Xref
Annual Report 2018

Plain-text annual report

ANNUAL REPORT 2018 Xref Limited / Annual Report 2018 / 1 CONTENTS 2018 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 76 77 82 86 With Xref, clients make more confident, smarter decisions. 2 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 3 2018 Highlights Total Sales $7.1 million 72% TOTAL ANNUAL GROWTH Recognised Revenue $4.8 million 63% TOTAL ANNUAL GROWTH Overseas Sales Channel Sales New Client Sales 13% 24% 45% Australia Overseas Direct Channel Existing New KEY METRICS ANNUAL REVENUE PER ACCOUNT (ARPA) New clients acquired during FY18 contributed an ARPA of $8,4k, while for clients in their second, third and fourth year their ARPA has grown to $9.5k, $12.5k and $17.9k respectively. Sales Revenue vs Recognised Revenue SALES REVENUE VS RECOGNISED REVENUE Credit sales: $7.1m Revenue: $4.8m Credit sales: $4.1m Revenue: $3.0m Credit sales: $0.67m Revenue: $0.37m Credit sales: $1.7m Revenue: $1.3m 8 7 6 5 4 3 2 1 s n o i l l i M $ FY15 FY15 (1) FY16 FY16 FY17 FY17 FY18 FY18 Under Xref’s business model, clients purchase Xref credits to use our candidate referencing platform. These credit sales are reported initially as unearned income, and when clients pay for the credits, this is recognised as cash receipts. The credits are consumed when reference checks are ordered, and credit usage becomes recognised revenue. CLIENT ACQUISITION Client acquisition continued to strengthen and at 30 June 2018, more than 750 direct paying clients were using our services globally. Use of integrations to access Xref also more than doubled in the final quarter of FY18 alone and at the end of the financial year 136 clients use our platform through channel partners. $17.9K $9.5K Acquired FY17 Acquired FY15 32% Acquired FY17 58% Acquired FY16 89% Acquired FY15 CLIENT ADOPTION The adoption rate for newly acquired clients is 29% in their first year. For clients in their second, third and fourth years adoption rates have grown to 32%, 58% & 89% respectively. Overall client adoption was 38% at the end of the financial year. 379 Acquired 224 Acquired Existing New 42 Acquired 121 Acquired FY14 FY15 FY16 FY17 FY18 2 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 3 Chairman’s Report CHAIRMAN’S REPORT Xref now supports over 750 direct paying clients as well A dedicated team as those businesses accessing our platform through our 13 established channel partners. Sales via channel partners now contribute over 20% of sales revenue which enables us to expand worldwide cost-effectively. Xref’s strong client acquisition and retention are testament to the value of our powerful technology platform. We delivered strong growth in Australia, and international sales continued to ramp up faster than Australian sales at the same stage of market development. We have focused on building skilled sales teams in Europe, the Nordics region and North America, that can replicate Australia’s fast sales growth. Technological leadership I am excited by our team’s ongoing innovation. Our newest product, People Search, for example, provides a leading analytics platform, helping employers and recruitment professionals efficiently make use of existing Xref’s strong growth has been possible because of the many positive skills and attributes of our staff. This includes - but doesn’t end at - the human resources and recruitment specialists who ensure our teams really understand our customers, our technical experts who strive to continually improve and evolve the service we offer, and our customer success teams who offer unrivalled support for our clients around the clock. I would like to express my thanks for the dedication and ongoing enthusiasm of all our employees and to acknowledge their outstanding work over the past year. I would also like to acknowledge the investors who participated in our August 2017 capital raising, as well as all our shareholders. Xref now has a strong ‘institutional’ register and our shareholders have been a vital ingredient in helping the Company to capitalise on its growth opportunity. referee data in their Xref account, to find ‘passive’ Ongoing growth Having laid the foundations for strong and sustainable growth, an exciting path lies ahead. We now have a burgeoning business with unrivalled talent and technology, and a sustainable business structure and cost base. As we continue to expand and evolve, we are well positioned for growth in all markets. We look forward to further increasing market penetration, expanding our partner network and building a profitable global business. Welcome to Xref’s third annual report. This has been another year of great success for Xref. We are capitalising on a unique position in the global human resources technology market, providing a fully API- driven, software as a-service platform that simplifies the way employers seek references. We automate one of the most difficult, time-consuming recruitment processes – obtaining candidate references – and provide intuitive, data-driven insights for human resources practitioners. candidates that meet top talent criteria. Identifying experienced and well-qualified candidates who may not be actively seeking employment is an ongoing challenge for the industry, this platform takes Xref users another Technological change is creating massive opportunities step beyond traditional sourcing techniques. for growth, particularly within the $14 billion human resources software sector. Globally, many organisations Helping clients meet regulatory needs are transitioning to the cloud, creating opportunities The introduction of the General Data Protection for companies such as Xref, which has a first-mover Regulation (GDPR) in May 2018, marked one of the advantage, to serve the growing data-driven recruiting biggest collective shifts in the way businesses operate sector. Strong sales and client growth across the EU. Effective data management has become a key technology challenge for organisations globally. We are proud to offer the assurance of a fully GDPR- It is with great pleasure that we report credit sales for the compliant reference checking process and actively year of $7.1 million, up 72% when compared to FY17. The support our clients’ compliance with their regulatory Brad Rosser, Chairman rapid rate of Xref’s organic growth can truly be seen in obligations. the fact that sales revenue for just the last week of FY18 was almost equal to the sales revenue generated during the entire year of FY15, before the company’s listing on the ASX. 4 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 5 Chief Executive Officer’s & Chief Technology Officer’s Report CHIEF EXECUTIVE OFFICER’S & CHIEF TECHNOLOGY OFFICER’S REPORT Under Xref’s business model, clients purchase Xref credits to use our candidate referencing platform. These credit sales are reported initially as unearned income, and when clients pay for the credits, this is recognised as cash receipts. The credits are consumed when reference checks are ordered, and credit usage becomes recognised revenue. Growing Average Revenue Per Account (ARPA) Together with increased client acquisition and adoption, a sales focus on enterprise organisations and high- value sectors has contributed to an increase in Average Revenue Per Account (ARPA). This is another key benchmark by which we measure our progress. Our ability to increase penetration within existing clients’ businesses, accessing a greater proportion of available hires, can be seen by comparing the ARPA for new and established clients. New clients acquired during FY18 contributed an ARPA of $8.4k, while for clients in their second, third and fourth year their ARPA has grown to $9.5k, $12.5k and $17.9k respectively. Overall ARPA has grown to $10k. This demonstrates clients’ increased use of our platform over time and validates its value to their businesses. A highlight of the year was the opening of our Norwegian office in September 2017 to service the Nordic region, comprising Norway, Denmark, Sweden, Iceland and Finland. The Norwegian team has strong recruitment sector experience, and has already welcomed some extremely high-profile clients, including Clas Ohlsen, the Norwegian Refugee Council and Norwegian State Railways (NSB). The labour market in this region is approximately 30% larger than Australia’s, so we are very excited about the opportunity to build on these early successes. Our total addressable market includes more than 180 These platforms provide talent management solutions million people in North America, 120 million people for more than 50,000 organisations worldwide. We in Europe, and 15 million people in Australia and New participate in joint marketing activities with integration Zealand. Having opened our first international sales partners to promote Xref’s platform, which can be easily office in 2016, we now support clients from offices in accessed through partners’ marketplaces. Sydney, London, Oslo and Toronto and our services have been used by employers, recruiters candidates and their referees in over 190 countries across the world. During FY18, we also launched a public API platform to allow third-party organisations to more efficiently integrate their software with Xref. This reduces the time International sales represented 13% of the total achieved required to bring an integration with Xref’s platform to in FY18, and trends are showing that this proportion market. Shortly after the close of the financial year, we will continue to grow. During the year we introduced announced our first public API-driven integration with notable new clients in every region - in Australia and New recruitment solution provider, PeopleScout. Zealand, these included Incitec Pivot, NRMA, and Coca Cola Amatil New Zealand; in Europe, Shangri-La Hotel Group, UBM plc and Sanctuary Group; and new North American clients, Snapchat (Snap Inc.), Hays Canada, and SCM Insurance. Channel expansion The integration partner channel is an essential component of our global growth strategy. It allows enterprise companies to seamlessly embed the Xref solution into their human resources workflow. We help to educate partner sales teams so they become advocates for our services, providing a cost-effective way to win Use of integrations to access Xref more than doubled in the final quarter of FY18 alone and at the end of Increased scalability and product improvement During the year we continually improved and refined our services, increasing scalability and security, and adding new language capabilities to our solution. We introduced the Sentiment Engine, which provides a graphical way to interpret written references and offers further insight into referees’ responses, at a glance. We also beta launched People Search, a paid platform addition which offers users the ability to find and filter historical referee data that could present passive candidate targeting opportunities. Further platform updates introduced during the year included report branding, enhanced data analytics, enterprise security, GDPR compliance and improved user management features. the financial year 136 clients use our platform through Cost management channel partners, including Qantas, Westpac and the NSW Government. In FY18, we commenced several new channel partnerships and our integration portfolio now includes some of the world’s leading HR technology providers, including Bullhorn, Checkr, Equifax, Expr3ss!, iCIMS, Lever, Oracle Taleo, SmartRecruiters, SnapHire, Talent App Store, Workday and Zapier. In June 2018, we launched our latest platform integration with recruitment software provider, JobAdder, taking us to a total of 13 live integrations by the end of the year. While investing to support global growth, we have maintained a tight control over costs and cash outflows have been in line with anticipated budgets throughout the year. A new sales platform has significantly improved the speed of client acquisition, reducing the length of the sales cycle to secure new clients by 55% from 80 days to 39 days. Having expanded internationally to drive sales, our costs have now steadied as we experience significant revenue growth Accelerating global growth new clients. Records for all key metrics We are delighted to report another year of record results and incredible progress across all key business metrics. Sales of Xref credits increased more than 70% year-on- year to a record $7.1 million in FY18, up from $4.1 million in FY17. Recognised Revenue increased 63%, rising to $4.8 million from $2.9 million. Client acquisition continued to strengthen, and at 30 June 2018, more than 750 direct paying clients were using our services globally, excluding those accessing our platform through our partner network. We also measure our growth success in terms of client adoption, based on the rate at which clients implement our services across their entire organisation. 