Xref
Annual Report 2017

Plain-text annual report

ANNUAL REPORT 2017 Xref Limited / Annual Report 2017 / 1 CONTENTS 2017 Highlights Chairman’s Report Chief Executive Officer’s & Chief Technology Officer’s Report Directors’ Report Independence Declaration Financial Statements Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Directory 2 4 6 10 26 27 34 73 74 78 82 With Xref, clients make more confident, smarter decisions. 2 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 3 2017 Highlights Total Sales $4.1 million 137% TOTAL ANNUAL GROWTH Revenue $3.0 million 127% TOTAL ANNUAL GROWTH Client Sales Split LARGEST CLIENT TOP 10 CLIENTS $250K 6% of FY17 sales $1.1M 28% of FY17 sales TOP 20 CLIENTS $1.7M 42% of FY17 sales Industry Sector Growth PRIVATE SECTOR $1.4M $3.4M FY16 / 82% of sales FY17 / 83% of sales NOT FOR PROFIT $163K $332K FY16 / 9% of sales FY17 / 8% of sales PUBLIC SECTOR $171K $458K FY16 / 10% of sales FY17 / 11% of sales TOP GROWTH SECTORS Manufacturing Finance, Accounting & Banking Transport & Logistics Government - State Construction & Civil Engineering Healthcare & Medical Retail & Consumer Products 144% SALES GROWTH 104% SALES GROWTH 168% SALES GROWTH % of total FY17 sales Sales YoY Growth 2% 11% 5% 10% 4% 9% 8% 709% 376% 217% 152% 145% 132% 117% MAP KEY Office Presence 2 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 3 CHAIRMAN’S REPORT Chairman’s Report It is a pleasure to welcome shareholders to Xref’s annual report for the 2017 financial year. Having joined Xref’s board in August 2016, it has been fantastic to see the outstanding progress the company has made over the course of just one year. The new single domain platform, xref.com, and the fresh new brand, reflect our recent phase of maturity and our ambitions for global growth. First mover advantage driving client growth At launch, Xref’s platform introduced an entirely new, cloud-based human resources technology solution. Today, its value has been recognised globally and it now helps more than 600 organisations make significant time and expense savings. Our software simplifies the way employers seek references, automating one of the most difficult, time-consuming processes and providing intuitive, data-driven insights for human resources practitioners. This is a quantum leap forward, enabling the industry to transition away from telephone-based referencing, to offer a service in line with the expectations of a digital age. We are capitalising on our first mover advantage through a global growth strategy. We achieved more than 50% client growth during FY2017. While the majority of our clients are currently in Australia and New Zealand, including 36% of the Australian Securities Exchange’s top 50 companies, we also seeing strong growth in the UK, Europe, Middle East and North America. These are regions with large populations and labour markets, presenting a significant opportunity for us to continue to grow. Ease of use Our platform is built on powerful, scalable technology with an open architecture that offers the flexibility required to continue to develop and evolve our service. We are anticipating the changing needs of the human resources market, and constantly creating exciting new features for clients. One recent example of product improvement was the introduction of the Sentiment analysis engine, which provides greater insight into a referee’s feedback at a glance. Based on machine learning, the algorithm provides an assessment of a referee’s ‘tone of voice’, offering a percentage breakdown of the feedback that was positive, neutral and negative, helping employers to interpret the data quickly and with ease. This reduces opportunities for misinterpretation when assessing a candidate’s professional performance and fit for a position. Strong revenue growth It is a pleasure to report continued strong renewals and new client growth. Xref set a $0.85 million monthly sales record in June 2017, which exceeded the previous monthly record by 70%. Our consistent focus on global expansion helped drive a 127% increase in net revenue to $3.0 million in FY2017 compared to $1.3 million in the previous year. We are investing to expedite global expansion and the reported loss from continuing operations was in line with management expectations. Our growth has been accelerated by strong support for the company’s capital raising efforts, including an $8 million share placement in FY2016. A further $7.5 million before costs was raised in August 2017, through a placement which closed oversubscribed. These funds are supporting our growth through international expansion and channel partnerships. Following shareholder endorsement of a move for the company’s domicile from New Zealand to Australia, forms were lodged with ASIC to complete the process on 28 August 2017, which successfully re-domiciled on 21 September 2017. Xref completed the divestment of the mining assets owned as part of the activities of King Solomon Mines Limited in early 2017. A great and passionate team The year’s success is ultimately the product of a talented and dedicated team. Our staff grew significantly in 2017 and I would like to thank all of them for their ongoing hard work and dedication. They are part of a highly driven culture and the skills and commitment they offer our clients is what helps make Xref great. Strengthened Board I would also like to thank my board colleagues for their commitment and support over the year, and acknowledge Nigel Heap who also joined the board in August 2016 as a non-executive director. He is the UK and Ireland Managing Director of Hays plc, the leading global professional group, and brings significant human resources expertise to our Board. Looking ahead I am excited by the growth opportunities both in Australia and overseas, and optimistic about the future. The new financial year has started with strong sales growth and client renewals. Xref has secured some of the world’s leading international brands as clients and some HR market leaders as partners, having established a sustainable growth path, the service looks set to continue to expand and evolve in all the markets we currently operate in and more. Brad Rosser, Chairman 4 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 5 Chief Executive Officer’s & Chief Technology Officer’s Report CHIEF EXECUTIVE OFFICER’S & CHIEF TECHNOLOGY OFFICER’S REPORT Single global domain simplifies access During the year we purchased xref.com, a memorable, top-level and global internet domain name. This strengthens the value of our global platform and, particularly for those organisations which use Xref in many countries, simplifies access to our services as individual country domains are no longer required. We completed the transition to the xref.com domain effective July 1, 2017. This move aligned with our new brand launch, which emphasises the simplicity and efficiency of our platform, and the maturity of the business today. Xref exceeds 100% year-on-year growth Xref passed many milestones in its first full year as an Accelerating global growth ASX-listed business. By the end of the 2017 financial We are investing in our business to build global growth, year, more than 140,000 candidates had experienced and during FY17 we grew enough to enable support for the benefits of the Xref platform; more than 280,000 clients in Australia, New Zealand, the United Kingdom, referees had provided references; and more than 700 Europe and the Middle East, Canada and the USA, and companies in seven countries had used our services. Singapore, from offices in Sydney, London and Toronto. Our business model is simple: we sell Xref credits to our clients. Each credit allows a client to take as many references as are required on one candidate. The credits are consumed as candidates are referenced through the Since the end of the year we have also introduced further global expansion, with an office in Norway, that will further support our European efforts, particularly across the Nordic region. Xref platform. Our process also places the candidate at Xref has generated dramatic growth since listing on the the centre of the referencing process for the first time, ASX. Our clients include government, small- to medium- enabling them to encourage timely responses from sized businesses, recruitment agencies, not for profit referees. Fast and efficient reference checking simplifies organisations and others. More than 50% of our clients the hiring process and reduces employers’ exposure to are large enterprises, and we support clients in 32 security breaches, discrimination and potential fraud. market sectors. Our business is highly cash generative, and, during FY17 Australia and New Zealand Xref continued to exceed 100% year-on-year growth. Sales were a record $4.1 million, an increase of 137% from $1.7 million in FY2016. We completed the year with a new monthly record, achieving sales of $0.85 million in June 2017, up 250% compared to June 2016. Clients’ consumption of credits also grew. Revenue, which excludes sold but unused credits, was $3.0 million, more than double $1.3 million for the previous year. We completed the year with a strong cash position and in August 2017, raised a further $7.5 million before costs through a placement to institutional and sophisticated investors. These funds will expedite our channel integrations and partnerships, accelerating global growth. In Australia and New Zealand, we serve an employment market of approximately 15 million people. This business is now used by hundreds of clients every day, and thousands of candidates and referees contribute data to our platform every week. Significant new clients introduced during the year included Auckland Transport, Bluescope Steel, CSR, Department of Premier and Cabinet (Victoria), KPMG, ME Bank, NBN, News Corporation, NSW Treasury, Reserve Bank of Australia, Telstra and Transurban. Expansion in Europe and North America Xref’s expansion is guided by demand from existing clients, which include some of the world’s largest enterprises and global brands. We track client and referee activity, which led to the establishment of our Workday. These organisations, which can be accessed London and Canada offices, to capitalise on the growth through Xref’s employee dashboard, support more than potential of the regions we service. Our growth into 20,000 companies across the world. Applicant tracking Europe, Canada and the USA has had a strong start. systems’ (ATS) own marketplaces provide easy access Client usage has grown faster than in Australia at a to Xref through their platforms, helping their clients to comparative stage of the company’s development. manage all aspects of the recruitment lifecycle. Our London office supports a European market of Our partners provide a valuable marketing channel approximately 120 million people, and also serves and, combined, employ more than 1,500 support the Middle East and Africa. Among our new clients are staff. We are educating their sales teams through joint household names including the Chelsea Football Club, marketing activities and co-promoting the strengths of the Chelsea Foundation, JCB (JC Bamford), Sue Ryder, our combined services. As partners become familiar with The Salvation Army, Thwaites and TMP Worldwide. the benefits of using Xref, we anticipate they will become During the year we also secured our first European strong advocates of our services. clients including Hammer & Hanborg in Sweden. The Our platform has a 98% success rate, far higher than Nordic market (Denmark, Finland, Norway, Iceland and the results typically seen from telephone or email Sweden) has an employment market of about 14 million based candidate referencing. It also provides 60% people and continues to provide a regional hotspot of more data, five times faster, and on average, 60% of candidate referencing activity. These market features feedback is provided out of business hours.. It offers led to the recently announced Norway office, opened to users convenience and greater insight into candidate better service the Nordic region. suitability, while enabling them to make data-driven Our Toronto office supports the Canadian and USA employment market of about 180 million people, and we have now secured more than 30 clients in the region, including Bruce County Council, Konica, Lindt, Miele and TravelEdge Group. Expanding channels to market Through our platform, we are able to bring tremendous value to channel partners. Xref’s open architecture, allows integrations to be deployed quickly and with ease. Once activated, clients can move quickly between the decisions. Specialised, proprietary software During the year we re-engineered our global technical infrastructure and development resources. Significant new services included launching a new, fully API-driven employee dashboard, to improve the user experience; developing a time-based referencing app for the European market; and introducing the new Sentiment analysis engine, which analyses reference data to provide employers with an easy to understand sentiment score. integrated platforms and embed automated candidate We have also introduced multi-language