of ordinary shares
outstanding during the year, adjusted for own shares held.
Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary shareholders outstanding, adjusted for own shares held, for the effects of all dilutive
potential ordinary shares, which comprise convertible notes and share options granted to employees.
v. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is ultimately responsible for strategic decision, approving the
allocation of resources and assessing the performance of the operating segments, has been identified as the Board of
Directors.
w. Going Concern
Notwithstanding the Group incurred a loss after tax for the year of $894,287 (2015: $87,807), the consolidated financial
statements have been prepared on a going concern basis as the Group raised a $8 million through a share placement in
August 2016, which is sufficient for the Group to support its operating activities and enable the Group to pay its debts when
they fall due in the next 12 months and the foreseeable future. As such the consolidated financial statements have been
prepared on the going concern basis.
42 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
4. Changes to accounting policies and disclosures
The accounting policies set out in these financial statements are consistent for all periods presented. The Group did not
adopt any new accounting standards, interpretation or amendments.
New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning
after 1 January 2015, and have not been applied in preparing these consolidated financial statements. These will be applied
when they become mandatory. Significant standards include:
NZ IFRS 9 Financial Instruments is effective for annual periods beginning on or after 1 January 2018. NZ IFRS 9 addresses
the classification, measurement and recognition of financial assets and financial liabilities and relaxes the current NZ IAS 39
requirements for hedge accounting.
NZ IFRS 16 Leases is effective for annual periods beginning on or after 1 January 2019. NZ IFRS 16 sets out the principles
for the recognition, measurement, presentation and disclosure of leases This standard will fundamentally change the
accounting treatment of leases by lessees. The current dual accounting model for lessees, which distinguishes between on
balance sheet finance leases and off balance sheet operating leases will no longer apply. Instead there will be a single, on
balance sheet model for all leases which I similar to current finance lease accounting.
NZ IFRS 15 Revenue from Contracts with Customers is effective for annual periods beginning on or after 1 January 2018.
It has an objective of a single revenue recognition model that applies to revenue from contracts with customers in all
industries.
The Group is in the process of assessing the impact of the change in standards on the consolidated financial statements.
5. Significant accounting judgements, estimates and assumptions
The following are significant management judgements in applying the accounting policies of the Group that have a
significant effect on the financial statements:
Impairment
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds
its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from
each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows.
In the process of measuring expected future cash flows management makes assumptions about future operating results.
These assumptions relate to future events and circumstances.
Internally generated software and research costs
Management monitors progress of internal research and development projects by using a project management system.
Significant judgement is required in distinguishing research from the development phase.
To distinguish any research-type project phase from the development phase, it is the Group’s accounting policy to require a
detailed forecast of sales or cost savings expected to be generated by the intangible asset. The forecast is incorporated into
the Group’s overall budget forecast as the capitalisation of development costs commences. This ensures that managerial
accounting, impairment testing procedures and accounting for internally-generated intangible assets are based on the same
data.
Xref Limited / Annual Report 2016 / 43
NOTES TO THE FINANCIAL STATEMENTS / continued
Fair value measurement of financial instruments
When the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be
measured based on quoted price in active markets, the fair value is measured using valuation techniques including the
discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this
is not feasible, a degree of judgement is required in establishing fair values. Changes in assumptions about these factors
could affect the reported fair value of financial instruments.
Deferred tax assets
The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the
Group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific
limits to the use of any unused tax losses or credits. If a positive forecast of taxable income indicates the probable use of
a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in
full.
Capitalisation or expensing of development costs
Management has determined that for the 2016 financial year that no expenditure be capitalised as an asset. The basis for this
decision is that over the past 5 years there has been significant development of the platform and that the current platform is
completely different to that which existed 5 years. The system that is developed is not a standalone asset and is constantly
evolving & the whole codebase and infrastructure regularly changes to keep up with technological advances.
Research and Development Refundable Tax Offset
The Group has identified costs including hosting fees, market research, external contractors, system testing and
remuneration which it has identified as research and development costs. The Research and Development tax refund is
calculated as 45% of the total figure.
Share based payment valuation including options, performance rights and consideration shares issued for the
acquisition of Xref Pty Ltd.
The Group commissioned reports supporting the prospectus used to raise the $4 million which gave valuations for
consideration shares, performance rights and options issued as part of the acquisition process. These were used as a basis
for crtitical discussion before figures were adopted.
Valuation of Chinese Assets subject to sale
The assets property, plant and equipment and exploration and evaluation assets have been reviewed for impairment based
on historical experience and other factors, including estimations of market transactions that are believed to be reasonable
under the circumstances.
These asset values have then been reduced prior to acquisition based on an estimation of fair value less costs to sell in line
with the sale and purchase agreement consideration for Inner Mongolia Plate Mining Co Limited of RMB 10 (equivalent to
AU$2).
44 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
6. Group information
The consolidated financial statements of the Group include:
Name
Parent
Xref Limited
Subsidiaries
Principal activity
Country of
incorporation
Group % equity
interest
2016
2015
Candidate Referencing
New Zealand
100%
0%
Xref (AU) Pty Limited
Candidate Referencing
Australia
100%
100%
Xref (UK) Limited
Xref Referencing
(CA) Limited
Candidate Referencing
United Kingdom
100%
Candidate Referencing
Canada
100%
Inner Mongolia Plate Mining Co Limited
Mineral exploration and
development
China
90%
0%
0%
0%
Xref Pty Limited changed its name to Xref (AU) Pty Limited after the acquisition of King Solomon MInes Limited to reduce
any perceived confusion over names.
On 8 March 2006, King Solomon Mines Limited (now renamed as Xref Limited) and Inner Mongolia Ao Meng Xin Economic
and Trade Co. Limited signed an agreement to form Inner Mongolia Plate Mining Co Limited, a Sino-foreign equity joint
venture of which King Solomon Mines Limited owns 90% and Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited
holds 10% in trust for King Solomon Mines Limited due to Chinese regulatory requirements.
As Xref Limited effectively owns 100% of this subsidiary and retains all the risks and rewards of ownership, the Company has
not accounted for any non-controlling interest.
a.
Investments in subsidiaries
All investments in subsidiaries are carried at cost and eliminated through consolidation in the Group.
b. Acquisition of subsidiary - 2016
On 18 January 2016, the Parent acquired 100% of the shares of Xref Pty Limited (the “subsidiary”) later renamed Xref (AU) Pty
Limited, an unlisted company in Australia providing candidate referencing software. However for accounting presentation
purposes, this is treated as reverse acquisition of assets by Xref Pty Limited.