45% of sales revenue was derived from new clients in FY18. Adoption rates for these new clients is already 29%. For clients in their second, third and fourth years adoption rates have grown to 32%, 58% and 89% respectively. Overall client adoption was 38% at the end of the financial year. Business model Xref’s cloud-based software allows companies to harness the benefits of technology, supporting timely, data- driven decisions on talent acquisition and retention while reducing employers’ exposure to security breaches, discrimination and potential fraud. 6 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 7 CHIEF EXECUTIVE OFFICER’S & CHIEF TECHNOLOGY OFFICER’S REPORT / Continued We have continually refined our business processes Importantly, we retain our first-mover advantage and to ensure that as we grow we become an increasingly have a unique, leading technology platform which lean organisation. We are focused on building for consistently provides a high return on investment for the future and expect to benefit from increased clients backed by unrivalled customer support. The efficiencies in FY19 through greater scale. new financial year has started well with sales in line Positive outlook for growth with management expectations. We wish to thank our clients, team and shareholders for their ongoing We enter the new financial year in a very positive support as we continue to build a sustainable global position. Our markets are growing, and we have business. a strong pipeline of new business opportunities across Australia and New Zealand, United Kingdom & the Nordics and in North America, supported by experienced, skilled teams. Our business is benefiting from faster client adoption, accelerating new client and integration sales, and ongoing renewals. Lee-Martin Seymour, Tim Griffiths, Chief Executive Officer, Chief Technical Officer, Co-Founder Co-Founder 8 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 9 Directors’ Report DIRECTORS’ REPORT The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter Strong global growth as the ‘consolidated entity’) consisting of Xref 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 2018. Xref continues to invest to build global scale, capitalising on its unique software platform. The Company’s fully API-enabled solution allows clients to achieve time and cost savings by connecting their human resources workflow systems through Directors The following persons were directors of Xref Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Brad Rosser (Chairman) Lee-Martin Seymour Timothy Griffiths Timothy Mahony Nigel Heap Principal activities the internet. During this financial year, Xref improved its performance against three key business metrics that guide the Company’s global growth and progress towards profitability – client acquisition, client adoption and AveARPA) Client acquisition strengthened and, at 30 June 2018, more than 750 direct paying clients were using our services globally. Use of integrations to access Xref also more than doubled in the final quarter of FY18 alone and at the end of the financial year 136 clients use our platform through channel partners. Client adoption increases over time. It is measured by comparing the use of Xref credits as a percentage of a client organisation’s total expected hires over a year. 45% of sales revenue was derived from new clients in FY18. Adoption rates for these new clients is already 29%. For clients in their second, third and fourth years adoption rates have grown to 32%, 58% & 89% respectively. Overall client adoption was 38% at the end of the financial year. 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. Average Revenue Per Account of new clients acquired during FY18 was $8.4k, while for clients in their second, third and fourth year their ARPA has grown to $9.5k, $12.5k & $17.9k respectively. Overall ARPA has grown to $10k. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Large addressable market Result Clients across APAC, EMEA and North America are serviced from offices in Sydney, London, Toronto and, from September 2017, Oslo. The decision to introduce a physical presence in Oslo came in response to unsolicited demand for the Xref The loss for the consolidated entity after providing for income tax amounted to $8,912,898, and was within management service in the region. Xref has a large addressable market, including more than 180 million people in North America, 120 expectations (30 June 2017: $6,457,005). Review of operations million people in Europe, and 15 million people in Australia and New Zealand. Technology improvement Xref achieved strong sales growth during FY18 as it continued to invest for future growth. The power of Xref’s platform increased in FY18 adding new features and updates including report branding, enhanced HIGHLIGHTS OF THE FINANCIAL YEAR INCLUDED: > Sales - $7.1 million, up 72% from $4.1 million in FY17 with strong growth across Australia, New Zealand, Europe and North America. Sales cycle improved by 55%, reducing from 80 days to 39 days. > Recognised Revenue - increased 63% to $4.8 million from $2.9 million in FY17. data analytics, enterprise security, GDPR compliance and improved user management features. The Company is also introducing products that present new revenue opportunities, including People Search, a separate paid platform that helps employers identify potential passive candidates in their existing referee data. Xref’s partner channels expand Collaboration with partners helps increase Xref’s channels to market, and the company has focused on introducing > Client Acquisition - continued to strengthen. At year end more than 750 direct paying clients were using Xref’s integrations with some of the world’s leading HR technology providers to build new business. These software systems are services globally, excluding those accessing the platform via a partner network. > Average Revenue Per Account (ARPA) - increased as a result of growing platform adoption. > Offices - Oslo office opened to service the Nordic region. used by enterprises to manage talent acquisition. Sales via channel partners increased to contribute over 20% of the total sales in FY18, assisted by joint marketing campaigns with partners and other initiatives. Xref currently has 13 ‘live’ partners that support more than 50,000 organisations worldwide, and the number is growing. Integrations increase adoption, and a public API was launched to allow third-party organisations to connect with Xref’s platform more efficiently. > Integration Partners - more than doubled to 13, including some of the world’s leading applicant tracking systems. Landmark partnership with San Francisco-based Checkr, enabling North American background checks Finance and corporate via the Xref platform. Cash outflows were within management expectations as the Company continued to build global scale. The net loss for the > Platform - new features and products, including Sentiment and People Search and public API to expedite third- year was $8,912,898. party integrations. > Funding - successful capital raising of $7.5 million in August 2017. In July 2017 and March 2018, the Company invited eligible employees to participate in the Xref Employee Option plan. 10 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 11 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued Following 100% acceptance of the offer on both occasions, 1,055,449 and 2,749,782 new employee share options were issued. Name: Title: Timothy Griffiths Chief Technology Officer In August 2017, Xref completed a $7.5 million capital raising which closed oversubscribed. Qualifications: MBA In September 2017, Xref opened its office in Oslo, Norway to service the Nordic region. Experience and expertise: While Xref’s business has always been headquartered in Australia, the company moved its domicile from New Zealand to Australia on 21 September 2017. In March 2018, executive directors Lee-Martin Seymour and Tim Griffiths sold 9,847,517 and 9,847,516 shares respectively, to meet demand from institutional investors. Following completion of the sale, they have entered into a voluntary agreement with Xref which restricts any further sale of shares before the announcement of the company’s FY19 results (i.e. September 2019). Matters subsequent to the end of the financial year In August 2018, the Board gave approval to issue further invitations to eligible employees to participate in the Xref Employee Option plan. Should 100% of the invitations be accepted 1,275,569 new employee share options will be issued No other adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation. Likely developments and expected results of operations Xref anticipates continued growth across all business metrics and, with a strong pipeline of new business opportunities across all the markets within which it operates, we are confident about the year ahead. Environmental regulation The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law. Information on directors Name: Title: Lee-Martin Seymour Managing Director and Chief Executive Officer Qualifications: None Experience and expertise: Lee-Martin Seymour is a co-founder of Xref. He has 18 years recruitment experience across many geographic and market sectors. For 12 years Lee worked for one of the world’s largest specialist recruitment companies. As a result he understands the demands of the employment market and is passionate about pioneering positive change for the long term. As a serial entrepreneur Lee has identified and successfully leveraged market opportunities to aid innovation in the employment sector. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of the Remuneration & Nomination Committee Interests in shares: 30,857,612 ordinary shares Interests in options: None Contractual rights to shares: 8,333,333 performance rights Timothy Griffiths is a co-founder of Xref. Mr Griffiths, an MBA-qualified technologist, has 21 years’ experience advising companies, including Virgin and SkyTV. He worked for Benchmark Capital providing technical diligence for high tech start-up investment and was co-founder of media company a2a plc, which floated on the UK stock market. More recently Tim was CIO for Jcurve Solutions, an Australian cloud NetSuite ERP provider. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: None Interests in shares: 30,857,613 ordinary shares Interests in options: None Contractual rights to shares: 8,333,333 performance rights Name: Title: Qualifications: Experience and expertise: Brad Rosser Chairman BCom, MBA Brad Rosser is a business builder and entrepreneur who worked for McKinsey and Co from 1992 to 1995 before working directly for Richard Branson as Director of Corporate Development for Virgin from 1995 to 1999, helping to identify and implement start-up businesses. He holds an MBA from Cornell University’s Johnson Graduate School of Management and a Bachelor of Commerce (Honours) from the University of Western Australia. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of the Audit & Risk Committee and member of the Remuneration & Nomination Committee Interests in shares: Interests in options: None 7,000,000 Contractual rights to shares: None 12 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 13 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued Name: Title: Tim Mahony Non-Executive Director Qualifications: BFinAdmin Key Management Personnel Chief Financial Officer Mr James Solomons, BComm, FCA, CTA, GAICD Experience and expertise: Timothy Mahony spent 18 years in investment banking, specialising in capital markets and debt trading. Tim 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. James is a chartered accountant with over 18 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. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of the Audit & Risk Committee and member of the Remuneration & Nomination Committee Interests in shares: 1,650,000 ordinary shares Interests in options: Contractual rights to shares: 900,000 None Name: Title: Nigel Heap Non-Executive Director Qualifications: LLB,AMP Experience and expertise: Nigel Heap is the UK Ireland Managing Director, and Chairman of the Asia Pacific business, of Hays plc, the leading global professional recruitment group, and a member of the group’s management board. He joined Hays in 1988 and over the last 20 years has successfully led the growth of the Asia-Pacific business. He has completed INSEAD’s Advanced Management Program and holds a Bachelor of Laws from Manchester University. Other current directorships: Hays UK Ltd Former directorships (last 3 years): None Special responsibilities: Member of the Audit & Risk Committee Interests in shares: 18,000 ordinary shares Interests in options: Contractual rights to shares: 900,000 None Company Secretary Mr Robert Waring, BEc, ACA, FCIS, ASIA, FAICD Robert has over 40 years of experience in financial and corporate roles, including more than 25 years in company secretarial roles for ASX-listed companies. He is a director of Oakhill Hamilton Pty Ltd, a company that provides secretarial and corporate advisory services to a range of listed and unlisted companies. He is also the Company Secretary of ASX-listed companies Aeris Environmental Ltd, Vectus Biosystems Limited and Cobalt Blue Holdings Limited. Meetings of directors The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30 June 2018, and the number of meetings attended by each director were: Full Board Nomination and Remuneration Committee Audit and Risk Committee Attended Held Attended Held Attended Held Lee-Martin Seymour Timothy Griffiths Timothy Mahony Nigel Heap Brad Rosser 8 7 8 8 7 8 8 8 8 8 1 - 2 - 2 2 - 2 - 2 - 2 2 1 - - 2 2 2 1 Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of Remuneration report (audited) 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. The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. 14 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 15 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued The remuneration report is set out under the following main headings: Non-executive directors remuneration > Principles used to determine the nature and amount of remuneration > Details of remuneration > > Service agreements Share-based compensation > Additional disclosures relating to key management personnel Principles used to determine the nature and amount of 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 The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive remuneration for directors was shown as $200,000. This has changed and a resolution was passed at the 2016 AGM that and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic the maximum aggregate cash-based remuneration payable to Non Executive Directors in any financial year be increased objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the by A$300,000 from A$200,000 to A$500,000. 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 Executive remuneration The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. > performance linkage / alignment of executive compensation The executive remuneration and reward framework has four components: 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. > base pay and non-monetary benefits > > short-term performance incentives share-based payments 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, consisting of dividends and 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 increasing return on assets as well as focusing the executive on key non-financial drivers of value Additionally, the reward framework should seek to enhance executives’ interests by: > > rewarding capability and experience reflecting competitive reward for contribution to growth in shareholder wealth > providing a clear structure for earning rewards In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. > other remuneration such as superannuation and long service leave The combination of these comprises the executive’s total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remunerations. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive. The short-term incentives (‘STI’) program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are 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 2018 Annual Meeting (“AGM”) A Remuneration Report has been prepared for the 2018 year and a resolution will be put to the 2018 AGM to ask shareholders to approve it. 16 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 17 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity consisted of the following directors of Xref Limited: > > > Lee-Martin Seymour – Managing Director & Chief Executive Officer Timothy Griffiths – Executive Director & Chief Technology Officer Timothy Mahony – Non-Executive Director > Nigel Heap – Non-Executive Director > Brad Rosser – Chairman 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 salary and fees Cash bonus Non- monetary Super- annuation 2018 $ $ Non-Executive Directors: Brad Rosser Tim Mahony Nigel Heap 149,081 51,815 55,000 - - - Executive Directors: Lee-Martin Seymour 271,167 25,000 Timothy Griffiths 270,000 25,000 Other Key Management Personnel: James Solomons 270,000 25,000 Robert Waring 64,732 - 1,131,795 75,000 $ - - - - - - - - $ - - - 23,750 23,750 23,750 - 71,250 Long service leave Equity- settled $ $ Total $ - - - - - - - - 373,027 522,108 9,042 60,857 35,576 90,576 - - 319,917 318,750 103,107 421,857 3,628 68,360 524,380 1,802,425 Short- term benefits Post- employment benefits Short- term benefits Post- employment benefits Long-term benefits Share- based payments Cash bonus Non- monetary Super- annuation Cash salary and fees $ 12,500 125,032 54,555 47,755 2017 Non-Executive Directors: Simon O’Loughlin (Chairman) * Brad Rosser (Chairman)** Timothy Mahony Nigel Heap ** Executive Directors: Lee-Martin Seymour $ - - - - 250,000 41,450 Timothy Griffiths 250,000 41,450 Other Key Management Personnel: James Solomons 209,644 41,450 Robert Waring 71,715 - 1,021,201 124,350 * Represents remuneration from 1 July 2016 to 18 August 2016 ** Represents remuneration from 18 August 2016 to 30 June 2017 Long service leave Equity- settled $ $ 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 $ - - - - - - - - - $ - - - - 21,850 21,850 18,893 - 62,593 18 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 19 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued The proportion of remuneration linked to performance and the fixed proportion are as follows: Name: Title: Timothy Griffiths Executive Director and Chief Technology Officer Name 2018 2017 2018 2017 2018 2017 Term of agreement: No fixed term Fixed remuneration At risk - STI At risk - LTI Agreement commenced: 1 July 2017 Non-Executive Directors: Simon O’Loughlin (Chairman) Brad Rosser (Chairman) Timothy Mahony Nigel Heap Executive Directors: Lee-Martin Seymour Timothy Griffiths Other Key Management Personnel: James Solomons Robert Waring - 100% 100% 100% 100% 100% 100% 100% 92% 92% 87% 87% 92% 100% 85% 100% - - - - 8% 8% 8% - - - - - 13% 13% 15% - - - - - - - - - - - - - - - - - Details: Name: Title: Base salary for the year ending 30 June 2018 of $250,000 per annum, 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 July 2017 Term of agreement: No fixed term Details: Base salary for the year ending 30 June 2018 of $250,000 per annum, 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. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Options Cash bonuses are dependent on meeting defined performance measures. The amount of the bonus is determined having regard to the satisfaction of performance measures and weightings as described above in the section ‘Consolidated entity The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key performance and link to remuneration’. The maximum bonus values are established at the start of each financial year and management personnel in this financial year or future reporting years are as follows: 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 2017 Term of agreement: No fixed term Details: Base salary for the year ending 30 June 2018 of $250,000 per annum, 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. Grant date Vesting date and exercisable date Expiry date Exercise price at grant date Fair value per option 26 September 2017 22 March 2018 22 March 2018 22 March 2018 3/7/18 12/2/18 12/2/19 12/2/20 3 July 2021 1 February 2021 12 February 2022 12 February 2023 $0.58 $0.70 $0.70 $0.70 $0.3162 $0.0697 $0.0928 $0.1120 Options granted carry no dividend or voting rights. 20 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 21 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued All options were granted over unissued fully paid ordinary shares in the company. The number of options granted was Performance rights 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 2018 are set out below: Name 2018 2017 2018 2017 Number of options granted during the year Number of options granted during the year Number of options vested during the year Number of options vested during the year Tim Mahony Nigel Heap Brad Rosser James Solomons Robert Waring - - - - 300,000 300,000 900,000 300,000 300,000 7,000,000 2,000,000 2,500,000 16,312 - - 1,000,000 - - - - Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part of compensation during the year ended 30 June 2018 are set out below: Name James Solomons Robert Waring 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 $ 223,328 3,667 $ - - $ - - % 24% 5% There were no performance rights over ordinary shares issued to directors and other key management personnel as part of compensation that were outstanding as at 30 June 2018. There were no performance rights over ordinary shares granted to or vested by directors and other key management personnel as part of compensation during the year ended 30 June 2018. Additional disclosures relating to key management personnel Shareholding The number of shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Balance at the start of the year Received as part of remuneration Additions Disposals/ other Balance at the end of the year 1,650,000 18,000 32,371,795 32,371,796 9,000 213,885 66,634,476 - - - - - - - - - - - 1,650,000 18,000 8,333,334 (9,847,517) 30,857,612 8,333,333 (9,847,516) 30,857,613 - - - - 9,000 213,885 16,666,667 (19,695,033) 63,606,110 Ordinary shares Timothy Mahony Nigel Heap Lee-Martin Seymour Timothy Griffiths James Solomons Robert Waring Option holding The number of options over ordinary shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Options over ordinary shares Brad Rosser Timothy Mahony Nigel Heap James Solomons Robert Waring Balance at the start of the year 7,000,000 900,000 900,000 - - - - - 2,500,000 16,312 8,800,000 2,516,312 Granted Exercised Expired/ forfeited/ other Balance at the end of the year - - - - - - - - - - - - 7,000,000 900,000 900,000 2,500,000 16,312 11,316,312 22 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 23 DIRECTORS’ REPORT / Continued DIRECTORS’ REPORT / Continued Other transactions with key management personnel and their related parties Non-audit services During the financial year; Payments for accounting services from Verve Solutions Pty Ltd (related entity of James Solomons) of $154,154 (ex GST) were made. 