capabilities, referencing into their workflow. such as localised French for the Canadian market, Millions of organisations worldwide use applicant tracking systems to manage recruitment and we aim to partner with the world’s leading systems to form integrations that Spanish and Swedish. This increases our addressable market and we will systematically roll out new languages during the coming year. will enable us and out partners to offer organisations a Our investment in technology is delivering continuous more comprehensive suite of recruitment solutions. Our improvement in client experience and driving first integration with the Oracle Taleo applicant tracking productivity, margin, and efficiency across our business. system has been very successful, and we have since added Bullhorn, Expr3ss!, iCIMS, SmartRecruiters and 6 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 7 CHIEF EXECUTIVE OFFICER’S & CHIEF TECHNOLOGY OFFICER’S REPORT / Continued Structure for sustainable growth We are focused on achieving operational excellence and have built a sustainable structure that supports global growth. This includes a global marketing program that supports our sales and channel presence, helping to develop leads. Our customer success team helps clients to achieve their business goals, ensuring the continued strength of our client relationships. The positive testimonials of clients are an important part of our program, demonstrating the value of our platform for human resources business success. We maintain tight control of costs through a sustainable and scalable global accounting culture. This is led by CFO James Solomons who joined us from Xero where he was head of accounting. As we enter new markets the ability to set accurate budgets and achieve goals aligned with management targets is particularly important to our business. Recently we also appointed a new Chief Operating Officer Sharon Blesson, to ensure the success of ongoing integrations and delivery of operations. Outlook for growth We have established a strong position in our key markets and continue to focus on building scale, driving new business and significant renewals from existing clients. We are building a global business, and investing in our capability to increase sales. Revenue growth continues to exceed 100% year-on-year and we expect to maintain this dynamic growth trajectory. Our channel strategy aims to capitalise on a cost-effective sales expansion path that complements direct sales. Xref’s technology is fully API-driven, aiding its connection with different technologies and providing a modern foundation for future product enhancements. We are continuing to integrate with applicant tracking systems and other technology-driven human resources platforms, and exploring partnerships with human resources organisations to assist growth in new markets. Lee-Martin Seymour, Tim Griffiths, Chief Executive Officer, Chief Technical Officer, Co-Founder Co-Founder 8 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 9 Directors’ Report DIRECTORS’ REPORT The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter Xref demonstrated strong global growth in FY17  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 2017. Directors Xref is investing to build global scale and extended its client base by over 50% in FY17 to more than 600 clients worldwide, including 36% of the ASX 50. The company services clients in Australia, New Zealand, the United Kingdom, Europe and the Middle East, North America and Singapore, from offices in Sydney, London and Toronto.  Since balance, Xref has also introduced an office in Norway, to serve clients across the Nordic countries (Norway, Denmark, Sweden, Iceland and The following persons were directors of Xref Limited during the whole of the financial year and up to the date of this Finland). report, unless otherwise stated: Lee-Martin Seymour Timothy Griffiths Timothy Mahony Brad Rosser (appointed 18 August 2016) Nigel Heap (appointed 18 August 2016) Simon O’Loughlin (resigned 18 August 2016) Principal activities During the financial year the consolidated entity continued to conduct its core activity which was to develop human resources technology that automates the candidate reference process for employers. Dividends No dividends have been paid by the Company during the financial year ended 30 June 2017, nor have the Directors recommended that any dividends be paid. Review of operations Xref is investing to build on a global scale, and the loss for the consolidated entity after providing for income tax amounted to $6,456,038, within management expectations (30 June 2016: loss of $830,649). Highlights of the FY17 included:  > > Sales of $4.1 million, up 137% compared to $1.7 million in FY16 Strong growth in Australia, New Zealand, UK, Europe, Middle East and North America, including more than 50% annual client growth > Net revenue of $3.0 million, up 127% compared to $1.3 million in FY16.  > Securing the global domain Xref.com, enabling the launch of a global brand > Activating six channel integration partners which support 20,000 organisations worldwide > Launching new products and services including new employee dashboard, time-based referencing and Sentiment algorithm > Winning HRD’s ‘Employer of choice’ gold award  > Completing an $8 million share placement in August 2016 > After balance date, Xref completed a $7.5 million placement, which was oversubscribed.  > After balance date, Xref also launched a new office in Oslo, Norway, to support European growth Channel provides new growth path  Xref has focused on growth through integration partnerships which increase its channels to market. The company has integrated, or is in the process of integrating, with 10 organisations and channel integrations that are now ‘live’ worldwide including Bullhorn, Equifax (formerly Veda), Expr3ss!, iCIMS, Oracle Taleo, SmartRecruiters and Workday. Since balance, Xref has also announced its integration with Checkr in Canada and the USA. Channel partners employ more than 1,500 support staff and their advocacy helps to reduce Xref’s cost of acquiring new business.  Re-engineering technology drives client growth  Xref continued to innovate and launch new systems, including a new fully API-driven employee dashboard with a rebuilt client, candidate and referee experience. APIs allow exciting new features such as dynamic reports and self-service ‘customer success’ capabilities, and the platform also increased scale and security, and added mobile functionality and multi-language capabilities. On July 1, 2017, Xref launched the new Sentiment Engine which leverages the platform’s big data, and through machine learning is able to analyse referee feedback and provide a sentiment breakdown, at a glance.  Winner of ‘Employer of choice’ gold award and cloud innovation award  Xref was pleased to receive Human Resource Director (HRD)’s ‘Employer of choice’ gold award for companies with less than 100 employees, as a recognition of the support and opportunities the company offers its people. In August 2017, Xref also received the Australian Business Award for cloud innovation, recognising the power of the platform and the flexibility, efficiency, security and automation it offers its clients. Growth exceeds 100% year-on- year Sales for FY17 were $4.1 million, up 137% from $1.7 million in FY16. Sales, which represent cash payments, are a leading indicator of Xref’s revenue growth. Unearned revenue, which is represented in unused credits, was $2.03 million at 30 June 2017 (note 21), up from $904k at 30 June 2016. Revenue grew 127% to $3.0 million for FY17, compared to $1.3 million for FY16, demonstrating the strong and continuing demand for Xref’s services.  At 30 June 2017, Xref held $4.1 million in cash (note 15). On 2 August 2017, the company raised $7.5 million before costs through a placement, which closed oversubscribed, to Australian institutions and sophisticated investors at a price of 60c per share. Funds from the placement will support:  > Marketing to accelerate expansion in key international markets and co-promotional activities with channel partners to increase sales;  > > The further development of integrations with applicant tracking systems and other human resources platforms, which provide a valuable marketing channel for Xref; and  Initiatives to educate global partner teams and leverage integrations, which provide enterprises access to Xref’s candidate referencing platform, enabling the rapid digital onboarding of new clients.  10 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 11 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued In August 2016, Xref raised $8 million through a share placement which also closed oversubscribed. These funds were We will continue to make evidence-based, strategic improvements to the business and pioneer positive change in the HR used to accelerate the company’s investment in global sales growth, product integration and software development. The industry, globally. Xref is on a dynamic growth trajectory and we anticipate continued 100% year-on-year revenue growth. company also received an R&D refundable tax offset of $482,426 in December 2016.  As we scale, we have a strong platform for ongoing growth in our key markets of Australia, Europe, Canada and the USA, Positive growth outlook  Xref maintains a dynamic growth trajectory and anticipates continued 100% year-on- year revenue growth.  Corporate  Following shareholder endorsement of moving the company’s domicile from New Zealand to Australia on 27 May 2016 the company lodged forms to this effect with ASIC on Monday 28th August 2017. The company successfully redomiciled to Australia on 21 September 2017. Xref fully divested the mining assets owned as part of the activities of King Solomon Mines Limited in March 2017 for a total consideration of $2. Matters subsequent to the end of the financial year with great opportunities to expand further. 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 On 2 August 2017, Xref Limited raised $7,500,000 before share placement costs through a placement to Australian Experience and expertise: institutions and sophisticated investors at a price of 60c per share. Lee-Martin Seymour is CEO and co-founder of Xref. Having spent more than 17 years working in recruitment across various industries and geographies, he developed a deep understanding of the demands of the industry and a passion to pioneer change. A serial entrepreneur, Lee has been at the forefront of multiple other technology and recruitment organisations that redefine processes, build brands and streamline business practices. During September, Xref incorporated a company in Norway (Xref AS) as part of its continued expansion into new regions. The Norway office is focusing on the Nordic geographical region. Four staff have been hired including a General Manager, and three sales staff. Customer support is initially being provided from the Xref London office. Clients have already been secured in this new region. Refer to the market announcement on 21 September 2017 for further information. On July 3, 2017 Xref issued invitations to eligible employees to participate in the Xref Employee Option plan. This plan was approved at the EGM held in May 2016. The last date for acceptance to participate was September 7th 2017. With 100% of employees accepting the invitation, the total number of new options issued in Xref Limited is 1,055,499. Refer to the market announcement on 26 September 2017 for further information. As at 21 September 2017 Xref is now domiciled in Australia. The address of its registered office is Unit 14, 13 Hickson Road, Dawes Point, New South Wales, Australia 2000 Likely developments and expected results of operations Our ongoing growth centres on three key pillars, global expansion, integrations, and product development. We continue to invest in the global expansion of Xref, in terms of both the physical growth of the organisation - with new offices and on partnerships and integrations, a major driver for our success in the last year, which has included agreements with Bullhorn, Expr3ss!, iCIMS, Oracle Taleo, SmartRecruiters and Workday. Critically, we will never lose sight of the continuous product developments required to meet the needs of clients around the world as their roles, industries and demands evolve. With offices in Australia, the UK and Canada at balance date and a new office with four experienced staff introduced in Norway since, the global expansion and adoption of the Xref solution shows no signs of slowing. A pipeline of potential markets will become the ongoing focus of the year ahead. Integrations have also continued to gain momentum since balance date. An integration in the US and Canada with Checkr Other current public directorships: None Former directorships (last 3 years): None Special responsibilities: Member of the Remuneration Committee Interests in shares: 32,371,796 ordinary shares Interests in options: None Contractual rights to shares: 16,666,667 performance rights Name: Title: Timothy Griffiths Chief Technology Officer Qualifications: MBA Timothy Griffiths is CTO and co-founder of Xref. An MBA-qualified technologist with more than 20 years’ experience advising global companies, Tim’s IT expertise and technology start-up knowhow have taken the business from a smart idea to a global success. Tim previously worked for Benchmark Capital and was co-founder of media company a2a plc, which floated on the UK stock market. More recently, Tim was also CIO for Jcurve Solutions, an Australian cloud NetSuite ERP provider. Other current public directorships: None Former directorships (last 3 years): None Special responsibilities: Member of the Audit Committee Interests in shares: 32,371,796 ordinary shares personnel - and the R&D required to introduce and scale the Xref service in new markets. We also maintain our focus Experience and expertise: - the first agreement that sees a partner integrated into the Xref platform, rather than vice versa - marks the beginning of Interests in options: None another positive year of partnerships with other, smart HR solutions that will allow Xref to offer clients greater value with Contractual rights to shares: 16,666,666 performance rights minimal disruption to their existing workflow. 