King Solomon Mines Limited (later renamed Xref Limited) acquired shares in Xref Pty Limited to maximise value for its
shareholders as its operations in China were on hold. Xref Pty Limited sought an opportunity to expand delivery of its
candidate referencing system.
Xref Limited / Annual Report 2016 / 45
NOTES TO THE FINANCIAL STATEMENTS / continued
Fair value of consideration paid for controlling interest in subsidiary
Shares
Performance rights
Total consideration paid
Identifiable assets acquired and liabilities assumed
Fixed Assets
Assets classified as held for sale
Trade and other receivables
Xref Pty Limited Convertible notes
Cash and cash equivalents
Total assets
Trade creditors and other payables
Liabilities classified as held for sale
Accounts payable and accruals
Total liabilities
Net identifiable assets and liabilities acquired at fair value
Goodwill arising on acquisition
Profit on Acquisition
Cash consideration received
Cash and cash equivalents acquired from subsidiary
Acquisition costs charged to expenses
Net cash paid relating to acquisition of subsidiary
2016
$
2,525,000
433,333
2,958,333
864
333,814
82,579
572,000
3,764,579
4,753,836
333,812
43,831
377,643
4,376,193
-
1,417,860
2016
$
3,770,054
51,730
3,718,324
Cash and cash equivalents acquired included $5,475 held in the company Inner Mongolia Plate Mining Co Limited and
classified as held for sale.
46 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
7. Segment reporting
There is only one operating segment (candidate referencing) for the year ended 30 June 2016. The disclosures on the face
of the statement of comprehensive income to operating loss and the statement of financial position (excuding the items
designated for sale) represent the Group’s one business segment.
Geographical information
Revenue from external customers
Australia
United Kingdom
Total operating revenue
Non-current operating assets
Australia
Canada
United Kingdom
Total Non-current operating assets
Group
2016
$
2015
$
1,304,475
368,626
8,701
-
1,313,176
368,626
147,960
10,257
7,521
32,930
-
-
188,411
10,257
The information above is based on the locations of the customers.
8. Non-current assets held for sale and discontinued operations
The assets and liabilities related to Inner Mongolia Plate Mining Co Limited have been presented as held for sale following
the acquisition by Xref Pty Limited.
a. Cash flows associated with discontinued operations:
Operating cash flows
Total cash flows from discontinued operations
Group
2016
$
(2,297)
(2,297)
2015
$
-
-
Xref Limited / Annual Report 2016 / 47
NOTES TO THE FINANCIAL STATEMENTS / continued
b. Net assets of disposal group classified as held for sale
Assets
Exploration and evaluation assets
Other assets
Total assets
Liabilities
Trade creditors and other payables
Total liabilities
Net assets of disposal group
Group
2016
$
240,000
93,814
333,814
333,812
333,812
2
2015
$
-
-
-
-
-
-
The assets and liabilities of the discontinued operations are classified as held-for-sale and were written down to their fair
value.
The measurement of fair value has been determined by using observable inputs, being the selling price agreed between
the buyer and the company and is therefore within level 2 of the fair value hierarchy. The buyer is a related party of the
company. The disposal has not been completed.
c. Net profit of disposal group classified as held for sale
Expenses
Profit/ (loss) for the year from discontinued operations
9. Revenue
Rendering of services
Total revenue
Group
2016
$
(2,354)
(2,354)
2015
$
-
-
Group
2016
$
2015
$
1,313,176
368,628
1,313,176
368,628
48 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
10. Expenses
The following expenses were expensed in the operating profit/(loss) for the year:
Audit fees
Accounting
Directors Fees
Legal Fees
Marketing expenses
Other Consultants
Share Option Expense
Administration expense
Foreign exchange loss
Operating lease payments
Auditors remuneration
Fees charged by Audit Firm:
Financial statement audit
Total fees paid to audit firm
11. Depreciation, amortisation and impairment expenses
Depreciation of property, plant and equipment
Total
12. Research and development costs
Research and development costs expensed
Total research and development costs for the year
Group
2016
$
69,636
157,559
2015
$
-
-
91,298
11,333
172,028
277,437
410,162
21,588
-
-
-
-
623,846
139,437
48,101
272,722
-
-
2,144,376
150,770
69,636
69,636
-
-
Group
2016
2015
$
$
17,310
4,389
17,310
4,389
Group
2016
$
2015
$
1,072,058
385,091
1,072,058
385,091
The Parent and Group research and development projects have focused on cloud-based solutions for candidate
recruitment.
Xref Limited / Annual Report 2016 / 49
NOTES TO THE FINANCIAL STATEMENTS / continued
13. Other income
Profit on Acquisition
Research & Development - Refundable Tax Offset
Interest Received
Other Income
Total
14. Income tax
Group
2016
$
1,417,860
2015
Restated
$
-
482,426
173,291
16,413
22
965
1,479
1,916,721
175,735
The company is moving domicile from New Zealand to Australia and selling the Chinese subsidiary, the company does not
recognise a potential tax loss in these countries. However Xref Limited has operating subsidiaries in Australia, the UK and
Canada which are expected to accumulate tax losses prior to returning a profit.
The company has recognised income tax of $716 being resident withholding tax on interest earned in Australia by Xref
Limited and which can not be claimed.