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 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 Payments for company secretarial services from Oakhill Hamilton Pty Ltd (related entity of Robert Waring) of $64,732 (ex the Corporations Act 2001. GST) were made. All transactions were made on normal commercial terms and conditions and at market rates. external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: The directors are of the opinion that the services as disclosed in note 10 to the financial statements do not compromise the Performance Rights Lee-Martin Seymour had A 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 4 December 2017. As at the date of this report there is a balance of 8,333,333 Performance Rights available for Lee-Martin Seymour. Timothy Griffiths had A Class Performance Rights converted into 8,333,333 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 4 December 2017. As at the date of this report there is a balance of 8,333,333 Performance Rights available for Timothy Griffiths. This concludes the remuneration report, which has been audited. Indemnity and insurance of officers > 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. Rounding of amounts The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. 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. The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director Corporate Governance 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. The Group’s Corporate Governance Statement and Appendix 4G checklist are released to ASX on the same day the Annual Report is released. The Corporate Governance Statement and Corporate Governance 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. 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. On behalf of the directors 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. Lee-Martin Seymour Brad Rosser Managing Director Chairman 29 August 2018 24 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 25 Independence Declaration Financial Statements Statement of profit or loss and other comprehensive income for the year ended 30 June 2018 Revenue Sales - Credits Sold in Current Year Less adjustment for Unearned Revenue Other income Expenses Employee expenses Overheads and administrative expenses Depreciation, amortisation and impairment expenses Loss before income tax expense from continuing operations Income tax expense Loss after income tax expense from continuing operations Loss after income tax expense from discontinued operations Loss after income tax expense for the year attributable to the owners of Xref Limited Other comprehensive income Note Consolidated 2018 $ 2017 $ 9 13 10 11 14 8 7,071,723 4,107,518 (2,225,723) (1,127,069) 4,846,000 2,980,449 1,849,140 1,437,665 (9,170,013) (5,418,895) (6,359,098) (5,409,076) (78,927) (46,181) (8,912,898) (6,456,038) - - (8,912,898) (6,456,038) - (967) (8,912,898) (6,457,005) Items that may be reclassified subsequently to profit or loss Foreign currency translation (205,147) (51,862) Other comprehensive income for the year, net of tax (205,147) (51,862) Total comprehensive income for the year attributable to the owners of Xref Limited (9,118,045) (6,508,867) Total comprehensive income for the year is attributable to: Continuing operations Discontinued operations (9,118,045) (6,507,900) - (967) (9,118,045) (6,508,867) 26 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 27 FINANCIAL STATEMENTS / For the Year Ended 30 June 2018 FINANCIAL STATEMENTS / For the Year Ended 30 June 2018 Statement of profit or loss and other comprehensive income for the year ended 30 June 2018 (continued) Statement of financial position as at 30 June 2018 Note Consolidated 2018 $ Cents 2017 $ Cents Earnings per share for loss from continuing operations attributable to the owners of Xref Limited Basic earnings per share Diluted earnings per share 26 26 (6.39) (6.39) (6.13) (6.13) Earnings per share for profit from discontinued operations attributable to the owners of Xref Limited Basic earnings per share Diluted earnings per share Earnings per share for loss attributable to the owners of Xref Limited N/A N/A 0.00 0.00 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes Assets Current assets Cash and cash equivalents Trade and other receivables Prepayments 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 Employee Entitlements Superannuation payable Lease Incentive Unearned Revenue Total current liabilities Non-current liabilities Employee entitlements Lease Incentive Total non-current liabilities Total liabilities Net assets Note Consolidated 2018 $ 2017 $ 15 16 17 18 19 20 4,451,896 4,069,573 3,144,727 2,616,084 229,886 192,620 7,826,509 6,878,277 322,105 117,953 120,196 212,357 101,681 74,998 560,254 389,036 8,386,763 7,267,313 1,646,024 1,641,502 277,529 184,268 13,103 162,725 115,258 31,512 21 4,268,871 2,030,253 6,389,795 3,981,250 22 52,622 - 52,622 22,436 13,103 35,539 6,442,417 4,016,789 1,944,346 3,250,524 28 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 29 FINANCIAL STATEMENTS / For the Year Ended 30 June 2018 FINANCIAL STATEMENTS / For the Year Ended 30 June 2018 Statement of financial position as at 30 June 2018 (continued) Equity Issued capital Other equity reserves Accumulated losses Total equity Note Consolidated 2018 $ 2017 $ 23 24 40,087,991 32,687,991 (21,754,920) (21,961,640) (16,388,725) (7,475,827) 1,944,346 3,250,524 The above statement of financial position should be read in conjunction with the accompanying notes $ l a t o T y t i u q e s t fi o r p d e n i a t e R e v r e s e r e v r e s e r 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 g i e r o F y c n e r r u c e r a h S n o i t p o e v r e s e r e c n a m r o f r e P e v r e s e r s t h g i r e r a h S l a t i p a c $ $ $ $ $ $ d e t a d i l o s n o C 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 e c n a l a B ) 5 0 0 , 7 5 4 , 6 ( ) 5 0 0 , 7 5 4 , 6 ( ) 2 6 8 , 1 5 ( - ) 7 6 8 , 8 0 5 , 6 ( ) 5 0 0 , 7 5 4 , 6 ( 1 8 6 , 1 0 1 , 8 ) 0 0 0 , 0 4 5 ( - - 4 5 4 , 3 6 3 - - - - 0 6 1 , 2 9 - - - - - - - - - ) 2 6 8 , 1 5 ( ) 2 6 8 , 1 5 ( - - - - - - - - - - - - - - - - ) 3 3 3 , 3 8 ( 4 5 4 , 3 6 3 ) 0 6 1 , 2 9 ( - - - - - - - 3 3 3 , 3 8 1 8 6 , 1 0 1 , 8 ) 0 0 0 , 0 4 5 ( e h t r o f e s n e p x e x a t e m o c n i r e t f a s s o L r a e y e h t r o f e m o c n i e v i s n e h e r p m o c r e h t O x a t f o t e n , r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T r a e y r i e h t n i s r e n w o h t i w s n o i t c a s n a r T : s r e n w o s a y t i c a p a c 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 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 e c n a l a B . s e t o n g n i y n a p m o c c a 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 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 e v o b a e h T 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 d e t a d i l o s n o C 30 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 31 FINANCIAL STATEMENTS / For the Year Ended 30 June 2018 FINANCIAL STATEMENTS / For the Year Ended 30 June 2018 $ $ $ $ $ $ y t i u q e l a t o T s t fi o r p d e n i a t e R e v r e s e r e v r e s e r 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 g i e r o F y c n e r r u c e r a h S n o i t p o s e v r e s e r s t h g i r e v r e s e r e c n a m r o f r e P $ d e u s s I l a t i p a c d e t a d i l o s n o C 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 y l u J 1 t a e c n a l a B ) 8 9 8 , 2 1 9 , 8 ( ) 8 9 8 , 2 1 9 , 8 ( ) 7 4 1 , 5 0 2 ( - ) 5 4 0 , 8 1 1 , 9 ( ) 8 9 8 , 2 1 9 , 8 ( 0 0 0 , 0 0 5 , 7 ) 0 0 0 , 0 5 4 ( - 7 6 8 , 1 6 7 - - - - - - - - - - - - ) 7 4 1 , 5 0 2 ( ) 7 4 1 , 5 0 2 ( - - - - - - - - - - 7 6 8 , 1 6 7 6 4 3 , 4 4 9 , 1 ) 5 2 7 , 8 8 3 , 6 1 ( ) 1 2 8 , 5 4 8 , 2 2 ( ) 2 6 0 , 0 4 2 ( 3 6 9 , 0 3 3 , 1 - - - - - - - - e s n e p x e x a t e m o c n i r e t f a s s o L r a e y e h t r o f e m o c n i e v i s n e h e r p m o c r e h t O x a t f o t e n , r a e y e h t r o f e m o c n i 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 0 0 0 , 0 0 5 , 7 ) 0 0 0 , 0 5 4 ( s t s o C g n i s i a R l a t i p a C d e u s s I s e r a h S n i s r e n w o h t i w s n o i t c a s n a r T : s r e n w o s a y t i c a p a c r i e h t ) 0 0 0 , 0 5 3 ( 0 0 0 , 0 5 3 i s t h g R e c n a m r o f r e P - - - d e u s s I s n o i t p O 1 9 9 , 7 8 0 , 0 4 8 1 0 2 e n u J 0 3 t a e c n a l a B . s e t o n g n i y n a p m o c c a 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 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 e v o b a e h T 8 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 Statement of cash flows for the year ended 30 June 2018 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Other revenue Notes Consolidated 2018 $ 2017 $ 7,207,058 3,524,328 (15,523,197) (9,631,070) (8,316,139) (6,106,742) 117,452 53,031 1,731,688 482,426 Net cash used in operating activities 28 (6,466,999) (5,571,285) Cash flows from investing activities Payments for property, plant and equipment Payments for intangibles Cash from loans to other entities Proceeds from disposal of property, plant and equipment 17 18 (184,406) (119,804) (16,272) - - - 31,416 233 Net cash used in investing activities (200,678) (88,155) Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Net cash from financing activities Net increase in cash and cash equivalents 23 23 7,500,000 8,000,000 (450,000) (540,000) 7,050,000 7,460,000 382,323 1,800,560 Cash and cash equivalents at the beginning of the financial year 4,069,573 2,270,832 Effects of exchange rate changes on cash and cash equivalents - (1,819) Cash and cash equivalents at the end of the financial year 15 4,451,896 4,069,573 32 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 33 Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS / continued 1. Reporting entity 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. Xref is a human resources technology company that automates the candidate reference process for employers. The Group re-assesses whether or not it controls another entity if facts and circumstances indicate that there are changes in one or more of the three elements of control. The financial statements of subsidiaries are included in the preliminary 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 2. Basis of preparation position, performance and cash flows. 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 A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction - that is, as transactions with owners in their capacity as owners, recorded in the statement of movements in equity. If the Group loses control over a subsidiary, it: 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 > derecognises the assets (including goodwill) and liabilities of the subsidiary; > derecognises the carrying amount of any non-controlling interest; properties, certain classes of property, plant and equipment and derivative financial instruments. > derecognises the cumulative carrying amount of foreign currency translation; differences recorded in reserves; 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. Significant accounting policies > > > > > 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. The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies b. Foreign currency translation have been consistently applied to all the years presented, unless otherwise stated. The financial statements are presented in Australian Dollars, which is Xref Limited’s functional and presentation currency. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 32. a. Basis of consolidation The Group financial statements consolidate the financial statements of the Parent and all entities over which the Parent is deemed to have controlling relationship (defined as “subsidiaries”). An entity is defined as a subsidiary when the Group is exposed, or has rights to variable returns from its relationship with the entity and has the ability to affect those returns through its power over the entity. When the Group has less than a majority of the voting power or similar rights of another entity, the Group considers all relevant facts and circumstances in assessing whether it has power over the other entity. Foreign currency transactions Foreign currency transactions are translated into the functional currency of the Parent, using exchange rates prevailing at the dates of the transactions (i.e. the spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from measurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in the reported profit or loss. Non-monetary items measured at historical cost are not re-translated at each year-end, instead they are only translated once using the exchange rate at the transaction date. Non-monetary items measured at fair value are translated using the exchange rates at the date when the year-end fair value was determined. The net balance of foreign exchange gains and losses that relate to monetary items (such as borrowings, cash and cash equivalents) are presented in the Statement of Comprehensive Income within “finance income” or “finance costs”. All other foreign exchange gains and losses are presented in the Statement of Comprehensive Income within “Other gains/ (losses)”. 34 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 35 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit e. Trade creditors and other payables and loss are recognised in the Statement of Comprehensive Income as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in fair value movements disclosed within other comprehensive income. Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Creditors are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Foreign operations Trade creditors and other payables are recognised initially at fair value and subsequently measured at amortised cost In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other using the effective interest method. than Australian Dollars are translated into Australian Dollars upon consolidation. The results and financial position of subsidiaries are translated into the presentation currency as follows: i. assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; f. Property, plant and equipment Except for land and buildings, items of property, plant and equipment are measured at cost, less accumulated depreciation and any impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs and the cost replacing part of an item of property, plant and equipment is recognised as an asset if, and ii. income and expenses for each statement of comprehensive income are translated at average exchange rates (unless only if, it is probable that future economic benefits or service potential will flow to the Group and the cost of the item can this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, be measured reliably. The carrying amount of the replaced part is derecognised. 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. 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. The assets and liabilities of foreign operations, including any goodwill, are translated to AUDs at exchange rates at All repairs and maintenance expenditure is charged to profit or loss in the year in which the expense is incurred. the reporting date. The income and expenses of foreign operations, are translated to AUDs at exchange rates at the dates of the transactions. Foreign currency differences are recognised on other comprehensive income, and presented in the foreign currency translation reserve within equity. When a foreign operation is disposed of such that control is lost, the cumulative amount of the translation reserve related to the foreign operation is reclassified to the reported surplus or deficit as part of the gain or loss on disposal. c. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. d. Trade debtors and other receivables 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. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Computer Equipment Office Equipment Office Furniture Office Fit-out 3-5 years 3-20 years 10-20 years 6-20 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting 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 date. assets. Trade debtors and other receivables are measured initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for any impairment. An allowance for impairment is established where there is objective evidence the Group will not be able to collect all amounts due according to the original terms of the receivable. Other receivables are recognised at amortised cost, less any provision for impairment. Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. g. Intangible assets 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 less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of 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. 36 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 37 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Internally developed intangible assets. j. Financial instruments 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. 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. Development activities include a plan or design for the production of new or substantially improved products. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources 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. to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct Initial recognition and measurement labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development Financial assets and financial liabilities are recognised initially at fair value plus transaction costs attributable to the expenditure is recognised in the reported surplus and deficit when incurred. acquisition, except for those carried at fair value through profit or loss, which are measured at fair value. Capitalised development expenditure is measured at cost less accumulated amortisation and any impairment losses. Financial assets and financial liabilities are recognised when the Parent and Group becomes a party to the contractual Patents and trademarks Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the De-recognition of financial instruments provisions of the financial instrument. period of their expected benefit, being their finite life of 10 years. h. 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 asset. Leases where the Group assumes substantially all the risks and rewards incidental to ownership of the leased assets, are classified as finance leases. All other leases are classified as operating leases. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the Subsequent measurement of financial assets lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. The subsequent measurement of financial assets depends on their classification, which is primarily determined by the Associated costs, such as maintenance and insurance, are expensed as incurred. i. 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 the estimates used to determine the recoverable amount. An impairment loss on property carried at fair value is reversed through the relevant reserve. All other impairment losses are reversed through profit or loss. Any reversal of impairments previously recognised is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. 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. 38 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 39 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued ii. Financial assets at fair value through profit and loss Termination benefits 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. Termination benefits are recognised as an expense when the Group is committed without realistic possibility of withdrawal, to terminate employment, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to 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. their present value. Long-term benefits Equity investments are measured at cost less any impairment charges, where the fair value cannot currently be estimated reliably. 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”. 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. k. Provisions A provision is recognised for a liability when the settlement amount or timing is uncertain; when there is a present legal or constructive obligation as a result of a past event; it is probable that expenditures will be required to settle the obligation; and a reliable estimate of the potential settlement can be made. Provisions are not recognised for future operating losses. A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower that the unavoidable cost of meeting its obligation under the contract. 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 payments 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. m. 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 Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable discounts. evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are discounted to their present values, where the time value of money is material. The increase in the provision due to the passage of time is recognised as an interest expense. Rendering of services All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. The Group sells candidate reference credits to its customers. When customers use a credit, the service has been performed and revenue is recognised in the accounting periods in which the services are provided. Unused credits are recognised as The following specific recognition criteria must be met before revenue is recognised: l. Employee benefits Short-term employee benefits unearned income in the financial statements. Interest income Employee benefits, previously earned from past services, that the Group expect to be settled within 12 months of reporting Interest income is recognised as it accrues, using the effective interest method. date are measured based on accrued entitlements at current rate of pays. n. Finance costs These include salaries and wages accrued up to the reporting date and annual leave earned, but not yet taken at the reporting date. Finance costs recorded in the Statement of Comprehensive Income comprise the interest expenses charged on borrowings and the unwinding of discounts used to measure the fair value of provisions. The Group recognises a liability and an expense for bonuses where they are contractually obliged or where there is a past practice that has created a constructive obligation. 