12 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 13 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued 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: None Former directorships (last 3 years): None Special responsibilities: Member of the Audit and Remuneration Committees Interests in shares: 1,650,000 ordinary shares Interests in options: 900,000 Contractual rights to shares: None 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): None Special responsibilities: Member of the Audit Committee Interests in shares: 18,000 ordinary shares Interests in options: 900,000 Contractual rights to shares: None Name: Title: Qualifications: Experience and expertise: 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: None Former directorships (last 3 years): None Special responsibilities: Member of the Remuneration Committee Interests in shares: Interests in options: None 7,000,000 Contractual rights to shares: None ‘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. Key Management Personnel Chief Financial Officer Mr James Solomons, BComm, CA, CTA, AFA, MIPA, QCA, JP, GAICD James is a chartered accountant with over 17 years of experience within the accounting & corporate finance industry. He has held various roles within the sector and has positioned himself as a leader in the accounting technology space bringing with him to Xref over 3 years of experience as Xero Australia’s Head of Accounting. A successful entrepreneur in his own right James has a deep understanding of the need to find a balance between investing for growth whilst maintaining strong corporate governance processes across the business. Company Secretary Mr Robert Waring, BEc, ACA, FCIS, ASIA, FAICD Robert has more than 41 years of experience in financial and corporate roles, including more than 26 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, Nanosonics Limited and Vectus Biosystems Limited. 14 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 15 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued 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 2017, 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 5 5 5 - 4 4 5 5 5 5 5 5 - - - - - - - - - - - - - 3 3 - - - - 3 3 - - - Lee-Martin Seymour Timothy Griffiths Timothy Mahony Simon O’Loughlin Brad Rosser Nigel Heap 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 Held: represents the number of meetings held during the time the Director held office or was a member of the relevant remuneration is separate. In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive Director committee. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 Australia 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 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 23th December 2015, noted on Page 18 the current maximum annual aggregate remuneration for directors was shown as $200,000. This has changed and a resolution was passed at the 2016 AGM that the maximum aggregate cash-based remuneration payable to Non Executive Directors in any financial year be increased by A$300,000 from A$200,000 to A$500,000. Executive remuneration > Additional disclosures relating to key management personnel The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of 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 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. 16 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 17 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued 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 2017 Annual General Meeting (‘AGM’) A Remuneration Report has been prepared for the 2017 year and a resolution will be put to the 2017 AGM to ask shareholders to approve it. 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: > > > Lee-Martin Seymour – Managing Director & Chief Executive Officer Timothy Griffiths – Executive Director & Chief Technology Officer Timothy Mahony – Non-Executive Director > Nigel Heap – (appointed as Non-Executive Director on 18 August 2016) > Brad Rosser – (appointed as Non-Executive Chairman on 18 August 2016) > Simon O’Loughlin – (Ex-Chairman, resigned 18th August 2016) And the Key Management Personnel: > James Solomons – Chief Financial Officer > Robert Waring – Company Secretary Short- term benefits Post- employment benefits Long-term benefits Share-based payments Cash bonus Nonmone- tary Superannua- tion Long service leave Equity- settled shares Equity- settled options $ $ $ Cash salary and fees $ 12,500 125,032 54,555 2017 Non-Executive Directors: Simon O’Loughlin (Chairman)* Brad Rosser (Chairman)** Timothy Mahony Nigel Heap** 47,755 $ - - - - Executive Directors: Lee-Martin Seymour Timothy Griffiths Other Key Management Personnel: James Solomons 250,000 41,450 250,000 41,450 209,644 41,450 Robert Waring 71,715 - 1,021,201 124,350 $ - - - - - - - - - - 21,850 21,850 - - - 18,893 - 62,593 Total $ 12,500 $ - 292,232 417,264 15,300 69,855 55,921 103,676 - - - - 313,300 313,300 269,987 71,715 - - - - - - - - - 363,453 1,571,597 - - - - - - - - - *Represents remuneration from 1 July 2016 to 18 August 2016 **Represents remuneration from 18 August 2016 to 30 June 2017 18 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 19 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued Short-term benefits Post-em- ployment benefits Long- term benefits Share-based pay- ments Cash salary and fees Cash bonus Non- mone- tary Superan- nuation Long service leave Equity-set- tled shares Equi- ty-settled options Total 2016 $ $ $ Non-Executive Directors: Simon O’Loughlin (Chairman) Tim Mahony Simon Taylor Executive Directors: Lee-Martin Seymour Timothy Griffiths Other Key Management Personnel: James Solomons Robert Waring Fu La Stephen McPhail 30,000 20,833 16,450 248,807 248,807 16,962 96,173 36,000 63,000 777,032 - - - - - - - - - - - - - - - - - - - - $ - - - 10,962 10,962 1,611 - - - 23,535 $ - - - - - - - - - - $ - - - - - - - - - - $ $ 15,300 45,300 21,588 42,421 12,750 29,200 - - - - - 259,769 259,769 18,573 96,173 36,000 12,750 75,750 62,388 862,955 The proportion of remuneration linked to performance and the fixed proportion are as follows: Name 2017 2016 2017 2016 2017 2016 Fixed remuneration At risk - STI At risk - LTI Non-Executive Directors: Simon O’Loughlin (Chairman) Brad Rosser (Chairman) Timothy Mahony Nigel Heap Executive Directors: Lee-Martin Seymour Timothy Griffiths 100% 100% 100% 100% 100% - 100% - 87% 87% 100% 100% Other Key Management Personnel: James Solomons Robert Waring 85% 100% 100% 100% - - - - 13% 13% 15% - - - - - - - - - - - - - - - - - - - - - - - - - Cash bonuses are dependent on meeting defined performance measures. The amount of the bonus is determined hav- ing regard to the satisfaction of performance measures and weightings as described above in the section ‘Consolidated entity performance and link to remuneration’. The maximum bonus values are established at the start of each financial year and amounts payable are determined in the final month of the financial year by the Nomination and Remuneration Committee. 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: Lee-Martin Seymour Managing Director and Chief Executive Officer Agreement commenced: 1 July 2016 Term of agreement: No fixed term Details: Name: Title: Base salary for the year ending 30 June 2017 of $230,000pa, plus superannuation, plus $20,000 car allowance 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 Agreement commenced: 1 July 2016 Term of agreement: No fixed term Details: Name: Title: Base salary for the year ending 30 June 2017 of $230,000pa, plus superannuation, plus $20,000 car allowance 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 Agreement commenced: 1 January 2017 Term of agreement: No fixed term Details: Base salary for the year ending 30 June 2017 of $230,000, plus superannuation, plus $20,000 car allowance 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. 20 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 21 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued Share-based compensation Options Additional disclosures relating to key management personnel Shareholding The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key The number of shares in the company held during the financial year by each director and other members of key management personnel in this financial year or future reporting years are as follows: management personnel of the consolidated entity, including their personally related parties, is set out below: Grant date Vesting date and exercisable date Expiry date Exercise price Fair value per option at grant date 7 December 2016 25/11/16 - 25/11/18 25 November 2021 7 December 2016 25/11/19 25 November 2022 $0.70 $0.70 $0.1198 $0.1428 Options granted carry no dividend or voting rights. All options were granted over unissued fully paid ordinary shares in the company. The number of options granted was determined having regard to the satisfaction of performance measures and weightings as described above in the section ‘Consolidated entity performance and link to remuneration’. Options vest based on the provision of service over the vesting period whereby the executive becomes beneficially entitled to the option on vesting date. Options are exercisable by the holder as from the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant date. There are no amounts paid or payable by the recipient in relation to the granting of such options other than on their potential exercise. 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 2017 are set out below: Name  Simon O’Loughlin Tim Mahony Simon Taylor Stephen McPhail Nigel Heap Brad Rosser Number of options granted during the year 2017 Number of options granted during the year 2016 Number of options vested during the year 2017 Number of options vested during the year 2016 - - - - 900,000 7,000,000 300,000 900,000 250,000 250,000 - - - 300,000 - - 300,000 - 300,000 300,000 250,000 250,000 - - Balance at Received Balance at the start of as part of Disposals/ the end of the year remuneration Additions other the year Ordinary shares Non-Executive Directors: Simon O’Loughlin* Brad Rosser ** Timothy Mahony Nigel Heap** Executive Directors: Lee-Martin Seymour Timothy Griffiths Other Key Management Personnel: James Solomons Robert Waring *for the period 1 July 2016 to 18 August 2016 **for the period 18 August 2016 to 30 June 2017 Option holding 550,000 - 1,650,000 - 24,038,462 24,038,462 - 213,885 50,490,809 - - - - - - - - - - - 18,000 8,333,333 8,333,334 9,000 - - 16,693,667 - - - - - - - - - 550,000 - 1,650,000 18,000 32,371,795 32,371,796 9,000 213,885 67,184,476 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 Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel below: as part of compensation during the year ended 30 June 2017 are set out below: Value of options granted during the year Value of options exercised during the year Value of options lapsed during the year Remuneration consisting of options for the year Name Nigel Heap Brad Rosser $ 107,820 896,100 $ - - $ - - % 54% 70% Options over ordinary shares Simon O’Loughlin* Brad Rosser Timothy Mahony Nigel Heap *for the period 1 July 2016 to 18 August 2016 Balance at the start of the year  Granted  Exercised Expired/ forfeited/ other Balance at the end of the year 300,000 - - 7,000,000 900,000 - - 900,000 1,200,000 7,900,000 - - - - - - - - - 300,000 7,000,000 900,000 900,000 - 9,100,000 22 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 23       DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued Other transactions with key management personnel and their related parties The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by During the financial year; the Corporations Act 2001. Payments for accounting services from Aptus Accounting & Advisory (related entity of James Solomons) of $93,845 (ex GST) The directors are of the opinion that the services as disclosed in note 10 to the financial statements do not compromise the were made. external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: Payments for company secretarial services from Oakhill Hamilton Pty Ltd (related entity of Robert Waring) of $71,715 (ex GST) were made. All transactions were made on normal commercial terms and conditions and at market rates. Performance Rights > all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and > none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. Lee-Martin Seymour had B Class Performance Rights converted into 8,333,333 fully paid ordinary shares after the Rounding of amounts achievement of the performance milestones set out in the conversion events, as approved by shareholders at the 26 The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and November 2015 EGM, and as detailed in the terms and conditions of the Company’s B Class Performance Rights released Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that to ASX on 5 February 2016. As at the date of this report there is a balance of 16,666,667 Performance Rights available for Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Lee-Martin Seymour. Timothy Griffiths had B Class Performance Rights converted into 8,333,334 fully paid ordinary shares after the achievement of the performance milestones set out in the conversion events, as approved by shareholders at the 26 November 2015 EGM, and as detailed in the terms and conditions of the Company’s B Class Performance Rights released to ASX on 5 Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors’ report. February 2016. As at the date of this report there is a balance of 16,666,667 Performance Rights available for Timothy Corporate Governance Griffiths. 