Group
2016
$
716
716
2015
$
-
-
(846,880)
(87,807)
(254,064)
(26,342)
417,505
(163,441)
716
716
848
25,494
-
-
a. Components of income tax expense
Current year tax expense
Income tax profit and loss
b. Reconciliation of effective tax rate
Profit/(loss) before income tax
Income tax using Company tax rates @30%
(2015: 30%)
Expected income tax expense (deferred tax
asset)
Adjustments:
Deferred tax asset not recognised
Permanent differences
Interest RWT unable to claimed
Current year income tax expense
50 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
c. Calculation of Potential Tax Asset
2015
Losses BF
Current year loss
Accumulated Losses
Permanent Tax
Difference
Timing Differences
Taxable Loss CF
Australia
UK
Canada
NZ
Total
$
(175,579)
(87,807)
(263,386)
173,291
87,268
(2,827)
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
(175,579)
(87,807)
(263,386)
173,291
-
(90,095)
Tax Rates
30%
20%
27%
28%
Calculated Deferred Tax
Asset
Tax Expense
Potential Deferred Tax Asset
2016
Losses BF
Current year loss
Accumulated Losses
Permanent Tax
Difference
Timing Differences
(848)
-
(848)
(263,386)
-
-
-
-
-
-
-
-
(333,250)
(363,246)
(596,636)
(363,246)
(98,298)
(98,298)
-
-
-
(848)
-
(848)
-
(263,386)
(52,802)
(847,596)
(52,802)
(1,110,982)
(740,555)
274,501
-
-
-
-
55,359
(685,196)
-
274,501
Taxable Loss CF
(1,062,690)
(363,246)
(98,298)
2,557
(1,521,677)
Tax Rates
30%
20%
27%
28%
Calculated Deferred Tax
Asset
(318,807)
(72,649)
(26,049)
716
(416,789)
Tax Expense
-
-
-
(716)
(716)
Potential Deferred Tax Asset
(318,807)
(72,649)
(26,049)
(0)
(417,505)
Xref Limited / Annual Report 2016 / 51
NOTES TO THE FINANCIAL STATEMENTS / continued
d. Income tax payable/ (receivable)
Provisional tax and RWT paid
Closing balance
e. NZ Imputation credits
Closing balance
f. Deferred tax assets and liabilities
Group
2016
$
716
716
Group
2016
$
2015
$
-
-
2015
$
15,948
-
The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the
Group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific
limits to the use of any unused tax losses or credits. If a positive forecast of taxable income indicates the probable use of a
deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full.
The company has not yet raised a deferred tax entry as the company is not certain whether the tax losses carried forward
can be utilised in the foreseeable future.
15. Cash and cash equivalents
Cash at bank and in hand
Call deposits
Bank overdrafts
Total cash and cash equivalents
Group
2016
$
2015
$
2,200,335
81,148
70,507
(10)
-
(72)
2,270,832
81,076
The carrying amount of cash and cash equivalents approximates their fair value.
The Parent has arranged a legal right of set off between its bank trading account, call deposit accounts, and its bank
overdraft. Bank overdrafts are repayable on demand and form an integral part of an entity’s cash management. Accordingly,
this balance have been netted in the 2016 Statement of Financial Position.
Cash at bank earns interest at floating rates on daily deposit balances.
Term deposits are for a period of 3 years and serve as security for leased premises maturing at renewal dates. Interest is paid
annually.
52 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
16. Trade debtors and other receivables
Trade debtors
Related party receivables
Research and development incentive grant
Other receivables
Total
Group
2016
$
220,114
25,995
2015
Restated
$
83,949
5,626
655,717
173,290
42,234
4,747
944,060
267,612
Trade debtors and other receivables are non-interest bearing and receipt is normally on 30 days terms. Therefore the
carrying value of trade debtors and other receivables approximates its fair value.
All receivables are subject to credit risk exposure.
The maximum exposure to credit risk at the reporting date is the carrying amount of trade debtors and other receivables as
disclosed above. The Group does not hold any collateral as security.
As at 30 June 2016, the ageing analysis of trade receivables is detailed as follows:
Group
2016
2015
Gross
Impairment
Net
Gross
Impairment
Net
0- 30 days (not past due)
152,309
-
152,309
57,202
-
57,202
31 - 60 days
61 - 90 days
Greater than 90 days
Total trade debtors
67,651
154
-
220,114
-
-
-
-
67,651
26,747
154
-
-
-
220,114
83,949
-
-
-
-
26,747
-
-
83,949
The Group’s management considers that all financial assets that are not impaired or past due for each of the reporting
dates under review are of good credit quality. None of the Group’s financial assets are secured by collateral or other credit
enhancements.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade
and other receivables. The main components of this allowance are a specific loss component that relates to individually
significant exposures, and a collective loss component established for groups of similar assets in respect of losses that
have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment
statistics for similar financial assets.
There was no impairment as at 30 June 2016 (2015: No impairment recognised).
Xref Limited / Annual Report 2016 / 53
NOTES TO THE FINANCIAL STATEMENTS / continued
17. Property, plant and equipment
Movements for each class of property, plant and equipment are as follows:
Group 2016
Computer
Equipment
Office
Equipment
Office
Furniture
Office
Fitout
Gross carrying amount
Opening balance
Acquisitions from Reverse Acquisition
Other additions
Disposals
Closing balance
Accumulated depreciation and impairment
Opening balance
Current year depreciation
Depreciation written back on disposal
Closing balance
$
-
-
30,114
-
30,114
-
3,938
-
3,938
$
18,614
864
82,370
(5,349)
96,499
8,357
12,630
(5,078)
15,909
$
-
-
$
-
-
Total
$
18,614
864
22,979
10,941
146,404
-
-
(5,349)
22,979
10,941
160,533
-
486
-
486
-
8,357
256
17,310
-
(5,078)
256
20,589
Carrying amount 30 June 2016
26,176
80,590
22,493
10,685
139,944
Group 2015
Computer
Equipment
Office
Equipment
Office
Furniture
Office
Fitout
Total
$
11,206
7,408
18,614
3,968
4,389
8,357
$
-
-
-
-
-
-
-
10,257
Gross carrying amount
Opening balance
Other additions
Closing balance
Accumulated depreciation and impairment
Opening balance
Current year depreciation
Closing balance
Carrying amount 31 March 2015
$
-
-
-
-
-
-
-
$
11,206
7,408
18,614
3,968
4,389
8,357
10,257
$
-
-
-
-
-
-
-
54 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
18. Trade creditors and other payables
Current
Trade creditors
Related party payables
Non trade payables and accrued expenses
Amounts withheld from Salaries and wages
GST payable
Total
Group
2016
$
2015
$
291,904
8,491
165,414
21,070
44,050
4,570
4,695
4,981
43,224
61,776
530,929
119,246
Trade creditors and other payables are non-interest bearing and normally settled on 30 day terms; therefore their carrying
amount approximates their fair value.
19. Employee entitlements
Current
Annual leave entitlements
Total
Group
2016
2015
Restated
$
$
62,922
62,922
8,788
8,788
Short–term employee entitlements represent the Group’s obligation to its current and former employees that are expected
to be settled within 12 months of balance date. These consist of accrued holiday entitlements at the reporting date.