40 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 41 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued o. Profit and loss from discontinued activities q. Goods and Services Tax (GST) A discontinued operation is a component of the entity that either has been disposed of, or is classified as held for sale, and: All amounts in these financial statements are shown exclusive of GST, except for receivables and payables that are stated > > > represents a separate major line of business or geographical area of operations; is part of a single co-ordinated plan to dispose of a separate major line of business; or geographical area of operations; or is a subsidiary acquired exclusively with a view to re-sale The disclosures for discontinued operations in the prior year relate to all operations that have been discontinued by the reporting date for the latest year presented. Where operations previously presented as discontinued are now regarded as continuing operations, prior year disclosures are correspondingly re-presented. p. Income tax Current income taxes Current tax is the amount of income tax payable based on the taxable surplus for the current year, plus any adjustment to income tax payable in respect of prior years. Current tax is calculated using tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date. Deferred tax Deferred tax is the amount of income tax payable or recoverable in future years in respect of temporary differences and unused tax losses (if any). Temporary differences are differences between the carrying amount of asset and liabilities in the financial statements and the corresponding tax bases used in the consumption of taxable surpluses. Deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects the tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets are recognised to the extent that it is probable that taxable surpluses will be available in future years, against which the deductible temporary differences or tax losses can be utilised. Deferred tax is measured at the tax rates that are expected to apply when the asset is realised or the liability settled, based inclusive of GST. The net amount of GST recoverable from, or payable to the Australian Taxation Office (ATO), or tax offices in other jurisdictions is included as part of receivables and / or payables in the Statement of Financial Position. GST balances from different countries are not offset. r. Share capital Share capital represents the consideration received for shares that have been issued. All transaction costs associated with the issuing of shares are recognised as a reduction in equity, net of any related income tax benefits. s. Dividend distribution Dividend distributions to the parent’s shareholders are recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Parent Directors. t. Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shareholders outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees. u. 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. v. Going Concern on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. The measurement of Not withstanding the Group incurred a loss after tax for the year of $8,912,898 (2017: $6,457,005), the consolidated financial deferred tax reflects the tax consequences that would follow from the manner in which the Group expects to recover the statements have been prepared on a going concern basis as the Group has a net asset position of $1,944,346 (2017: carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of income tax in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively. $3,250,524). The Group has an expectation that the sum of its activities will result in a positive cash position as at 30 June 2019, although a trading deficit is predicted. The Group has been able to demonstrate in previous years that they have been successful in raising capital when needed. In August 2017 $7.5 million was raised before costs. The Directors remain confident that this can again be done when required to support the Groups continuing activities. The directors believe the Group can support its operating activities and 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 2018 Xref Limited / Annual Report 2018 / 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. Critical 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 2018. 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 The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of transaction price, and recognition of revenue when each performance obligation is satisfied. The consolidated entity has the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial at this time performed an assessment of the performance obligations within current contracts and has assessed that there or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The will be no material impacts on the way revenue is currently recognised. 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. AASB 9 Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces Impairment all previous versions of AASB 9 and completes the project to replace IAS 39 ‘Financial Instruments: Recognition and An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds Measurement’. AASB 9 introduces new classification and measurement models for financial assets. For financial liabilities, its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from the standard requires the portion of the change in fair value that relates to the entity’s own credit risk to be presented each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to flows. In the process of measuring expected future cash flows management makes assumptions about future operating more closely align the accounting treatment with the risk management activities of the entity. The consolidated entity has results. considered its financial assets and liabilities and does not believe that there will be any material impacts on the financial statements. AASB 16 Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 ‘Leases’ and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, 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, These assumptions relate to future events and circumstances Provision for impairment of receivables The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and specific knowledge of the individual debtor’s financial position. Internally generated software and research costs Management monitors progress of internal research and development projects by using a project management system. Significant judgement is required in distinguishing research from the development phase. lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling To distinguish any research-type project phase from the development phase, it is the Group’s accounting policy to costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset require a detailed forecast of sales or cost savings expected to be generated by the intangible asset. The forecast is (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the incorporated into the Group’s overall budget forecast as the capitalisation of development costs commences. This ensures earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease that managerial accounting, impairment testing procedures and accounting for internally-generated intangible assets are expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will based on the same data. 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 activities) and interest (either operating or financing activities) component. The standard will impact the Group as it holds various leases for premises and assets. The full calculations of the impact have not yet been assessed as the nature of these contracts is subject to change. As the Group gets closer to the date of implementation, the Group will substantiate the effects to the financial statements. Management has determined that for the 2018 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. 44 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 45 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Deferred tax assets 7. Operating segments 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 There is only one operating segment (candidate referencing) for the year ended 30 June 2018. 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. full. Geographical information Research and Development Refundable Tax Offset The Group has identified costs including hosting fees, market research, external contractors, system testing and remuneration which it has identified as research and development costs. The Research and Development tax refund is calculated as 43.5% of the total figure. 6. Group information The preliminary consolidated financial statements of the Group include Principal activities Principal place of business / Country of incorporation Ownership interest Name 2018 % 2017 % Xref Limited Candidate Referencing Australia 100.00% 100.00% Xref (AU) Pty Limited Candidate Referencing Australia 100.00% 100.00% Xref (UK) Limited Candidate Referencing United Kingdom 100.00% 100.00% Xref Referencing (CA) Limited Candidate Referencing Xref AS Candidate Referencing Canada Norway 100.00% 100.00% 100.00% - a. Investments in subsidiaries All investments in subsidiaries are carried at cost and eliminated through consolidation in the Group. Credit sales to external customers Australia Canada United Kingdom Norway Revenue from external customers Australia Canada United Kingdom Norway Non-current operating assets Australia Canada United Kingdom Norway 2018 $ 2017 $ 6,150,386 3,844,059 455,107 354,664 111,566 120,864 142,595 - 7,071,723 4,107,518 2018 $ 2017 $ 4,316,355 2,889,087 222,011 241,223 66,411 23,124 68,238 - 4,846,000 2,980,449 Consolidated 2018 $ 2017 $ 390,283 104,842 58,113 7,016 207,128 22,125 58,102 - 46 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 47 Total Non-current operating assets 560,254 287,355 The information above is based on the locations of the customers. NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 8. Discontinued operations Description The assets and liabilities related to Inner Mongolia Plate Mining Co Limited have been presented as held for sale following 10. Overheads and administrative expenses the acquisition by Xref Pty Limited. Financial performance information Audit fees Accounting Directors fees Legal fees Marketing fees Other Consultants Share Option Expense Administration expense Foreign exchange loss Operating lease payments Expenses Loss before income tax expense Income tax expense Loss after income tax expense from discontinued operations Cash flow information Net cash used in operating activities 9. Revenue Revenue Consolidated 2018 $ - - - - 2017 $ (967) (967) - (967) Consolidated 2018 $ - 2017 $ (967) Consolidated 2018 $ 2017 $ Auditors remuneration Fees charged by Audit Firm: Financial statement audit and review 90,678 111,352 11. Depreciation, amortisation and impairment expenses Consolidated 2018 $ 2017 $ Consolidated 2018 $ 90,678 250,709 263,157 178,566 2017 $ 111,352 314,279 232,353 187,628 1,559,137 1,486,865 900,470 761,867 830,788 363,454 1,742,124 1,301,920 (76,477) 688,867 25,522 554,915 6,359,098 5,409,076 Consolidated 2018 $ 2017 $ Rendering of services 4,846,000 2,980,449 Depreciation of property, plant and equipment 78,927 46,181 48 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 49 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 12. Research and development costs 14. Income tax expense Consolidated 2018 $ 2017 $ Research and development costs expensed 3,931,717 3,183,062 The Parent and Group research and development projects have focused on cloud-based solutions for candidate recruitment. Note 5 reflects the Groups policy on the expensing/ capitalisation of development costs. Research and development costs expenses amount to $3,931,717 (2017: $3,183,063) of which $3,145,694 (2017: $2,420,768) are recognised in employee expenses. 