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 Corporations Act 2001. 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 section 237 of the Corporations Act 2001 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. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 10 to the financial statements. The Group’s Corporate Governance Statement and ASX Appendix 4G are released to ASX on the same day the Annual Report is released. The Corporate Governance Statement and Corporate Governance Compliance Manual can be found on the Company’s website at https://xref.com/en/investor-centre/. This report is made in accordance with a resolution of Directors, pursuant to section 298 (2) (a) of the Corporations Act 2001. On behalf of the directors Lee-Martin Seymour Brad Rosser Managing Director Chairman 27 September 2017 27 September 2017 Sydney Sydney 24 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 25 Independence Declaration 27 September 2017 The Board of Directors Xref Limited 14/13 Hickson Street Dawes Point 27 September 2017 SYDNEY NSW 2000 The Board of Directors Xref Limited 14/13 Hickson Street Dear Board Members Dawes Point SYDNEY NSW 2000 Xref Limited Crowe Horwath Sydney ABN 97 895 683 573 Member Crowe Horwath International Audit and Assurance Services Level 15 1 O'Connell Street Sydney NSW 2000 Australia Tel +61 2 9262 2155 Crowe Horwath Sydney Fax +61 2 9262 2190 ABN 97 895 683 573 Member Crowe Horwath International www.crowehorwath.com.au Audit and Assurance Services Level 15 1 O'Connell Street Sydney NSW 2000 Australia Tel +61 2 9262 2155 Fax +61 2 9262 2190 www.crowehorwath.com.au In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the Directors of Xref Limited. Dear Board Members As lead audit partner for the audit of the financial report of Xref Limited for the financial year ended 30 Xref Limited June 2017, I declare that to the best of my knowledge and belief, that there have been no contraventions of: In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (i) declaration of independence to the Directors of Xref Limited. (ii) any applicable code of professional conduct in relation to the audit. As lead audit partner for the audit of the financial report of Xref Limited for the financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, that there have been no Yours sincerely contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (i) (ii) any applicable code of professional conduct in relation to the audit. CROWE HORWATH SYDNEY Yours sincerely ASH PATHER CROWE HORWATH SYDNEY Partner ASH PATHER Partner Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. Financial Statements Consolidated statement of comprehensive income for the year ended 30 June 2017 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 Operating profit/ (loss) OTHER INCOME Other income Notes 2017  $ 2016 $  4,107,518 1,734,426 (1,127,069) (421,250) 9 2,980,449 1,313,176 10 11 5,418,895 5,409,076 1,912,737 2,144,376 46,181 17,310 10,874,152 4,074,423 (7,893,702) (2,761,247) 13 1,437,665 1,916,721 Profit/(loss) before income tax from continuing activities (6,456,038) (844,526) Income tax expense/ (credit) 14 - 716 Profit/(loss) for the year from continuing activities (6,456,038) (845,242) DISCONTINUED OPERATIONS Profit/ (loss) for the year from discontinued operations 8 (967) (2,354) Loss attributable to the shareholders of the Company (6,457,005) (847,596) 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 (51,862) (51,862) 16,947 16,947 Total comprehensive loss for the year (6,508,867) (830,649) Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. 26 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 27                   FINANCIAL STATEMENTS / For the Year Ended 30 June 2017 FINANCIAL STATEMENTS / For the Year Ended 30 June 2017 Consolidated statement of comprehensive income for the year ended 30 June 2017 (continued) Consolidated statement of financial position as at 30 June 2017 EARNINGS PER SHARE From continuing and discontinuing operations Basic and diluted (cents per share) From continuing operations Basic (cents per share) From discontinuing operations Basic (cents per share) Notes 2017 $ 2016 $ 25 25 25 (0.06) (0.02) (0.06) (0.02) - - These financial statements should be read in conjunction with the notes to the financial statements Assets Current assets Cash and cash equivalents Trade and other receivables Prepayments Non-current assets classified as held for sale Total current assets Non-current assets Property, plant and equipment Intangibles Rental Bonds Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Unearned Revenue Employee entitlements Superannuation payable Lease incentives Liabilities directly associated with assets classified as held for sale Total current liabilities Non-current liabilities Employee entitlements Lease Incentive Total non-current liabilities Total liabilities Net assets Notes 2017 2016 15 16 8 17 18 19 21 20 8 20 4,069,573 2,616,084 192,620 2,270,832 944,060 52,132 6,878,277 3,267,024 - 6,878,277 333,814 3,600,838 212,357 101,681 74,998 389,036 139,944 - 48,467 188,411 7,267,313 3,789,249 1,641,502 2,030,253 162,725 115,258 31,512 530,929 903,566 62,922 57,679 21,470 3,981,250 1,576,566 - 333,812 3,981,250 1,910,378 22,436 13,103 35,539 - 44,615 44,615 4,016,789 3,250,524 1,954,993 1,834,256 28 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 29       FINANCIAL STATEMENTS / For the Year Ended 30 June 2017 FINANCIAL STATEMENTS / For the Year Ended 30 June 2017 Consolidated statement of financial position as at 30 June 2017 (continued) EQUITY Issued share capital Retained earnings Other equity reserves Total equity Notes 2017 2016 22 23 32,687,991 25,042,977 (7,475,827) (1,110,982) (21,961,640) (22,097,739) 3,250,524 1,834,256 These financial statements should be read in conjunction with the notes to the financial statements. 6 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o f y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o C n g i e r o F y c n e r r u c l a t o T y t i u q e d e n i a t e R s g n i n r a e n o i t a d i l o s n o C n o i t a l s n a r t n o i t p o e r a h S e c n a m r o f r e P e v r e s e r e v r e s e r e v r e s e r e v r e s e r s t h g i r l a t i p a c e r a h S $ $ $ $ $ $ $ - - 3 3 3 , 8 5 9 , 2 3 3 3 , 8 5 9 , 2 - - - - ) 9 8 7 , 7 2 4 ( ) 9 8 8 , 7 2 4 ( 3 0 5 , 4 6 1 3 0 5 , 4 6 1 ) 6 8 2 , 3 6 2 ( ) 6 8 3 , 3 6 2 ( - - - - 0 0 1 ) 1 2 9 , 5 4 8 , 2 2 ( ) 1 2 8 , 5 4 8 , 2 2 ( 8 8 5 , 1 2 ) 0 3 7 , 1 5 ( ) 2 4 1 , 0 3 ( - - - 7 4 9 , 6 1 - ) 6 9 5 , 7 4 8 ( ) 6 9 5 , 7 4 8 ( ) 9 4 6 , 0 3 8 ( ) 6 9 5 , 7 4 8 ( - - - - - - - - - - - - - - - - - 7 4 9 , 6 1 7 4 9 , 6 1 - - - - - 4 1 2 , 6 7 2 - - - 0 0 1 - 0 0 1 4 1 2 , 6 7 2 3 3 3 , 3 3 4 7 0 6 , 4 9 0 , 5 2 s t n e m e v o M y t i u q E n o i t i s i u q c A e s r e v e R y t i u q E e r a h S - - - 8 8 5 , 1 2 - 8 8 5 , 1 2 - - - - - - - - - - r a e y e h t r o f s s o l e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f s t n e m e v o m r a e y e h t r o f ) s s o l ( / t fi o r P : e m o c n I e v i s n e h e r p m o C s n o i t p o f o e u s s I ) 0 3 7 , 1 5 ( ) 0 3 7 , 1 5 ( s t s o c n o i t c a s n a r t l a t i p a c e r a h s f o e u s s I s r e n w o h t i w s n o i t c a s n a r t l a t o T y t i u q e n i y l t c e r i d d e d r o c e r 3 3 3 , 3 3 4 0 0 0 , 5 2 5 , 2 y t i u q e d t L y t P f e r X r o f n o i t a r e d i s n o C - - ) 0 0 1 ( l a t i p a C e r a h S d t L y t P f e r X f o n o i t a n m i i l E 7 0 7 , 9 6 5 , 2 2 d t L i l s e n M n o m o o S g n K y b d e c a p e R i l y l u J 1 t a s a y t i u q E n i t i c fi e D d t L y t P f e r X 5 1 0 2 f e r X y b s t e s s A f o n o i t i s i u q c A e s r e v e R d t L y t P 1 3 j t n e m t s u d a d o i r e p r o i r P e c n a l i a b g n n e p o d e t a t s e R 6 1 0 2 p u o r G s e t o N 6 5 2 , 4 3 8 , 1 ) 2 8 9 , 0 1 1 , 1 ( ) 1 2 8 , 5 4 8 , 2 2 ( 7 4 9 , 6 1 2 0 8 , 7 9 2 3 3 3 , 3 3 4 7 7 9 , 2 4 0 , 5 2 6 1 0 2 e n u J 0 3 t a s a y t i u q E . s t n e m e t a t s l a i c n a n fi e h t o t s e t o n e h t h t i w n o i t c n u n o c j n i d a e r e b l d u o h s s t n e m e t a t s l a i c n a n fi e s e h T 30 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 31 FINANCIAL STATEMENTS / For the Year Ended 30 June 2017 FINANCIAL STATEMENTS / For the Year Ended 30 June 2017 $ l a t o T y t i u q e n g i e r o F y c n e r r u c d e n i a t e R s g n i n r a e n o i t a d i l o s n o C n o i t a l s n a r t n o i t p o e r a h S e c n a m r o f r e P e v r e s e R e v r e s e r e v r e s e r e v r e s e r s t h g i r l a t i p a c e r a h S $ $ $ $ $ s e t o N 7 1 0 2 p u o r G 6 5 2 , 4 3 8 , 1 ) 2 8 9 , 0 1 1 , 1 ( ) 1 2 8 , 5 4 8 , 2 2 ( 7 4 9 , 6 1 2 0 8 , 7 9 2 3 3 3 , 3 3 4 7 7 9 , 2 4 0 , 5 2 6 1 0 2 y l u J 1 t a s a y t i u q E 7 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o f y t i u q e n i s e g n a h c f o t n e m e t a t S 1 8 6 , 1 0 1 , 8 ) 0 0 0 , 0 4 5 ( - 4 5 4 , 3 6 3 - - - - - 0 6 1 , 2 9 5 3 1 , 5 2 9 , 7 0 6 1 , 2 9 ) 2 6 8 , 1 5 ( - ) 5 0 0 , 7 5 4 , 6 ( ) 5 0 0 , 7 5 4 , 6 ( ) 7 6 8 , 8 0 5 , 6 ( ) 5 0 0 , 7 5 4 , 6 ( - - - - - - - - - - - - - - - ) 2 6 8 , 1 5 ( ) 2 6 8 , 1 5 ( - - - 4 5 4 , 3 6 3 ) 0 6 1 , 2 9 ( 4 9 2 , 1 7 2 - - - ) 3 3 3 , 3 8 ( 3 3 3 , 3 8 - - 1 8 6 , 1 0 1 , 8 ) 0 0 0 , 0 4 5 ( - - - - ) 3 3 3 , 3 8 ( 4 1 0 , 5 4 6 , 7 - - - - - - s t s o C g n i s i a R l a t i p a C i B s t h g R e c n a m r o f r e P d e u s s I s e r a h S d e u s s I s n o i t p O d e r i p x E s n o i t p O h t i w s n o i t c a s n a r t l a t o T s r e n w o : e m o c n I e v i s n e h e r p m o C r a e y e h t r o f ) s s o l ( / t fi o r P e h t r o f s t n e m e v o m e m o c n i e v i s n e h e r p m o c r e h t O r a e y s s o l e v i s n e h e r p m o c l a t o T r a e y e h t r o f 4 2 5 , 0 5 2 , 3 ) 7 2 8 , 5 7 4 , 7 ( ) 1 2 8 , 5 4 8 , 2 2 ( ) 5 1 9 , 4 3 ( 6 9 0 , 9 6 5 0 0 0 , 0 5 3 1 9 9 , 7 8 6 , 2 3 7 1 0 2 e n u J 0 3 t a s a y t i u q E . s t n e m e t a t s l a i c n a n fi e h t o t s e t o n e h t h t i w n o i t c n u n o c j n i d a e r e b l d u o h s s t n e m e t a t s l a i c n a n fi e s e h T Consolidated statement of cash flows for the year ended 30 June 2017 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 Notes 2017 $ 2016 $ 3,524,328 1,772,066 53,031 482,426 16,412 22 (9,631,070) (3,666,643) - (716) Net cash from/(used in) operating activities 27 (5,571,285) (1,878,859) 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 Cash from loans to other entities 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 Net cash from/(used in) financing activities 233 - 31,416 271 3,770,054 - (119,804) (146,404) (88,115) 3,623,921 22 22 8,000,000 (540,000) 7,460,000 550,000 (51,730) 498,270 Net increase/(decrease) in cash and cash equivalents 1,800,560 2,243,332 Cash and cash equivalents, beginning of the year Net foreign exchange differences Less cash included in disposal group 2,270,832 (1,819) - 81,076 (48,101) (5,475) Cash and cash equivalents at end of the year 15 4,069,573 2,270,832 These financial statements should be read in conjunction with the notes to the financial statements. 32 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 33                                                           Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS / continued 1. Reporting entity If the Group loses control over a subsidiary, it: Xref Limited is a limited liability company incorporated on 28 January 2003 and as at 21 September 2017 is domiciled in Australia. The address of its registered office is Unit 14, 13 Hickson Road, Dawes Point, New South Wales, Australia 2000. > derecognises the assets (including goodwill) and liabilities of the subsidiary; > derecognises the carrying amount of any non-controlling interest; Xref is a human resources technology company that automates the candidate reference process for employers. > derecognises the cumulative carrying amount of foreign currency translation; differences recorded in reserves; 2. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). a. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes of property, plant and equipment and derivative financial instruments. b. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 5. 3. Summary of significant accounting policies a. Basis of consolidation > > > > > 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. 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 The Group financial statements consolidate the financial statements of the Parent and all entities over which the Parent exchange rates at the date when the year-end fair value was determined. 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 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 in one or more of the three elements of control. The financial statements of subsidiaries are included in the preliminary movements disclosed within other comprehensive income. consolidated financial statements from the date that control commences until the date that control ceases. 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. 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. 34 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 35 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued The results and financial position of subsidiaries are translated into the presentation currency as follows: No assets classified as “held for sale” are subject to depreciation or amortisation subsequent to their classification as “held 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; for sale”. g. Property, plant and equipment ii. income and expenses for each statement of comprehensive income are translated at average exchange rates (unless Except for land and buildings, items of property, plant and equipment are measured at cost, less accumulated depreciation this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, and any impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. 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. 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. 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. Disposals c. Cash and cash equivalents 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. 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. Depreciation 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. Depreciation is charged on a straight value (SL) basis on all property, plant and equipment over the estimated useful life of the asset. The following depreciation rates have been applied at each class of property, plant and equipment: Computer Equipment Office Equipment Office Furniture Office Fit-out 3-5 years 3-20 years 10-20 years 6-20 years An allowance for impairment is established where there is objective evidence the Group will not be able to collect all Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining life of the amounts due according to the original terms of the receivable. improvements, whichever is shorter. e. Trade creditors and other payables The residual value and useful life of property, plant and equipment is reassessed annually. 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 h. Intangible assets presented as non-current liabilities. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost Trade creditors and other payables are recognised initially at fair value and subsequently measured at amortised cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of using the effective interest method. f. Assets available for sale intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. 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 Internally developed intangible assets 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. 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. 36 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 37 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Development activities include a plan or design for the production of new or substantially improved products. Development Initial recognition and measurement expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and Financial assets and financial liabilities are recognised initially at fair value plus transaction costs attributable to the commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources acquisition, except for those carried at fair value through profit or loss, which are measured at fair value. 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. Financial assets and financial liabilities are recognised when the Parent and Group becomes a party to the contractual provisions of the financial instrument. Capitalised development expenditure is measured at cost less accumulated amortisation and any impairment losses. De-recognition of financial instruments i. Leased assets 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 Leases where the Group assumes substantially all the risks and rewards incidental to ownership of the leased assets, are asset. 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. 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 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. 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. the estimates used to determine the recoverable amount. An impairment loss on property carried at fair value is reversed ii. Financial assets at fair value through profit and loss 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 instrument 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. 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. 38 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 39 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued iii. Held-to-maturity investments m. Employee entitlements Short- term employee benefits Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity Employee benefits, previously earned from past services, that the Group expect to be settled within 12 months of reporting other than loans and receivables. Investments are classified as held-to-maturity if the Group have the intention and ability date are measured based on accrued entitlements at current rate of pays. to hold them until maturity. The Group currently hold listed bonds designated into this category. These include salaries and wages accrued up to the reporting date and annual leave earned, but not yet taken at the Held-to-maturity investments are measured subsequently at amortised cost using the effective interest method. If there is reporting date. 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, The Group recognises a liability and an expense for bonuses where they are contractually obliged or where there is a past including impairment losses, are recognised in profit or loss. iv. Available-for-sale financial assets practice that has created a constructive obligation. Termination benefits 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. 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 Equity investments are measured at cost less any impairment charges, where the fair value cannot currently be estimated made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can reliably. be estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to 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”. 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 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. 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 lower that the unavoidable cost of meeting its obligation under the contract. discounts. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable The following specific recognition criteria must be met before revenue is recognised: evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Rendering of services Provisions are discounted to their present values, where the time value of money is material. The increase in the provision The Group sells candidate reference credits to its customers. When customers use a credit, the service has been performed due to the passage of time is recognised as an interest expense. and revenue is recognised in the accounting periods in which the services are provided. Unused credits are recognised as All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. unearned income in the financial statements. 40 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 41 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Interest income Changes in deferred tax assets or liabilities are recognised as a component of income tax in profit or loss, except where Interest income is recognised as it accrues, using the effective interest method. they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related o. Finance costs Finance costs recorded in the Statement of Comprehensive Income comprise the interest expenses charged on borrowings r. Goods and Services Tax (GST) deferred tax is also recognised in other comprehensive income or equity, respectively. and the unwinding of discounts used to measure the fair value of provisions. All amounts in these financial statements are shown exclusive of GST, except for receivables and payables that are stated 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: inclusive of GST. The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD), Australian Taxation Office ATO or tax offices in other jurisdictions is included as part of receivables and / or payables in the Statement of Financial > > > represents a separate major line of business or geographical area of operations; Position. GST balances from different countries are not offset. is part of a single co-ordinated plan to dispose of a separate major line of business; or geographical area of operations; or s. Share capital is a subsidiary acquired exclusively with a view to re-sale 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. 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 t. Dividend distribution 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. 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 Current income taxes shares outstanding during the year, adjusted for own shares held. 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. 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 $6,457,005 (2016: $847,596), the consolidated financial statements have been prepared on a going concern basis as the Group has a net asset position of $3,250,524 (2016: $1,834,256) and has raised $7.5 million (before costs) in August 2017 which was oversubscribed. The directors believe this 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 2017 Xref Limited / Annual Report 2017 / 43 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 4. New Accounting Standards and Interpretations not yet mandatory or early adopted 5. Significant accounting judgements, estimates and assumptions Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet The preparation of the financial statements requires management to make judgements, estimates and assumptions mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2017. that affect the reported amounts in the financial statements. Management continually evaluates its judgements and The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, most relevant to the consolidated entity, are set out below. AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, Share-based payment transactions verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, and recognition of revenue when each performance obligation is satisfied. The consolidated entity has at this time performed a preliminary assessment of the performance obligations within current contracts and has assessed that there will be no material impacts on the way revenue is currently recognised. AASB 9 Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial assets. For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. The consolidated entity has considered its financial assets and liabilities and does not believe that there will be any material impacts on the financial statements. AASB 16 Leases The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. 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 This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB Management monitors progress of internal research and development projects by using a project management system. 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, Significant judgement is required in distinguishing research from the development phase. a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing 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. Management has determined that for the 2017 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 previously existed. The system that currently exists is not a standalone asset and is constantly evolving. Additionally, the codebase and infrastructure regularly changes to keep up with technological advances. activities) and interest (either operating or financing activities) component. The impact of this standard on the financial Deferred tax assets statements of the consolidated entity is yet to be assessed. 