20. Unearned revenue
Balance brought forward
Add: credits sold
Less: credit used
Less: conditional credits
Unearned revenue movement
Balance carried forward
Group
2016
$
2015
$
482,316
177,742
1,734,426
673,202
(1,108,044)
(284,679)
(205,132)
(83,949)
421,250
304,574
903,566
482,316
Xref Limited / Annual Report 2016 / 55
NOTES TO THE FINANCIAL STATEMENTS / continued
21. Share capital - Xref Limited
Opening Balance
Shares Issued
Capital Raising Costs
Closing Balance
Number
of
Shares
Issue
Price
$
Average
Issue Price
$/Share
254,511,135
17,631,553
580,418,213
1,211,090
0.069
0.002
-
(109,641)
834,929,348
18,733,002
0.022
Number
of
Shares
Issue
Price
$
Average
Issue Price
$/Share
Opening Balance
834,929,348
18,733,002
0.022
Consolidation (1 for 50)
Rounding after Consolidation
Issued to redeem Xref Pty Ltd Convertible notes
Issued for Cash
Issued for Acquisition of Xref Pty Ltd
Capital Raising Costs - King Solomon Mines
Capital Raising Costs - Xref Pty Ltd
16,698,587
81
3,575,000
572,000
20,000,000
4,000,000
50,000,000
2,525,000
0.1600
0.2000
0.0505
-
-
(735,295)
(51,730)
Closing Balance
90,273,668
25,042,977
0.277
Explanation of movements in Issued Capital for the 2015 financial year
On 28th August 2014 at the Annual General Meeting, resolutions were passed to authorise issue of 13,708,334 shares as part
payment of $41,125 fees for directors from 1 July 2014 to 31 December 2014.
The Company issued 38,176,670 shares to raise $114,530 for working capital and payment of expenses in the first 6 months
of the financial year.
A fully underwritten rights issue was then made to shareholders where three new shares were offered for every two existing
shares held by existing Australian and New Zealand resident shareholders at 7:00pm (Sydney time) on 24 October 2014 at
an issue price of $A0.002 ($NZ0.0022) per new share to raise $919,188 before costs.
In addition the underwriting document also authorised issue of a further 68,939,000 shares at an issue price of $A0.002 to
raise a further $137,878.
56 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
Explanation of movements in Issued Capital for the 2016 financial year
A resolution was passed at the EGM on 26th November 2015 to consolidate the existing King Solomon Mines shares so
that one new share would be issued for every 50 shares originally held. The original 834,929,348 shares would have yielded
16,698,587 shares, but with rounding equated to 16,698,668 shares.
As part of the acquisition of Xref Pty Ltd., King Solomon Mines Limited undertook to raise further capital and to redeem
$550,000 of Convertible Notes issued by Xref Pty Ltd on 7 August 2015 plus interest of $22,000 at a 20% discount to the
$0.20 offered in the prospectus raising the other share capital.
King Solomon Mines then issued 50,000,000 shares plus 50,000,000 performance rights to acquire the business of Xref Pty
Ltd. An issue price of 5.05c per share is used being the midpoint of an assessed value of the King Solomon Mnes Limited
share (calculated on a control basis).
This was calculated by:
1. Assigning a value to King Solomon Mines Limited comprising the company’s net assets plus an assessed value of the
Company’s ASX listing in the range of $1.13 million to $1.16 million
2. Calculating a value for Xref PTY Limited of between $450,000 to $680,000 based on historical financial information and
an EBITDA multiple between 7.5 and 8.5.
3. Adding these valuations to the rexpected net proceeds from the share issue.
4. Dividing the total net valuation by the total share capital and options to yield the assessed value.
All issued shares are fully paid and do not have a par value. The holders of ordinary shares have equal voting rights and share
equally in any dividend distribution and any surplus on winding up of the Parent.
None of the Parent’s shares are held by any company within the Group.
22. Other equity reserves
Share Options Reserve
Performance Right Reserve
Foreign Currency Translation Reserve
Consolidation Reserve
Total
a. Foreign currency translation reserve
Group
2016
$
297,802
433,333
16,947
(22,845,821)
(22,097,739)
2015
$
-
-
-
-
-
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries for consolidation purposes. It is also used to record gains and losses on hedges of the net
investments in foreign operations.
Xref Limited / Annual Report 2016 / 57
NOTES TO THE FINANCIAL STATEMENTS / continued
b. Performance right reserve
The perfomance right reserve is used to record unutilised performance rights issued on 18 January 2016 as part of the
consideration for Xref Pty Ltd. Performance Rights operate as an equity-settled, share based compensation plan. When
rights are realised, the balance less any attributable transaction costs will be transferred to issued capital. If rights are not
used, they would be offset against the consolidation reserve.
The 50,000,000 performance rights are split into 3 Classes as shown below:
Class
Class A
Class B
Class C
Number Granted
Performance Right
Reserve
$A
Weighted Average
Fair Value
$ / Right
16,666,667
16,666,667
16,666,666
50,000,000
350,000
83,333
-
433,333
0.021
0.005
0.000
0.009
Class A Conversion Event
Upon the Group, during any six month reporting period of the company that ends on or prior to 2 years after the date of issue
of the rights, achieving Sales Revenue of $A2,500,000 or more.
Class B Conversion Event
Upon the Company achieving a 20 day Volume Weighted Average Market Price of the shares equal to or greater than
$0.50 within two years after the date of issue of the rights and a minimum sale in the UK of either 1000 credits or £25,000
(whichever comes first).
Class C Conversion Event
Upon the Group, during any six month reporting period of the Company that ends on or prior to five years after the date of
issue of the rights, achieving EBITDA of $A2,500,000 or more.
The conversion ratio of the Performance Rights into ordinary shares upon achievement of a relevant Performance Milestone
is one ordinary share for each Performance Right. They are in escrow until 8 February 2018.
The key inputs used in the binomial valuation of the Xref PR’s are summarised in the table below.
Grant date
Expiry date - Class A
Expiry date - Class B
Expiry date - Class C
Xref share value at issue
Share price hurdle (150% above the issue price)
Period over which the VWAP must exceed the share price hurdle
Expected volatility
Risk free rate
Dividend yield
20/01/2016
20/07/2018
20/01/2018
20/01/2021
$0.03
$0.50
20 days
60% to 70%
2.09%
0.00%
58 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
Class C options were considered based on likelihood of reaching the target EBITDA and a Nil valuation adopted.