13. Other income Other Income Profit on Sale Research & Development - Refundable Tax Offset Interest Received Other Income Other income Consolidated 2018 2017 $ - $ 2 1,710,297 1,384,632 117,452 21,391 53,031 - The Company has moved domicile from New Zealand to Australia, and so the company does not recognise a potential tax loss in New Zealand. However, Xref Limited has operating subsidiaries in Australia, the UK, Norway and Canada which are expected to accumulate tax losses prior to returning a profit. Consolidated 2018 $ 2017 $ Numerical reconciliation of income tax expense and tax at the statutory rate a. Reconciliation of effective tax rate Loss before income tax expense from continuing operations (8,912,898) (6,456,038) Loss before income tax expense from discontinued operations - (967) (8,912,898) (6,457,005) Tax at the statutory tax rate of 27.5% (2017: 30%) (2,451,045) (1,937,102) Deferred tax asset not recognised Permanent differences Adjustment for foreign tax rates 1,401,250 1,772,574 505,956 (441,019) 543,839 605,547 Income tax expense - - 1,849,140 1,437,665 b. Deferred tax assets and liabilities The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax losses or credits. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The company has not yet raised a deferred tax entry as the company is not certain whether the tax losses carried forward can be utilised in the foreseeable future. The deferred tax asset position of the Group, which has not been brought to account is $3,173,824 (2017: $1,772,574). 50 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 51 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 15. Current assets - cash and cash equivalents Cash at bank Rental bonds The carrying amount of cash and cash equivalents approximates their fair value. Consolidated 2018 $ 2017 $ 4,381,389 3,999,066 70,507 70,507 4,451,896 4,069,573 Trade debtors and other receivables are non-interest bearing and receipt is normally on 30 days terms. Therefore, the carrying value of trade debtors and other receivables approximates its fair value. All receivables are subject to credit risk exposure. The maximum exposure to credit risk at the reporting date is the carrying amount of trade debtors and other receivables as disclosed above. The Group does not hold any collateral as security The Group’s management considers that all financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. None of the Group’s financial assets are secured by collateral or other credit enhancements. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment The Parent has arranged a legal right of set off between its bank trading account, call deposit accounts, and its bank statistics for similar financial assets. overdraft. Cash at bank earns interest at floating rates on daily deposit balances. Rental bonds are for a period of 3 years and serve as security for leased premises maturing at renewal dates. Interest is paid annually. 16. Current assets - trade and other receivables The impairment to receivables as at 30 June 2018 is $165,000 (2017: No impairment recognised). As at 30 June 2018, the ageing analysis of trade receivables post due but not impaired is detailed as follows: Trade debtors Less: Provision for impairment of receivables Related party receivables Other receivables Research and development incentive grant 0 - 30 days overdue 30 - 90 days overdue 90 days overdue Consolidated 2018 $ 2017 $ 1,599,430 1,199,661 (165,000) - 1,434,430 1,199,661 - - 1,499 30,292 1,710,297 1,384,632 1,710,297 1,416,423 3,144,727 2,616,084 Consolidated 2018 $ 2017 $ 1,129,135 292,920 12,375 793,537 348,375 57,749 1,434,430 1,199,661 52 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 53 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 17. Non-current assets - property, plant and equipment Reconciliations Office Fitout Less: Accumulated depreciation Computer equipment - at cost Less: Accumulated depreciation Office equipment - at cost Less: Accumulated depreciation Office furniture - at cost Less: Accumulated depreciation Consolidated 2018 $ 2017 $ 96,784 (10,058) 12,284 (1,359) 86,726 10,925 183,028 123,599 (76,275) (29,188) 106,753 94,411 116,087 103,271 (50,815) (33,489) 65,272 69,782 72,915 (9,561) 39,973 (2,734) 63,354 37,239 322,105 212,357 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated $ $ $ $ Computer Equipment Office Equipment Office Furniture Office Fitout Balance at 1 July 2016 Additions Disposals 26,176 93,485 - 80,590 7,982 (1,210) 22,493 16,994 - 10,685 1,343 - Total $ 139,944 119,804 (1,210) Depreciation expense (25,250) (17,580) (2,248) (1,103) (46,181) Balance at 30 June 2017 Additions Prior year adjustment 94,411 59,092 - 69,782 7,986 4,269 37,239 32,888 - 10,925 84,440 - 212,357 184,406 4,269 Depreciation expense (46,750) (16,765) (6,773) (8,639) (78,927) Balance at 30 June 2018 106,753 65,272 63,354 86,726 322,105 18. Non-current assets - intangibles Patents and trademarks - at cost Domain: Xref.com & XF1.com Consolidated 2018 $ 10,963 2017 $ - 106,990 101,681 117,953 101,681 54 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 55 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 19. Current liabilities - trade and other payables 21. Current liabilities - Unearned Revenue Trade payables Non trade payables and accrued expenses Related party payables Accrued salaries, wages and related costs GST Payable Consolidated 2018 $ 2017 $ 162,894 525,139 - 853,126 104,865 571,166 552,807 4,097 481,441 31,991 1,646,024 1,641,502 Unearned Revenue Balance Brought Forward Unearned Revenue Movement Credits Sold Add Opening Conditional Credits Less: Credit Used (Cash Basis*) Less: Closing Conditional Credits 2018 $ 2017 $ 2,030,253 903,566 7,071,723 1,085,263 4,107,518 205,132 (4,485,468) (2,100,318) (1,445,795) (1,085,263) Refer to note 27 for further information on financial instruments. Trade creditors and other payables are non-interest bearing and normally settled on 30 day terms; therefore, their carrying amount approximates their fair value. 20. Current liabilities - Employee Entitlements Consolidated 2018 $ 2017 $ Net Unearned Revenue Movement 2,225,723 1,127,069 Opening Balance Revaluation due to Forex 12,895 (382) Balance Carried Forward 4,268,871 2,030,253 *This is the value of the credits that have been used in the period Annual leave 277,529 162,725 sold are added to unearned revenue when the client has paid. The credits are consumed when reference checks are ordered, and credit usage becomes recognised revenue. At balance date some clients will have purchased credits and have Short–term employee entitlements represent the Group’s obligation to its current and former employees that are expected been issued an invoice but will not have paid. The value of these unpaid credit sale invoices are the ‘conditional credits’ to be settled within 12 months of balance date. These consist of accrued holiday entitlements at the reporting date. above and represents trade debtors (less goods & services tax). Under Xref’s business model, clients purchase Xref credits to use our candidate referencing platform. The value of credits 56 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 57 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 22. Non-current liabilities - Employee entitlements The Class A Conversion Event for performance rights was achieved and the Class A shares were issued 4 December 2017. Non-Current 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. Consolidated Capital risk management 2018 $ 2017 $ 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. Long service leave 52,622 22,436 23. Equity - issued capital Consolidated 2018 2017 Shares Shares 2018 $ 2017 $ 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. Ordinary shares - fully paid 147,736,127 118,569,460 40,087,991 40,087,991 The consolidated entity is not subject to certain financing arrangements covenants during the financial year ended 30 June Movements in ordinary share capital Details Balance Shares Issued for Cash Performance rights Conversion Capital Raising Costs Issued for acquisition of domain name Date Shares Issue price $ 1 July 2016 90,273,668 25,042,977 11,428,571 $0.70 8,000,000 16,666,667 - 200,554 $0.00 $0.00 $0.50 83,333 (540,000) 101,681 Balance Issued for cash Capital raising costs Performance rights conversion 30 June 2017 118,569,460 32,687,991 12,500,000 $0.60 7,500,000 - 16,666,667 $0.00 $0.02 (450,000) 350,000 Balance 30 June 2018 147,736,127 40,087,991 Xref issued 12,500,000 shares at $0.60 (a 10.2% discount to the 5-day volume weighted average price) to Australian institutions and sophisticated investors on 7 August 2017 with the aim of accelerating global sales growth, facilitating product integrations, driving software development and providing further working capital for the Group’s operations. 2018. The capital risk management policy remains unchanged from the 30 June 2017 Annual Report. 24. Equity - Other equity reserves Foreign currency reserve Options reserve Performance right reserve Consolidation reserve Foreign currency reserve Consolidated 2018 $ 2017 $ (240,062) (34,915) 1,330,963 - 569,096 350,000 (22,845,821) (22,845,821) (21,754,920) (21,961,640) 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. 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. 58 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 59 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 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 Weighted Average Fair Value $A $/Right 16,666,667 16,666,667 16,666,666 50,000,000 (33,333,334) 16,666,666 350,000 83,333 - 433,333 (433,333) - 0.021 0.005 0.00 0.009 0.00 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. The Class A Conversion Event was achieved and the Class A shares were issued 4 December 2017. Class B Conversion Event Upon the Company achieving a 20 day Volume Weighted Average Market Price of the shares equal to or greater than $0.50 within two years after the date of issue of the rights and a minimum sale in the UK of either 1000 credits or £25,000 (whichever comes first). Class C Conversion Event Upon the Group, during any six month reporting period of the Company that ends on or prior to five years after the date of issue of the rights, achieving EBITDA of $A2,500,000 or more. The conversion ratio of the Performance Rights into ordinary shares upon achievement of a relevant Performance Milestone is one ordinary share for each Performance Right. They are in escrow until 8 February 2018. The key inputs used in the binomial valuation of the Xref PR’s are summarised in the table below. Grant date Expiry date - Class A Expiry date - Class B Expiry date - Class C Xref share value at issue Share price hurdle (150% above the issue price) Period over which the VWAP must exceed the share price hurdle Expected volatility Risk free rate Dividend yield 20/01/2016 20/07/2018 20/01/2018 20/01/2021 $0.03 $0.50 20 days 60% to 70% 2.09% 0.00% 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 2.55 years. a. Share option reserve Issued option and movements of options are shown below: Issue Date Expiry date Average exercise price per share Options Option Reserve 29 July 2016 6.000 32,000 92,160 Consolidation (1 for 50) 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 (b) Granted (a) 29 July 2016 1 February 2019 29 July 2016 7 December 2016 25 November 2022 7 December 2016 25 November 2021 3,908,909 199,354 300,000 300,000 3,144 3,144 4,540,909 297,802 0.230 0.230 0.230 0.271 0.120 0.230 0.120 0.700 0.700 0.529 0.230 0.700 0.700 0.585 32,000 4,508,909 (32,000) 2,500,000 5,400,000 12,408,909 4,508,909 2,500,000 5,400,000 960,109 92,160 220,942 (92,160) 67,576 280,578 569,096 229,954 187,895 568,862 211,748 21,217 8,180 69,670 21,295 12,142 At 1 July 2016 1 February 2019 At 30 June 2017 7 December 2016 25 November 2022 At 30 June 2017 7 December 2016 25 November 2021 Granted (c) 22 September 2017 Granted (d) 22 September 2017 3 July 2021 3 July 2021 Granted (e) Granted (f) Granted (g) Granted (h) 22 March 2018 5 February 2022 0.660 249,782 22 March 2018 12 February 2021 0.700 1,000,000 22 March 2018 12 February 2022 0.700 750,000 22 March 2018 12 February 2023 0.700 750,000 0.580 95,390 Closing Balance 30 June 2018 16,241,190 1,330,963 The Class B Conversion Event was achieved and the Class B shares were issued 10 March 2017. Closing