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. 44 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 45 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Research and Development Refundable Tax Offset 7. Segment reporting 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 43.5% of the total figure. 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). The sale agreement was executed in March 2017 for the written down value of $2 AUD. 6. Group information The preliminary consolidated financial statements of the Group include:  Name Parent Xref Limited Subsidiaries Group % equity interest  Principal activity Country of incorporation  2017  2016 Candidate Referencing New Zealand 100% 100% Xref (AU) Pty Limited Xref (UK) Limited Candidate Referencing Australia Candidate Referencing United Kingdom Xref Referencing (CA) Limited Candidate Referencing Inner Mongolia Plate Mining Co Limited Mineral exploration and development Canada China 100% 100% 100% 0% 100% 100% 100% 90% The mineral exploration & development asset was divested in March 2017 for the written down value of $2. a. Investments in subsidiaries All investments in subsidiaries are carried at cost and eliminated through consolidation in the Group. There is only one operating segment (candidate referencing) for the year ended 30 June 2017. The disclosures on the face of the statement of comprehensive income to operating loss and the statement of financial position (excluding the items designated for sale) represent the Group’s one business segment. Geographical information Credit sales to external customers Australia Canada United Kingdom Total operating revenue Revenue from external customers Australia Canada United Kingdom Total operating revenue Non-current operating assets Australia Canada United Kingdom Total Non-current operating assets The information above is based on the locations of the customers. 2017 $ 3,844,059 120,864 142,595 4,107,518 2016 $ 1,720,865 - 13,561 1,734,426 2,889,087 1,304,475 23,124 68,238 - 8,701 2,980,449 1,313,176 207,128 22,125 58,102 287,355 147,960 7,521 32,930 188,411 46 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 47             NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 8. Non-current assets held for sale and discontinued operations 9. Revenue 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 – exploration and mining cost Total cash flows from discontinued operations b. Net assets of disposal group classified as held for sale The asset was divested in March 2017 for the written down value of $2 Assets Exploration and evaluation assets Other assets Total assets Liabilities Trade creditors and other payables Total liabilities Net assets of disposal group 2017 $ (967) (967) 2017 $ - - - - - - 2016 $ (2,297) (2,297) 2016 $ 240,000 93,814 333,814 333,812 333,812 2 The assets and liabilities of the discontinued operations are classified as held-for-sale and were written down to their fair value in 2016. The measurement of fair value in 2016 was 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 was finalised in March 2017 for a consideration of $2. c. Net profit of disposal group classified as held for sale Rendering of services Total revenue 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 Total Auditors remuneration Fees charged by Audit Firm: Financial statement audit and review Total fees paid to audit firm 11. Depreciation, amortisation and impairment expenses Expenses Profit/ (loss) for the year from discontinued operations 2017 $ (967) (967) 2016 $ (2,354) (2,354) Depreciation of property, plant and equipment Total 2017 $ 2016 $ 2,980,449 1,313,176 2,980,449 1,313,176 2017 $ 111,352 314,279 232,353 187,628 1,486,865 830,788 363,454 1,301,920 25,522 554,915 2016 $ 69,636 157,559 91,298 172,028 277,437 410,162 21,588 623,846 48,101 272,722 5,409,076 2,144,376 111,352 111,352 69,636 69,636 2017 $ 46,181 46,181 2016 $ 17,310 17,310 48 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 49 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 12. Research and development costs Research and development costs expensed Total research and development costs for the year 2017 $ 2016 $ 3,183,062 1,072,058 3,183,062 1,072,058 The Parent and Group research and development projects have focused on cloud-based solutions for candidate recruitment. 13. Other income Profit on Sale Research & Development - Refundable Tax Offset Interest Received Other Income Total 14. Income tax 2017 $ 2 1,384,632 53,031 - 2016 $ 1,417,860 482,426 16,413 22 1,437,665 1,916,721 Australia UK Canada $ (263,386) $ - $ - NZ $ Total $ - (263,386) (333,250) (363,246) (98,298) (52,802) (847,596) (596,636) (363,246) (98,298) (52,802) (1,110,982) (740,555) 274,501 - - - - 55,359 (685,196) - 274,501 (1,062,690) (363,246) (98,298) 2,557 (1,521,677) 2016 Losses BF Current year loss Accumulated Losses Permanent Tax Difference Timing Differences Taxable Loss CF Tax Rates 30% 20% 27% 28% Calculated Deferred Tax Asset (318,807) (72,649) (26,049) 716 (416,789) The Company has moved domicile from New Zealand to Australia and has sold the Chinese subsidiary, and so the company does not recognise a potential tax loss in these countries. However, Xref Limited has operating subsidiaries in Australia, Tax Expense - - - (716) (716) the UK and Canada which are expected to accumulate tax losses prior to returning a profit. Potential Deferred Tax Asset Not Recognised (318,807) (72,649) (26,049) - (417,505) 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%) 2017 $ - - 2016 $ 716 716 (6,457,005) (846,880) Expected income tax expense (deferred tax asset) (1,937,102) (254,064) Adjustments: Deferred tax asset not recognised Permanent differences Adjustment for foreign tax rates Interest resident withholding tax unable to claimed Current year income tax expense (441,019) 1,772,574 605,547 - - 417,505 (163,441) - 716 716 2017 Losses BF Current year loss Accumulated Losses (596,636) (363,246) (98,298) (52,802) (1,110,982) (4,388,877) (850,881) (727,341) (489,906) (6,457,005) (4,985,513) (1,214,127) (825,639) (542,708) (7,567,983) Permanent Tax Difference 1,458,892 11,179 4,128 - 1,474,199 Timing Differences Taxable Loss CF (420,761) (1,083) (9,155) 102,449 (328,550) (3,947,382) (1,204,031) (830,666) (440,259) (6,422,338) Tax Rates 30% 20% 27% 28% Calculated Deferred Tax Asset (1,184,215) (240,806) (224,280) (123,273) (1,772,574) Tax Expense - - - - - Potential Deferred Tax Asset Not Recognised (1,184,215) (240,806) (224,280) (123,273) (1,772,574) 50 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 51                   NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued c. Income tax payable/(receivable) Provisional tax and resident withholding tax paid Closing balance d. NZ Imputation credits Closing balance e. Deferred tax assets and liabilities 2017 $ - - 2017 $ - 2016 $ 716 716 2016 $ 15,948 16. Trade debtors and other receivables Trade debtors Related party receivables Research and development incentive grant Other receivables Total 2017 $ 1,199,661 1,499 1,384,632 30,292 2,616,084 2016 $ 220,114 25,995 655,717 42,234 944,060 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. The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the All receivables are subject to credit risk exposure. 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 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 2017, the ageing analysis of trade receivables post due but not impaired is detailed as follows: can be utilised in the foreseeable future. 15. Cash and cash equivalents Cash at bank and in hand Rental bonds Bank overdrafts Total cash and cash equivalents The carrying amount of cash and cash equivalents approximates their fair value. 2017 $ 2016 $ 3,999,066 2,200,335 70,507 - 70,507 (10) 4,069,573 2,270,832 0 – 30 days overdue 30 – 90 days overdue 90 days overdue Total 2017 $ 793,537 348,375 57,749 1,199,661 2016 $ 152,309 67,651 154 220,114 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 The Parent has arranged a legal right of set off between its bank trading account, call deposit accounts, and its bank and other receivables. The main components of this allowance are a specific loss component that relates to individually overdraft. Bank overdrafts are repayable on demand and form an integral part of an entity’s cash management. Accordingly, significant exposures, and a collective loss component established for groups of similar assets in respect of losses that this balance has been netted in the 2017 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. 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 2017 (2016: No impairment recognised). 52 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 53 NOTES TO THE FINANCIAL STATEMENTS / continued 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 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 Computer Equipment Office Equipment Office Furniture Office Fitout $ - - $ 18,614 864 $ - - $ - - Total $ 18,614 864 30,114 82,370 22,979 10,941 146,404 18. Intangibles Domain: Xref.com Less: impairment Total 2017 $ 101,681 - 101,681 2016 $ - - - Xref issued 200,554 shares at $0.507, being $101,681 to Jeffery Robert Di Donato on the 10th May 2017 as consideration for the payment of the purchase price of the domain name xref.com. The value of consideration payable in share capital has been classified as an intangible asset. - (5,349) - - (5,349) 19. Trade creditors and other payables 30,114 96,499 22,979 10,941 160,533 - 8,357 3,938 - 12,630 (5,078) 3,938 15,909 - 486 - 486 - 256 - 256 8,357 17,310 (5,078) 20,589 Trade payables Non trade payables and accrued expenses Related party payables Accrued salaries, wages and related costs GST Payable Total 2017 $ 571,166 552,807 4,097 481,441 31,991 2016 $ 291,904 165,414 8,491 21,070 44,050 1,641,502 530,929 Carrying amount 30 June 2016 26,176 80,590 22,493 10,685 139,944 Trade creditors and other payables are non-interest bearing and normally settled on 30 day terms; therefore, their carrying Group 2017 Gross carrying amount Opening balance Other additions Disposals Closing balance Accumulated depreciation and impairment Opening balance Current year depreciation Depreciation written back on disposal Computer Equipment Office Equipment Office Furniture Office Fitout $ $ $ $ Total $ 30,114 93,485 96,499 22,979 10,941 160,533 7,982 16,994 1,343 119,804 -  (1,210) -  -  (1,210) 123,599 103,271 39,973 12,284 279,127 3938 25,250  - 15,909 17,580 486 256 2,248 1,103 20,589 46,181 -  -  -  -  amount approximates their fair value. 20. Employee entitlements Current Annual leave entitlements Total 2017 $ 162,725 162,725 2016 $ 62,922 62,922 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. 2017 $ 22,436 22,436 2016 $ - - Closing balance 29,188 33,489 2,734 1,359 66,770 Carrying amount 30 June 2017 94,411 69,782 37,239 10,925 212,357 Non current Long Service Leave Entitlements Total 54 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 55   NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 21. Unearned revenue Balance Brought Forward Unearned Revenue Movement: Credits Sold Opening Conditional Credits Credits Used Closing Conditional Credits 2017 $ 2016 $ 903,566 482,316 4,107,518 1,734,426 205,132 83,949 (2,100,318) (1,191,993) (1,085,263) (205,132) Opening Balance 2016 Shares Issued for Cash Performance rights Conversion Capital Raising Costs Number Issue Price Average Issue Price of Shares $ $/Share 90,273,668 25,042,977 11,428,571 8,000,000 16,666,667 83,333 0.277 0.700 0.005 - (540,000) Issued for acquisition of domain name 200,554 101,681 0.507 Closing Balance 2017 118,569,460 32,687,991 0.0276 Xref issued 11,428,571 shares at $0.70 (being a 5.4% discount to the market price at the time) to Australian institutions Net Unearned Revenue Movement 1,127,069 421,250 and sophisticated investors on 17 August 2016 with the aim of accelerating global sales growth, facilitating product integrations, driving software development and providing further working capital for the Group’s operations. Opening Balance Revaluation due to change in foreign exchange rates (382) - Xref issued 200,554 shares at $0.507 to Jeffery Robert Di Donato on the 10th May 2017 as consideration for the payment Balance Carried Forward 2,030,253 903,566 of the purchase price of the domain name xref.com 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. 22. Share capital - Xref Limited Capital risk management Number Issue Price Average Issue Price of Shares $ $/Share Opening Balance 2015 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 Closing Balance 2016 16,698,587 81 3,575,000 20,000,000 50,000,000 - - 0.160 0.200 0.051 572,000 4,000,000 2,525,000 (735,295) (51,730) 90,273,668 25,042,977 0.277 The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company’s share price at the time of the investment. The consolidated entity is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The consolidated entity is not subject to certain financing arrangements covenants during the financial year ended 30 June 2017. The capital risk management policy remains unchanged from the 30 June 2016 Annual Report. 