All rights may be converted immediately in the event of a change of control event.
The weighted average contractual life of the outstanding performance rights is 2.72 Years.
c. Share option reserve
Issued option and movements of options are shown below:
Issue Date
Expiry date
Average
exercise price in
$A per share
Options
Option
Reserve $A
At 1 April 2014
At 1 April 2014
Lapsed
29 July 2014
29 July 2016
29 July 2014
0.100
0.120
2,000,000
1,600,000
125,169
92,160
0.100
(2,000,000)
(125,169)
Closing Balance
30 June 2015
0.120
1,600,000
92,160
At 1 July 2015
29 July 2016
0.120
1,600,000
92,160
Consolidation (1 for 50)
29 July 2016
Granted
1 February 2016
1 February 2019
Granted - Class A
1 February 2016
1 February 2019
Granted - Class B
1 February 2016
1 February 2019
6.000
0.230
0.230
0.230
32,000
92,160
3,908,909
199,354
300,000
300,000
3,144
3,144
Closing Balance
30 June 2016
0.271
4,540,909
297,802
The options have been valued using a binomial options method, using the following assumptions:
Listing date (re-listing as Xref Limited)
Price history for volatility determination
Grant date
Measurement date
Exercise price
Expiry date
Life of option
Price of underlying shares at measurementdate
Risk free rate = 5 year Government Bond (26/11/2016)
Expected volatility
Dividends expected on the shares
09/02/2016
Nil
26/11/2015
26/11/2015
$0.23
01/02/2019
3.18 yr
$0.20
2.27%
40%
Nil
Xref Limited / Annual Report 2016 / 59
NOTES TO THE FINANCIAL STATEMENTS / continued
Volatility is based on comparisons with Info Media Limited and Isentia Group Limited. It has also been observed that the 30
day volatility has reduced significantly since June 2016 and is trending towards 40%.
The weighted average contractural life of the share options outstanding is 2.57 Years (2015: 1.7 Years).
Option movements during the year
A resolution was passed at the EGM on 26th November 2015 to consolidate the existing King Solomon Mines shares so that
one new share would be issued for every 50 shares originally held was also applied to the existing options which reduced
the number of options from 1,600,000 to 32,000.
As also approved at the 26th November 2015 EGM, 2,808,909 options were issued to Taylor Collison Limited for the
provision of corporate services in relation to the acquisition of Xref Pty Ltd., 800,000 options were issued to existing
directors of the company as a key component of their remuneration by the company and 900,000 options (split into 3
classes of 300,000 options each) were issued to Timothy Mahony. Vesting for the first 300,000 options required Timothy
Mahony to join the Xref Ltd board. Timothy Mahony has been appointed the board and these 300,000 options have vested.
Class A Vesting Event is the same as a Performance Right Class A Conversion Event
Upon the Group, during any six month reporting period of the company that ends on or prior to 2 years after the date of
issue of the rights, achieving Sales Revenue of $A2,500,000 or more.
Class B Vesting Event is the same as a Performance Right Class B Conversion Event
Upon the Company achieving a 20 day Volume Weighted Average Market Price of the shares equal to or greater than
$0.50 within two years after the date of issue of the rights and a minimum sale in the UK of either 1000 credits or £25,000
(whichever comes first).
Class A and B option expense is being recognised over the two years during which the options may be exercised. If the
options were to be exercised, the full remaining option expense if any would be immediately recognised and the Option
Reserve figure transferred to Issued Capital.
Option movements during the previous year
The 2,000,000 options issued to Directors and an employee lapsed.
At 30 June 2015, the remaining 1,600,000 options had an historical value of $92,160 carried in the Options Reserve (based
on the Black Scholes valuation model; assuming a stock volatility ranging between 80% to 120% depending on time of grant)
Options Vested and therefore exercisable
Source
Expiry Date
2016
2015
BF from King Solomon Mines Limited &
Consolidated (1 for 50)
29 July 2016
32,000
32,000
Acquisition of Xref Pty Ltd
1 February 2019
3,908,909
-
3,940,909
32,000
60 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
d. Consolidaton Reserve
The reserve was formed on the reverse acquisition of assets and liabilities of King Solomon Mines Limited by Xref Pty Limited
which brought the share capital of Xref Pty Liimited to the share capital of King Solomon Mines Limited immediately after the
reverse acquisition.
23. Dividends
The following dividends were declared and paid by the Parent.
$0.00 per ordinary share (2015: $120)
24. Earnings per share
Group
2016
$
-
2015
$
12,000
Basic EPS amounts are calculated by dividing the profit for the year attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of the Parent by the
weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary
shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
The Group recorded losses for the years ended 30 June 2015 and 30 June 2016. Diluted earnings per share has not been
calculated because the effect of including the share options in the calculation would be anti-dilutive. Hence the diluted
earnings per share is the same as the basic earnings per share.
The following reflects the income and share data used in the basic and diluted EPS computations:
Profit attributable to ordinary equity holders of the parent:
Continuing operations
Discontinued operations
Profit attributable to ordinary equity holders of the parent
for basic earnings
Weighted average number of ordinary shares for basic EPS
Weighted average number of ordinary shares adjusted for the
effect of dilution
Group
2016
2015
Restated
$
$
(845,242)
(87,807)
(2,354)
-
(847,596)
(87,807)
50,919,627
50,919,627
100
100
Xref Limited / Annual Report 2016 / 61
NOTES TO THE FINANCIAL STATEMENTS / continued
25. Financial instruments
a. Classification of financial instruments
The carrying amounts presented in the statement of financial position relate to the following categories of financial assets
and liabilities.
Group 2016
Financial assets
Cash and cash equivalents
Trade debtors and other receivables
Trade debtors and other receivables classified as
held for sale
Total
Financial liabilities
Trade creditors and other payables
Liabilites designated as held for sale
Total
Group 2015
Financial assets
Cash and cash equivalents
Trade debtors and other
receivables
Total
Financial liabilities
Trade creditors and other
payables
Total
d
n
a
s
n
a
o
L
l
s
e
b
a
v
i
e
c
e
r
2,270,832
944,060
-
3,214,892
-
r
o
f
-
e
b
a
l
i
l
a
v
A
l
a
i
c
n
a
n
fi
e
l
a
s
s
t
e
s
s
a
-
-
93,814
93,814
l
a
i
c
n
a
n
F
i
t
a
s
e
i
t
i
l
i
b
a
i
l
e
u
l
a
v
r
i
a
f
t
fi
o
r
p
h
g
u
o
r
h
t
s
s
o
l
d
n
a
l
a
t
o
T
-
-
-
2,270,832
944,060
93,814
-
3,308,706
-
-
-
d
n
a
s
n
a
o
L
l
s
e
b
a
v
i
e
c
e
r
81,076
267,612
348,688
-
-
-
-
-
e
l
a
s
-
r
o
f
-
e
b
a
l
i
l
a
v
A
s
t
e
s
s
a
l
a
i
c
n
a
n
fi
-
-
-
-
-
651,530
333,812
651,530
333,812
985,342
985,342
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
F
i
e
u
l
a
v
r
i
a
f
t
a
d
n
a
t
fi
o
r
p
h
g
u
o
r
h
t
s
s
o
l
l
a
t
o
T
-
-
-
81,076
267,612
348,688
142,257
142,257
142,257
142,257
b. Financial instrument risk management
The Group has exposure to the following risks from its use of financial instruments:
Credit risk
Liquidity Risk
Market Risk
62 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
The Group are exposed to market risk through their use of financial instruments and specifically to currency risk, interest rate
risk and certain other price risks, which result from both its operating and investing activities.
The Group have a series of policies to manage the risk associated with financial instruments. Policies have been established
which do not allow transactions that are speculative in nature to be entered into and the Group are not actively engaged in
the trading of financial instruments. As part of this policy, limits of exposure have been set and are monitored on a regular
basis.
i. Credit risk
Credit risk is the risk that a third party will default on its obligation to the Group, causing the Group to incur a loss.
The Group have no significant concentration of risk in relation to cash and cash equivalents, trade debtors and other
financial assets.
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group,
and incorporates this information into its credit risk controls.
Further details in relation to the credit quality of financial assets is provided in Note 16.
ii. Liquidity risk
Liquidity risk represents the Group’s ability to meet is contractual obligations as they fall due. The Group manages liquidity
risk by managing cash flows and ensuring that adequate cash is in place to cover any potential short falls.
Based on the Group’s initial expansion plans as outlined in the original prospectus along with forecasts prepared following
the successful capital raise of $4m (before costs) in January 2016 sufficient cash was on hand at 30 June 2016 to fund these
plans. Following another successful capital raise of $8m (before costs) in August 2016 the Group’s expansion plans have
changed to take advantage of this increased cash position. As at the date of this report the Group has sufficient cash on
hand to fund its planned expansion.
The Group has sufficient cash on hand to fund planned expansion.
All amounts shown as current financial liabilities are expected to be paid on demand and without interest
The Group’s financial liabilities have contractual maturities (including interest payments where applicable) as summarised
below:
Group 2016
Contractual cash-flow maturities
Carrying
amounts
Total
contractual
cash-flows
0-6
months
6-12
months
1 - 2 years 2-5 years
Later
than 5
years
Non-derivative financial
liabilities
Trade creditors and other
payables
530,929
530,929
530,929
Superannuation payable
57,679
57,679
57,679
Liabilities included in disposal
group classified as held for sale
333,812
333,812
333,812
Total
922,420
922,420
922,420
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Xref Limited / Annual Report 2016 / 63
NOTES TO THE FINANCIAL STATEMENTS / continued
Group 2015
Contractual cash-flow maturities
Carrying
amounts
Total
contractual
cash-flows
0-6
months
6-12
months
1 - 2 years 2-5 years
Later
than 5
years
Non-derivative financial
liabilities
Trade creditors and other
payables
119,246
119,246
119,246
Superannuation payable
14,223
14,223
14,223
Total
133,469
133,469
133,469
-
-
-
-
-
-
-
-
-
-
-
-
iii. Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters, while optimising the return.
Foreign exchange risk
Currency risk is the risk that the fair value of financial instruments will fluctuate due to a change in foreign exchange rates.
Most of the Group transactions are carried out in AUD. Exposures to currency exchange rates arise from the Group’s
overseas sales and purchases, which are primarily denominated in United Kingdom Pounds Sterling (GBP) and Canadian
dollars (CAD).
The Group monitors foreign expenditure, seeking favourable terms when it is time to for further funding. By adopting this
passive strategy, it expects its average foreign exchange rates to reflect the average foreign exchange rate for the year.
Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below.
The amounts shown are those reported to key management translated into AUD at the closing rate:
30 June 2016 - Group
Financial Assets
Financial Liabilities
Net statement of financial
position exposure
Short-term exposure
Long-term exposure
AUD
3,021,777
China
93,814
Other
157,161
(512,817)
(333,812)
(75,791)
AUD
70,507
-
2,508,960
(239,998)
81,370
70,507
China
Other
-
-
-
-
-
-
Short-term exposure
Long-term exposure
30 June 2015 - Group
AUD
China
Other
AUD
China
Other
Financial Assets
Financial Liabilities
Net statement of financial
position exposure
348,688
(142,527)
206,161
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
64 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
Foreign exchange risk
Sensitivity analysis
The following analysis illustrates the sensitivity of profit and equity in regards to the Group’s financial assets and financial
liabilities carried in foreign currencies. It assumes a +/- 12% change in the GBP exchange rate for the year ended at 30 June
2016 (2015: 0% as there was no foreign currency exposure).
The percentage movement has been determined based on the average exchange rate market volatility for the AUD in the
previous 6 months. It was particularly impacted by the announcement of Brexit.
Group
12% (2015: 0%) increase in AUD against foreign
currencies
12% (2015: 0%) decrease in AUD against foreign
currencies
2016
Profit for
the year
Equity
2015
Profit for
the year
Equity
(883,180)
1,811,678
(87,807)
(263,286)
(811,965)
1,845,974
(87,807)
(263,286)
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless,
the analysis above is considered to be representative of the Group’s exposure to currency risk.
Interest rate risk
Interest rate risk is the risk that cash flows from a financial instrument will fluctuate because of changes in market interest
rates.
Revenue of the Group is exposed to interest rate risk on interest bearing financial assets only as it has immaterial bank
overdraft balances.
The Group are also exposed to interest rate risk on interest bearing financial assets. The Group’s investment in bonds all pay
fixed interest rates and the interest risk exposure on money market funds is considered immaterial.