56 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 57       NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 23. Other equity reserves 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% 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 2.31 Years. a. Foreign Currency Translation Reserve b. Performance Right Reserve c. Share Options Reserve d. Consolidation Reserve Total a. Foreign currency translation reserve 2017 $ 2016 $ (34,915) 16,947 350,000 433,333 569,096 297,802 (22,845,821) (22,845,821) (21,961,640) (22,097,739) 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. b. Performance right reserve The performance 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 Less Conversion Event Performance right reserve balance Class A Conversion Event Number Granted Performance Right Reserve $A Weighted Average Fair Value $ / Right 16,666,667 16,666,667 16,666,666 50,000,000 (16,666,667) 350,000 83,333 - 433,333 (83,333) 0.021 0.005 0.000 0.009 33,333,333 350,000 0.0105 Upon the Group, during any six month reporting period of the company that ends on or prior to 30 months after the date of issue of the rights, achieving Credit Sales 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). The Class B Conversion Event was achieved and the Class B shares were issued 10 March 2017. 58 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 59 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued c. Share option reserve Issued option and movements of options are shown below: The options have been valued using a binomial options method, using the following assumptions: Issue Date Expiry date Average exercise price in $A per share Options Option Reserve $A (a) Listing date (re-listing as Xref Limited) Price history for volatility determination Consolidation (1 for 50) 29 July 2016 6.000 32,000 92,160 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 Closing Balance 30 June 2016 At 1 July 2016 At 1 July 2016 Expired Granted 7 December 2016 Granted 7 December 2016 29 July 2016 1 February 2019 29 July 2016 25 November 2022 25 November 2021 0.230 0.230 0.230 0.271 0.120 0.230 0.120 3,908,909 199,354 300,000 300,000 3,144 3,144 4,540,909 297,802 32,000 92,160 4,508,909 220,942 (32,000) (92,160) 0.700 (b) 2,500,000 67,576 0.700 (a) 5,400,000 280,578 Closing Balance 30 June 2017 0.529 12,408,909 569,096 Grant date Measurement date Exercise price Expiry date Life of option Price of underlying shares at measurement date Risk free rate = 5 year Government Bond (26/11/2016) Expected volatility Dividends expected on the shares (b) 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 measurement date Risk free rate = 5 year Government Bond (26/11/2016) Expected volatility Dividends expected on the shares 9/02/2016 2.47yr 26/11/2016 26/11/2016 $0.70 25/11/2021 5.00 yr $0.47 2.19% 40% Nil 09/02/2016 5.00yr 25/11/2016 25/11/2016 $0.70 25/11/2022 6.00 yr $0.47 2.7% 40% Nil 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 30 months after the date of issue of the rights, achieving Credit Sales 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). The Class B Conversion Event was achieved and the Class B shares were issued 10 March 2017. 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. The weighted average contractual life of the performance rights for the 2017 year was 1.59 years (2016: 2.59 years) 60 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 61 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Option movements during the year On the 29th July 2016, 92,160 options expired. As approved at the 25th November 2016 AGM, 7,900,000 options were issued to 2 directors of the company as a key 25. Earnings per share 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. component of their remuneration by the company. Chairman Brad Rosser was issued with 7,000,000 with 4,500,000 expiring Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of the Parent by the on the 25th November 2021 and 2,500,000 expiring on the 25th November 2022. Nigel Heap was issued 900,000 options, weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary all expiring on the 25th November 2021. 300,000 of the options issued to Nigel Heap vested on the 25th November 2016. shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. 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, which expired on 29th July 2016. (based on the Black Scholes valuation model; assuming a stock volatility ranging between 80% The Group recorded losses for the years ended 30 June 2016 and 30 June 2017. 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: to 120% depending on time of grant). Options Vested and therefore exercisable Source BF from King Solomon Mines Limited & Consolidated (1 for 50) Expiry Date 29 July 2016 2017 Acquisition of Xref Pty Ltd 1 February 2019 3,908,909 Options Vested – Tim Mahony Options Vested – Nigel Heaps 1 February 2019 25 November 2021 300,000 300,000 2016 32,000 3,908,809 300,000 Loss attributable to ordinary equity holders of the parent: Continuing operations Discontinued operations 2017 $ 2016 $ (6,456,038) (845,242) (967) (2,354) Loss attributable to ordinary equity holders of the parent for basic earnings (6,457,005) (847,596) Weighted average number of ordinary shares for basic EPS 105,341,482 50,919,627 4,508,909 4,240,909 Weighted average number of ordinary shares adjusted for the effect of dilution 105,341,482 50,919,627 The weighted average share price for the 2017 financial year was $0.548 (2016: $0.465) d. Consolidation 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 Limited to the share capital of King Solomon Mines Limited immediately after the reverse acquisition. 24. Dividends The following dividends were declared and paid by the Parent. $0.00 per ordinary share (2016: $0) 2017 2016 $ - $ - 26. 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 2017 Loans and receivables Available-for- sale financial assets Financial liabilities at fair value through profit and loss Total Financial assets Cash and cash equivalents Trade debtors and other receivables Total Financial liabilities Trade creditors and other payables Total 4,069,573 2,616,084 6,685,657 - - - - - - - - - - 4,069,573 2,616,084 6,685,657 1,919,485 1,919,485 1,919,485 1,919,485 62 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 63 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Loans and receivables Available-for- sale financial assets Financial liabilities at fair value through profit and loss Total The oversubscribed $7.5million raise in August 2017 has allowed the Group to continue its expansion plans. As at this date the Group has sufficient cash on hand to fund current 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 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 2,270,832 944,060 - - - 3,214,892 93,814 93,814 - - - 2,270,832 944,060 93,814 - 3,308,706 - - - - - - 651,530 333,812 651,530 333,812 985,342 985,342 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 The Group is 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. below: Group 2017 Non-derivative financial liabilities Trade creditors and other payables 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 1,641,502 1,641,502 1,641,502 Superannuation payable 115,258 115,258 115,258 Total 1,756,760 1,756,760 1,756,760 - - - - - - - - - - - - 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 - - - - - - - - - - - - - - - - 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. iii. Market risk Further details in relation to the credit quality of financial assets is provided in Note 16. affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will ii. Liquidity risk to manage and control market risk exposures within acceptable parameters, while optimising the return. Liquidity risk represents the Group’s ability to meet is contractual obligations as they fall due. The Group manages liquidity iv. Foreign exchange risk risk by managing cash flows and ensuring that adequate cash is in place to cover any potential short falls. The Group is exposed to fluctuations in foreign currency exchange rates as a result of maintaining foreign currency denominated bank accounts and entering into foreign currency transactions. Thus, the Group will incur a foreign exchange gain or loss each year due to the appreciation and depreciation of the Australian dollar relative to other currencies including the Canadian dollar, the UK Pounds Sterling and the New Zealand dollar. 64 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 65 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued The exposure to currencies of the Group is as follows: 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: Canadian dollars UK Pound Sterling New Zealand Dollars Chines Yuen Total 2017 $ 31,734 56,284 1,507 - 2016 $ 13,853 60,889 34,552 12,727 89,525 122,021 The potential impact on the bank accounts, net deficits and equity movements in foreign currency exchange rates (calculated by applying the change in foreign exchange rate to foreign currencies held at balance date) is indicated below: Potential Foreign Exchange Rate Fluctuation Impact on valuation of holding in: Canadian dollars UK Pound Sterling New Zealand Dollars Total impact of potential change in exchange rate a. Measurement of financial assets 5% $ 1,857 2,814 75 4,746 10% $ 3,713 5,628 151 9,492 20% $ 7,426 11,254 301 18,981 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) This sale agreement was executed in March 2017 for the written down value of $2 AUD. 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). Short-term exposure 30 June 2017 Financial Assets Financial Liabilities Net statements of financial position exposure 4,749,757 - 17,873 86,269 AUD China United Kingdom Canada New Zealand 6,385,797 (1,636,040) - - 112,949 111,913 (95,076) (25,644) - - - Long-term exposure 30 June 2017 Financial Assets Financial Liabilities Net statements of financial position exposure Short-term exposure 30 June 2016 Financial Assets Financial Liabilities AUD China United Kingdom Canada New Zealand 74,998 - 74,998 - - - - - - - - - - - - AUD China United Kingdom Canada New Zealand 2,987,225 93,814 99,842 20,262 37,056 (512,817) (333,812) (50,371) (6,286) (18,934) Net statements of financial position exposure 2,474,408 (239,998) 49,471 13,976 18,122 Long-term exposure 30 June 2016 Financial Assets Financial Liabilities AUD China United Kingdom Canada New Zealand 70,507 - 70,507 - - - - - - - - - - - - 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. Net statements of financial position exposure 66 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 67 NOTES TO THE FINANCIAL STATEMENTS / continued 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 +/- 5% change in exchange rates for the year ended at 30 June 2017 (2016: 12%). The percentage movement has been determined based on the average exchange rate market volatility for the AUD in the previous 12 months. Group 5% (2016: 12%) increase in AUD against foreign currencies 5% (2016: 12%) decrease in AUD against foreign currencies 2017 2016 Loss for the year Equity Loss for the year Equity (6,540,069) 3,143,168 (883,180) 1,811,678 (6,416,487) 3,347,656 (811,965) 1,845,974 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 2017 $ 2016 $ (6,457,005) (847,596) 46,181 - 363,454 (56,853) 17,309 22,000 21,588 65,048 1,127,069 421,250 - (1,417,860) 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. Add/(deduct) movements classified as investing activities 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. Add/(deduct) movements in working capital 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 Group (Increase)/ decrease in trade debtors and other receivables (1,572,023) (679,191) (Increase)/ decrease in prepayments (140,488) (49,790) (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 (26,531) 1,001,202 122,239 21,470 (48,467) 518,101 54,134 44,615 (Profit)/loss on sale of property, plant and equipment - - At the reporting date the interest rate profile of interest-bearing financial instrument was: Fixed interest instruments Financial assets Variable rate instruments Financial assets Total 2017 2016 Net cash flows from/ (used in) operating activities (5,571,285) (1,878,859) $ $ 28. Contingent assets and contingent liabilities The Group has no contingent assets or liabilities at 30 June 2017 (2016: $Nil). 70,507 70,507 29. Related party transactions 3,999,066 4,069,573 2,200,325 2,270,832 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. 