Interest rate risk profile
At the reporting date the interest rate profile of interest-bearing financial instruments
was:
Fixed interest instruments
Financial assets
Variable rate instruments
Financial assets
Total
2016
$
70,507
Group
2015
$
-
2,200,325
2,270,832
81,076
81,076
26. Measurement of fair value - non financial assets
The Group would normally require the determination of fair value for the assets designated available for sale. These are
subject of a contract for sale and carried at that net valuation of RMB 10 (AUD 2).
Xref Limited / Annual Report 2016 / 65
NOTES TO THE FINANCIAL STATEMENTS / continued
27. Reconciliation of cash flows from operating activities
Profit/(loss) for the year
Add/(deduct) non-cash items
Depreciation, amortisation and impairment
Interest on Convertible Notes
Option expense
Foreign exchange
Unearned revenue
Profit on acquisition
Other non-cash items
Add/(deduct) movements classified as investing activities
(Profit)/loss on sale of property, plant and equipment
Add/(deduct) movements in working capital
2016
$
Group
2015
Restated
$
(847,596)
(87,807)
17,309
22,000
21,588
65,048
4,389
-
-
-
421,250
304,574
(1,417,860)
-
(Increase)/ decrease in trade debtors and other receivables
(679,191)
(184,601)
(Increase)/ decrease in prepayments
(Increase)/ decrease in other financial assets
Increase/ (decrease) in trade creditors and other payables
Increase/ (decrease) in employee entitlements
(Increase)/ decrease in other financial liabilities
(49,790)
(48,467)
518,101
54,134
44,615
(2,342)
-
48,651
13,334
-
Net cash flows from/ (used in) operating activities
(1,878,859)
96,198
28. Contingent assets and contingent liabilities
The Group has no contingent assets or liabilities at 30 June 2016 (2015: $Nil).
29. Related party transactions
Related party transactions arise when an entity or person(s) has the ability to significantly influence the financial and
operating policies of the Group.
The Group has a related party relationship with its Shareholders, Directors and other key management personnel.
Unless otherwise stated transactions with related parties in the years reported have been on an arms-length basis, none of
the transactions included special terms, conditions or guarantees.
66 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
Transactions with related parties
The following transactions were carried out with related parties:
a. Purchase of services
Directors
Key management personnel
Other related parties
Total purchase of services from related parties
b. Year end receivable/ (payable) with related parties
Receivable from related parties:
Directors
Total
Payable to related parties:
Other related party
Directors
Total
c. Other related party balances
Directors
2016
$
576,959
68,260
92,571
737,790
2016
$
25,995
25,995
8,491
-
8,491
Group
2015
$
-
-
-
-
Group
2015
$
5,626
5,626
-
4,695
4,695
Loans to directors for the year ended 30 June 2016 amounted to $25,995 (2015: $5,626). The loan is repayable over 6
months at an interest rate of 5%.
d. Key management compensation
The Parent and Group have a related party relationship with its key management personnel. Key management personnel
include the Parent’s Board of Directors and the Chief Financial Officer.
Key management personnel compensation includes the following expenses:
Salaries and other short-term employee benefits
Total
2016
$
645,219
645,219
Group
2015
$
-
-
Xref Limited / Annual Report 2016 / 67
NOTES TO THE FINANCIAL STATEMENTS / continued
30. Parent Information
Result of the parent entity
Loss for the year
Other Comprehensive Income
Total comprehensive loss for
the year
Financial position of the parent entity at year end
Current assets
Non Current assets
Total assets
Current Liabilities
Total Liabilities
Total equity of the parent entity comprising of:
Share Capital
Reserves
Accumulated Losses
Retained Earnings
2016
$
2015
$
(592,336)
(868,456)
-
-
(592,336)
(868,456)
3,794,927
944,416
3,530,335
1,690
7,325,262
946,106
(21,930)
(21,930)
(51,118)
(51,118)
25,094,707
18,733,002
731,135
92,160
(18,522,510)
(17,930,174)
(18,522,510)
(17,930,174)
Parent entity contingencies
There are no contingencies for the parent entity in 2016 or 2015.
Parent entity guarantees
There are no guarantees entered into by the parent entity in relation to the debts of its subsidiary Inner Mongolia Plate Mining
Limited or any other Xref subsidiary in 2016 or 2015.
Parent entity capital commitments for acquisition of property, plant and equipment
There are no capital commitments for the parent entity in 2016 or 2015.
68 / Xref Limited / Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS / continued
31. Restatement of Prior Period Revenue & expense
The 2015 figures include an extra accrual for annual leave that had been omitted in error.
They also include a Research and Development tax refund that had been omitted in error.
(i) Impact of restatement on statement of financial position
As at 30 June 2015
Accounts Payable - Current
Other Receivables - Current
Accumulated Losses
(ii) Impact of restatement on statement of comprehensive income
For the year ended 30 June 2015
Employee Benefits - expenses
Research and development incentive grant
Income
Loss after Income Tax Expense
Previously
Reported
Adjustment
Restated
128,774
4,746
8,788
173,291
137,562
178,037
(427,889)
164,503
(263,386)
468,223
8,788
477,011
-
173,291
173,291
252,310
(164,503)
87,807
32. Commitments
Operating leases are held for premises used for office space. Lease comitments net of incentive payments are:
Non-cancellable operating leases are payable as follows:
Less than one year
Between one and five years
More than five years
Total
The Group had no other commitments at 30 June 2016 (2015; $Nil).
33. Events after the reporting period
2016
$
268,888
257,900
99,363
626,151
Group
2015
$
-
-
-
-
On 17 August 2016, Xref Limited raised $8,000,000 before share placement costs through a placement to Australian
institutions and sophisticated investors at a price of 70c per share.
No other adjusting or significant non-adjusting events have occurred between the reporting date and the date of
authorisation.
Xref Limited / Annual Report 2016 / 69
Shareholder
Information
Information relating to shareholders, as required by ASX Listing Rule 4.10, and not disclosed elsewhere in this Annual Report,
is detailed below.
Substantial Shareholders as at 1 September 2016 as disclosed in substantial holding notices given to
the ASX and to the Company:
Substantial Shareholders
Squirrel Holdings Australia Pty Ltd
West Riding Investments Pty Ltd
Industry Super Holdings Pty Ltd
Shareholding
% Shares Issued
24,038,462
24,038,462
7,923,038
23.64
23.64
7.79
Based on the market price at 31 August 2016 there were 82 shareholders with less than a marketable parcel of 736 shares.
Number of Ordinary Shares Held
Number of Holders
Ordinary Shares
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
114
213
130
268
80
805
52,237
632,331
1,047,317
9,931,657
90,038,697
101,702,239
72 / Xref Limited / Annual Report 2016
SHAREHOLDER INFORMATION / Continued
Top 20 Holders of Ordinary Shares as at 1 September 2016
Rank
Name of Shareholder
Shares
% of Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Squirrel Holdings Australia Pty Ltd
West Riding Investments Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Austral Capital Pty Ltd
Parkstone House Pty Ltd
Morgan Stanley Australia Securities (Nominee) Pty Limited
Mr Craig Mcdonald + Mrs Kim Mcdonald
Calama Holdings Pty Ltd
MSR Nominees Pty Limited
Mr Tim Mahony + Ms Jacki Pervan
GP Securities Pty Ltd
Schindler Investment Haus Pty Ltd
Twenty Ten Enterprise Ltd
UBS Nominees Pty Ltd
Biatan Pty Ltd
Octifil Pty Ltd
Citicorp Nominees Pty Limited
Green Mountains Investments Ltd
Grey Bucket Pty Ltd
Total of Top 20 Holdings
Other Holdings
Total Fully Paid Shares Issued
24,038,462
24,038,462
7,923,038
3,958,347
3,000,000
1,923,076
1,839,980
1,279,500
1,193,370
1,160,000
1,000,000
982,742
912,500
862,500
654,363
650,000
600,000
587,971
587,000
450,000
77,641,311
24,060,928
101,702,239
23.64
23.64
7.79
3.89
2.95
1.89
1.81
1.26
1.17
1.14
0.98
0.97
0.90
0.85
0.64
0.64
0.59
0.58
0.58
0.44
76.34
23.66
100.00
Fully Paid Ordinary Shares in Escrow as at 1 September 2016
Name of Shareholder
Parkstone House Pty Ltd
Squirrel Holdings Australia Pty Ltd
West Riding Investments Pty Ltd
Total
Shares the Holder is
Entitled to
In Escrow Until
1,923,076
18 January 2017
24,038,462
8 February 2018
24,038,462
8 February 2018
50,000,000
Xref Limited / Annual Report 2016 / 73
SHAREHOLDER INFORMATION / Continued
Performance Rights as at 1 September 2016
Name of Performance Holder
Performance Shares the Holder is
Entitled to
Squirrel Holdings Australia Pty Ltd
A Class Performance Rights:
8,333,333
West Riding Investments Pty Ltd
A Class Performance Rights:
8,333,334
Squirrel Holdings Australia Pty Ltd
B Class Performance Rights:
8,333,334
West Riding Investments Pty Ltd
B Class Performance Rights:
8,333,333
Squirrel Holdings Australia Pty Ltd
C Class Performance Rights:
8,333,333
West Riding Investments Pty Ltd
C Class Performance Rights:
Total
8,333,333
50,000,000
In Escrow
Until
8 February
2018
8 February
2018
8 February
2018
8 February
2018
8 February
2018
8 February
2018
The conversion ratio of the Performance Rights into ordinary shares upon achievement of a relevant performance milestone
is one ordinary share for each Performance Right.
Options as at 1 September 2016
Shares the Option Holder
is Entitled to Exercise Price
Option Expiry Date
In Escrow Until
2,808,909
300,000
250,000
250,000
900,000
4,508,909
$0.23
$0.23
$0.23
$0.23
$0.23
1 February 2019
8 February 2018
1 February 2019
8 February 2018
1 February 2019
8 February 2018
1 February 2019
8 February 2018
1 February 2019
8 February 2018
Name of Option Holder
Taylor Collison Limited
Simon O’Loughlin
Stephen McPhail
Simon Taylor
Timothy Mahony
Total
Voting Rights
At general meetings of the Company, all fully paid ordinary shares carry one vote per share without restriction. On a show of
hands, every member present at a general meeting, or by proxy, shall have one vote and, upon a poll, each share shall have
one vote. Performance Rights holders and Option holders have no voting rights until the Performance Rights are converted
and the Options are exercised, respectively.
Use of Funds
In accordance with ASX Listing Rule 4.10.19, the Company advises that it has used its cash and assets in a form readily
convertible to cash, that it had at the time of the Company’s reinstatement of its shares to quotation following compliance
with ASX Listing Rule 11.1.3, in a way consistent with its business objectives, as set out in its Replacement Prospectus dated 7
December 2015. This statement refers to the time between the Company’s reinstatement to quotation on ASX on 8 February
2016 and the end of the reporting period, being 30 June 2016.
On-Market Buy-Back
There is no current on-market buy-back of shares in the Company.
74 / Xref Limited / Annual Report 2016
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Xref Limited / Annual Report 2016 / 75
Corporate
Directory
PLACE OF BUSINESS
DIRECTORS
LEADERSHIP TEAM
AUDITORS
Australia (Head Office
and Registered Office)
Suite 17, 13 Hickson Road
Dawes Point, NSW 2000
Tel: +61 2 8244 3099
United Kingdom
20 Little Britain
London, EC1A 7DH
Canada
140 Yonge Street
Toronto, Ontario M5C 1X6
New Zealand
Registered Office
242 Marine Parade
Otaki Beach, Otaki 5512
New Zealand
Website
www.xref.global
Brad Rosser
Chairman
Lee-Martin Seymour
Tim Griffiths
Tim Mahony
Nigel Heap
Lee-Martin Seymour
Chief Executive Officer,
Co-Founder
Tim Griffiths
Chief Technology Officer,
Co-Founder
James Solomons
Chief Financial Officer
Sharon Blesson
Delivery & Operations
Director
David Haines
Global Sales Director
Edward Allnutt
Managing Director – EMEA
COMPANY SECRETARY
Robert Waring
Crowe Horwath
New Zealand
Level 29, 188 Quay Street
Auckland Central,
Auckland 1010
STOCK EXCHANGE
The company’s
ordinary shares are listed
on the ASX
SHARE REGISTRY
Computershare
Investor Services Pty Ltd
Yarra Falls,
452 Johnston Street
Abbotsford, Victoria
Australia 3067
Tel: +61 3 9415 5000
Fax: +61 3 9473 2570
76 / Xref Limited / Annual Report 2016