68 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 69     NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Transactions with related parties The following transactions were carried out with related parties: 30. Parent Information 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 Total c. Other related party balances Directors 2017 $ 2016 $ 1,229,896 576,959 475,547 19,396 68,260 92,571 1,724,839 737,790 2017 $ 1,499 1,499 4,097 4,097 2016 $ 25,995 25,995 8,491 8,491 Loans to directors for the year ended 30 June 2017 amounted to $1,499 (2016: $25,995). The loan was repaid on 7th July 2017 d. Key management compensation Salaries and other short-term employee benefits Total 2017 $ 1,133,523 1,133,523 2016 $ 645,219 645,219 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 Non Current Liabilities Total Liabilities Total equity of the parent entity comprising of: Share Capital Reserves Accumulated Losses Parent entity contingencies There are no contingencies for the parent entity in 2017 or 2016. Parent entity guarantees 2017 $ 2016 $ (489,907) (592,336) 5 - (489,902) (592,336) 1,507 3,794,927 14,849,709 3,530,335 14,851,216 7,325,262 (112,655) (21,930) - - (112,655) (21,930) (33,089,721) 25,094,707 (569,096) 731,135 18,430,354 (18,522,510) 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 2017 or 2016. Parent entity capital commitments for acquisition of property, plant and equipment There are no capital commitments for the parent entity in 2017 or 2016. 70 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 71 NOTES TO THE FINANCIAL STATEMENTS / continued 31. Commitments Operating leases are held for premises used for office space. Lease commitments net of incentive payments are: Directors’ Declaration In the directors’ opinion: Non-cancellable operating leases are payable as follows: Less than one year Later than one year and not greater than two years Later than two years and not greater than five years Total The Group had no other commitments at 30 June 2017 (2016; $Nil). 32. Events after the reporting period Group 2017 $ 257,357 104,480 - 361,837 2016 $ 268,888 257,900 99,363 626,151 > > > > the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in notes 1,2 & 3 to the financial statements; the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On 2 August 2017, Xref Limited raised $7,500,000 before share placement costs through a placement to Australian On behalf of the directors institutions and sophisticated investors at a price of 60c per share. During September, Xref incorporated a company in Norway (Xref AS) as part of its continued expansion into new regions. The Norway office is focusing on the Nordic geographical region. Four staff have been hired including a General Manager, and three sales staff. Customer support is initially being provided from the Xref London office. Clients have already been secured in this new region. Refer to the market announcement on 21 September 2017 for further information. On July 3, 2017 Xref issued invitations to eligible employees to participate in the Xref Employee Option plan. This plan was approved at the EGM held in May 2016. The last date for acceptance to participate was September 7th 2017. With 100% of employees accepting the invitation, the total number of new options issued in Xref Limited is 1,055,449. Refer to the market announcement on 26 September 2017 for further information. As at 21 September 2017 Xref is now domiciled in Australia. The address of its registered office is Unit 14, 13 Hickson Road, Dawes Point, New South Wales, Australia 2000 No other adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation. Lee-Martin Seymour Brad Rosser Managing Director Chairman 27 September 2017 27 September 2017 Sydney Sydney 72 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 73 Independent Auditor’s Report Xref Limited Independent Auditor’s Report to the Members of Xref Limited Report on the Audit of the Financial Report Crowe Horwath Sydney ABN 97 895 683 573 Member Crowe Horwath International Audit and Assurance Services Level 15 1 O'Connell Street Sydney NSW 2000 Australia Tel +61 2 9262 2155 Crowe Horwath Sydney Fax +61 2 9262 2190 ABN 97 895 683 573 www.crowehorwath.com.au Member Crowe Horwath International Audit and Assurance Services Level 15 1 O'Connell Street Sydney NSW 2000 Australia Tel +61 2 9262 2155 Fax +61 2 9262 2190 www.crowehorwath.com.au Xref Limited Opinion We have audited the financial report of Xref Limited (the Company and its subsidiaries (the Group)), Independent Auditor’s Report to the Members of Xref Limited which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, Report on the Audit of the Financial Report including a summary of significant accounting policies, and the directors’ declaration. Opinion In our opinion, the accompanying financial report of the Group is in accordance with the Corporations We have audited the financial report of Xref Limited (the Company and its subsidiaries (the Group)), Act 2001, including: which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the (a) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. performance for the year then ended; and In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Basis for Opinion Act 2001, including: performance for the year then ended; and We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under (a) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Basis for Opinion Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis Report section of our report. We are independent of the Group in accordance with the auditor for our opinion. independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Key Audit Matters Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide for our opinion. a separate opinion on these matters. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of a separate opinion on these matters. financial services licensees. INDEPENDENT AUDITOR’S REPORT / continued Key Audit Matter How we addressed the Key Audit Matter Intangibles and Research and Development Costs - Notes 12 and 16 In the current year, the Group incurred significant expenditure, comprising mostly payroll costs, to develop its domain and to advance several cloud- based solutions for candidate recruitment. Whilst the Group generates revenue by delivering services through its website and related software applications, we focused our attention on the fact that the Group has not capitalised research and development costs as intangible assets in the financial report. Management had outlined their key judgements made in relation to internally generated software and research costs in Note 5 of the financial report. Going concern - Note 3(w) We focus our attention on management’s assertions in relation to going concern, as outlined in Note 3(w) of the financial report. We held discussions with management to understand the nature of the Group’s research and development processes, recognising that the Group’s systems are constantly evolving and its codebase and infrastructure is regularly being modified. We challenged management’s approach to exercising their key judgements in relation to internally generated software and research costs in the context of the period that management expects to recover economic benefits associated with these activities. We critically analysed the Group’s cash flow forecast that was used to support the going concern assessment, including performing the following procedures: a. We compared the prior year cash flow forecast prepared by management with the actual cash flows achieved, and obtained justification from management on variances in order to evaluate the validity of management’s current forecasting processes. b. We interrogated the cash flow forecast using different inputs as a means to perform a sensitivity analysis. c. We discussed with management the significant assumptions and inputs used in the cash flow forecast, comparing the inputs used with historical results, and obtained reasonable justification for those inputs that differ from historical results. Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. 74 / Xref Limited / Annual Report 2017 Page | 2 Xref Limited / Annual Report 2017 / 75 INDEPENDENT AUDITOR’S REPORT / continued INDEPENDENT AUDITOR’S REPORT / continued Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards, International Financial Reporting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf .This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 16 to 24 of the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Xref Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. CROWE HORWATH SYDNEY ASH PATHER Partner Sydney 27 September 2017 76 / Xref Limited / Annual Report 2017 Page | 3 Page | 4 Xref Limited / Annual Report 2017 / 77 Shareholder Information SHAREHOLDER INFORMATION / Continued Information relating to shareholders, as required by ASX Listing Rule 4.10, and not disclosed elsewhere in this Annual Top 20 Holders of Ordinary Shares as at 24 August 2017 Report, is detailed below. Rank Name of Shareholder Shares % of Shares Substantial Shareholders as at 24 August 2017, 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 11,051,770 23.64 23.64 8.43 Based on the market price at 24 August 2017 there were 91 shareholders with less than a marketable parcel of 863 shares at a share price of $0.58. Number of Ordinary Shares Held 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Number of Holders Ordinary Shares % of Total Issue Capital 112 179 112 276 92 771 48,839 547,423 912,371 10,306,153 119,254,674 131,069,460 0.04 0.42 0.70 7.86 90.99 100.000 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 Morgan Stanley Australia Securities (Nominee) Pty Limited J P Morgan Nominees Australia Limited Austral Capital Pty Ltd Citicorp Nominees Pty Limited UBS Nominees Pty Ltd Parkstone House Pty Ltd CS Third Nominees Pty Limited Merrill Lynch (Australia) Nominees Pty Limited Mr Craig Mcdonald + Mrs Kim Mcdonald MSR Nominees Pty Limited Calama Holdings Pty Ltd Mr Tim Mahony + Ms Jacki Pervan Schindler Investment Haus Pty Ltd Twenty Ten Enterprise Ltd Biatan Pty Ltd Hughnan Pty Ltd GP Securities Pty Ltd Total of Top 20 Holdings Other Holdings Total Fully Paid Shares Issued 32,371,796 32,371,795 10,237,857 3,159,365 3,050,255 3,000,000 2,647,890 2,071,430 1,923,076 1,900,000 1,736,667 1,665,500 1,408,763 1,193,370 1,000,000 912,500 727,500 650,000 550,000 527,742 103,105,506 27,963,954 131,069,460 24.70 24.70 7.81 2.41 2.33 2.29 2.02 1.58 1.47 1.45 1.32 1.27 1.07 0.91 0.76 0.70 0.56 0.50 0.42 0.40 78.66 21.34 100.00 78 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 79 SHAREHOLDER INFORMATION / continued SHAREHOLDER INFORMATION / Continued Fully Paid Ordinary Shares in Escrow as at 24 August 2017 Name of Shareholder Shares the Holder is Entitled to ASX Escrow Until Squirrel Holdings Australia Pty Ltd 32,371,796 8 February 2018 West Riding Investments Pty Ltd 32,371,795 8 February 2018 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 Biatan Pty Ltd   150,000 8 February 2018 converted and the Options are exercised, respectively. Total 64,893,591 Use of Funds Performance Rights as at 24 August 2017 Name of Performance Holder Squirrel Holdings Australia Pty Ltd West Riding Investments Pty Ltd Squirrel Holdings Australia Pty Ltd West Riding Investments Pty Ltd Total Performance Shares the Holder is Entitled to A Class Performance Rights: 8,333,333 A Class Performance Rights: 8,333,334 C Class Performance Rights: 8,333,333 C Class Performance Rights: 8,333,333 33,333,333 ASX Escrow Until 8 February 2018 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 2017. 8 February 2018 On-Market Buy-Back There is no current on-market buy-back of shares in the Company. 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 24 August 2017 Name of Option Holder Taylor Collison Limited Shares the Option Holder is Entitled to Exercise Price Option Expiry Date ASX Escrow Until 2,808,909 $0.23 1 February 2019 Simon Thomas O’Loughlin 300,000 $0.23 1 February 2019 Stephen James McPhail and Olinka Clare Heath 250,000 $0.23 1 February 2019 Simon James Robson Taylor 250,000 $0.23 1 February 2019 Timothy Lloyd Mahony, Jackie Tadranka Pervan and Thomas James Mahony Brad Rosser Brad Rosser Nigel Heap Total 900,000 $0.23 1 February 2019 4,500,000 $0.70 2,500,000 $0.70 900,000 $0.70 12,408,909 25 November 2021 25 November 2022 25 November 2021 8 February 2018 8 February 2018 8 February 2018 8 February 2018 8 February 2018 No escrow No escrow No escrow 80 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 81 Corporate Directory PLACE OF BUSINESS DIRECTORS LEADERSHIP TEAM AUDITORS 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 Chief Operating Officer COMPANY SECRETARY Robert Waring Australia (Head Office and Registered Office) Suite 14, 13 Hickson Road Dawes Point, NSW 2000 Tel: +61 2 8244 3099 United Kingdom 46 New Broad Street London, EX2M 1JH Canada Suite 202 1 Adelaide Street East Toronto, Ontario M5C 1X6 Norway Rådmann Halmrastsvei 16 1337 Sandvika Norway Website xref.com Crowe Horwath Level 15 1 O’Connell Street Sydney NSW 2000 Tel: +61 2 9262 2155 STOCK EXCHANGE The company’s ordinary shares are listed on the ASX under code XF1 SHARE REGISTRY Computershare Investor Services Pty Ltd Yarra Falls, 452 Johnston Street Abbotsford, Victoria Australia 3067 Tel: 1300 850 505 (within Australia) Tel: + 61 3 9415 4000 (outside Australia) Offering extreme value to our staff, clients and shareholders 82 / Xref Limited / Annual Report 2017 Xref Limited / Annual Report 2017 / 83 Love. Simplicity 84 / Xref Limited / Annual Report 2017 

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