Balance 30 June 2017 60 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 61 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued The options have been valued using a binomial options method, using the following assumptions: (a) 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 (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 (c) 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 9/02/2016 1.63 yr 22/09/2017 22/09/2017 $0.585 03/07/2021 3.77 yr $0.745 2.295% 40% Nil (d) 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 (e) 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 (f) 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 1.63 yr 22/09/2017 22/09/2017 $0.58 03/07/2021 3.77 yr $0.745 2.295% 40% Nil 9/02/2016 2.11 yr 22/03/2018 22/03/2018 $0.66 05/02/2022 3.88 yr $0.57 2.395% 26.37% Nil 9/02/2016 2.11 yr 22/03/2018 22/03/2018 $0.70 01/02/2021 2.87 yr $0.57 2.160% 26.3% Nil 62 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 63 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued (g) 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 (h) 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 2.11 yr 22/03/2018 22/03/2018 $0.70 12/02/2022 2.87 yr $0.57 2.395% 26.340% Nil 9/02/2016 2.11 yr 22/03/2018 22/03/2018 $0.70 12/02/2023 4.90 yr $0.57 2.395% 26.350% 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 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 2018 year was 2.55 years (2017: 1.59 years). Option movements during the year At 26 September 2017, 1,055,499 options were issued under the terms of the Employee Option Plan to 52 of its employees and 5 of its contractors. At 22 March 2018, 2,749,782 options were issued under the terms of the Employee Option Plan to 25 of its employees and to the Company’s Chief Financial Officer (CFO). Option movements during the previous 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 component of their remuneration by the company. Chairman Brad Rosser was issued with 7,000,000 with 4,500,000 expiring on the 25th November 2021 and 2,500,000 expiring on the 25th November 2022. Nigel Heap was issued 900,000 options, all expiring on the 25th November 2021. 300,000 of the options issued to Nigel Heap vested on the 25th November 2016. Options vested and therefore exercisable Source Expiry Date 2018 2017 Acquisition of Xref Pty Ltd Options Vested – Tim Mahony Options Vested – Nigel Heap Options Vested - Brad Rosser Options Vested – James Solomons 1 February 2019 3,908,809 3,908,809 1 February 2019 25 November 2021 25 November 2021 12 February 2021 900,000 300,000 2,000,000 1,000,000 600,000 300,000 - - 8,108,809 4,808,909 The weighted average share price for the 2018 financial year was $0.624 (2017: $0.548) b. 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. 25. Equity - dividends There were no dividends paid, recommended or declared during the current or previous financial year. 26. 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. Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The Group recorded losses for the years ended 30 June 2017 and 30 June 2018. 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. 64 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 65 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued The following reflects the income and share data used in the basic and diluted EPS computations Consolidated 2018 $ 2017 $ Group 2018 Financial assets Loans and receivables Available-for- sale financial assets Financial liabilities at fair value through profit and loss Earnings per share for loss from continuing operations Loss after income tax attributable to the owners of Xref Limited (8,912,898) (6,456,038) Cash and cash equivalents Trade debtors and other receivables Total 4,451,896 3,144,727 7,596,623 Weighted average number of ordinary shares used in calculating basic earnings per share Number Number 139,516,949 105,341,482 Financial liabilities Trade creditors and other payables Weighted average number of ordinary shares used in calculating diluted earnings per share 139,516,949 105,341,482 Total - - - - - - - Basic earnings per share Diluted earnings per share Cents (6.39) (6.39) Cents (6.13) (6.13) Consolidated 2018 $ 2017 $ Group 2017 Financial assets Loans and receivables Available-for- sale financial assets Financial liabilities at fair value through profit and loss Cash and cash equivalents Trade debtors and other receivables Total 4,069,573 2,616,084 6,685,657 2,107,821 2,107,821 2,107,821 2,107,821 Total 4,451,896 3,144,727 7,596,623 Total 4,069,573 2,616,084 6,685,657 - - - - - - 1,919,485 1,919,485 1,919,485 1,919,485 - - - - - Earnings per share for loss from discontinued operations Loss after income tax attributable to the owners of Xref Limited N/A (967) Financial liabilities Trade creditors and other payables Consolidated Total 2018 $ 2017 $ b. Financial instrument risk management - - Earnings per share for loss Loss after income tax attributable to the owners of Xref Limited (8,912,898) (6,457,005) The Group has exposure to the following risks from its use of financial instruments: 27. 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. > 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 has a series of policies to manage the risk associated with financial instruments. Policies have been estab- lished which do not allow transactions that are speculative in nature to be entered into and the Group is not actively en- gaged in the trading of financial instruments. As part of this policy, limits of exposure have been set and are monitored on a regular basis. 66 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 67 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued i. Credit risk iii. Market 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. Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will The Group has no significant concentration of risk in relation to cash and cash equivalents, trade debtors and other financial assets. The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Further details in relation to the credit quality of financial assets is provided in Note 16 ii. Liquidity risk Liquidity risk represents the Group’s ability to meet is contractual obligations as they fall due. The Group manages liquidity risk by managing cash flows and ensuring that adequate cash is in place to cover any potential short falls. During the financial year expense growth reduced from 90% in the 2017 year to 44% in 2018, with a growth in revenue of 72%. There is continued growth forecasted and ongoing strong cost control enabling adequate management of liquidate risk. All amounts shown as current financial liabilities are expected to be paid on demand and without interest. The Group’s financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: Group 2018 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 1,646,024 1,646,024 1,646,024 Superannuation payable 184,268 184,268 184,268 Total 1,830,292 1,830,292 1,830,292 - - - - - - - - - - - - affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. iv. Foreign exchange risk 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 Norwegian Krone. The exposure to currencies of the Group is as follows: Canadian Dollars UK Pound Sterling Norwegian Krone New Zealand Dollars Total 2018 $ 176,044 100,975 111,427 - 388,446 2017 $ 37,130 56,284 - 1,507 94,921 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 Norwegian Krone Total impact of potential change in exchange rate 5% $ 8,802 5,049 5,571 19,442 10% $ 17,604 10,098 11,143 38,845 20% $ 35,209 20,195 22,285 77,689 Group 2017 Contractual cash-flow maturities Foreign exchange risk 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 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 - - - - - - - - - - - - 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 Australian Dollars (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) , Canadian dollars (CAD) and Norwegian Krone (NOK) 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. 68 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 69 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 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: Short-term exposure 30 June 2018 – Group AUD United Kingdom Canada Financial Assets Financial Liabilities 7,083,425 1,842,269 153,396 211,955 62,332 75,948 Norway 147,847 127,272 Net statements of financial position exposure 5,241,156 91,064 136,007 20,575 Group 5% (2017: 5%) increase in AUD against foreign currencies 5% (2017: 5%) decrease in AUD against foreign currencies 2018 2017 Profit for the year Equity Profit for the year Equity (9,038,288) 1,707,900 (6,540,069) 3,143,168 (8,850,009) 2,158,275 (6,416,487) 3,347,656 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. Long-term exposure Interest rate risk United Kingdom Canada Norway Interest rate risk is the risk that cash flows from a financial instrument will fluctuate because of changes in market interest 30 June 2018 – Group Financial Assets Financial Liabilities Net statements of financial position exposure AUD 50,948 - 50,948 51,411 17,836 - - 51,411 17,836 - - - Short-term exposure 30 June 2017 – Group AUD United Kingdom Canada Norway Financial Assets Financial Liabilities Net statements of financial position exposure 6,385,797 1,636,040 4,749,757 112,949 111,913 95,076 25,644 17,873 86,269 - - - Long-term exposure 30 June 2017 – Group Financial Assets Financial Liabilities Net statements of financial position exposure AUD 74,998 - 74,998 United Kingdom Canada Norway - - - - - - - - - Foreign exchange risk Sensitivity analysis The following analysis illustrates the sensitivity of profit and equity in regard 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 2018 (2017: 5%). The percentage movement has been determined based on the average exchange rate market volatility for the AUD in the previous 12 months. rates. Revenue of the Group is exposed to interest rate risk on interest bearing financial assets only as it has immaterial bank overdraft balances. The Group is 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. 28. Reconciliation of loss after income tax to net cash used in operating activities Consolidated 2018 $ 2017 $ Loss after income tax expense for the year (8,912,898) (6,457,005) Adjustments for: Depreciation, amortisation and impairment Option expense Foreign exchange Unearned revenue Change in operating assets and liabilities: Increase in trade and other receivables Increase in prepayments Decrease in other financial assets Increase/(decrease) in trade and other payables Increase in employee benefits Increase in other financial liabilities 78,927 46,181 761,867 363,454 (205,147) (56,853) 2,225,723 1,127,069 (528,643) (1,572,023) (37,266) (140,488) (45,198) (26,531) 253 1,001,202 144,990 122,239 50,393 21,470 Net cash used in operating activities (6,466,999) (5,571,285) 70 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 71 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued 29. Contingent assets The Group has no contingent assets at 30 June 2018 (2017: $Nil). 30. Contingent liabilities The Group has no contingent liabilities at 30 June 2018 (2017: $Nil). 31. Related party transactions Related party transactions arise when an entity or person(s) has the ability to significantly influence the financial and operating policies of the Group. The Group has a related party relationship with its Shareholders, Directors and other key management personnel. Unless otherwise stated transactions with related parties in the years reported have been on an arms-length basis, none of the transactions included special terms, conditions or guarantees. The following transactions were carried out with related parties a. Purchase of services Key management personnel Other related parties Consolidated 2018 $ 2017 $ 218,886 165,560 - 19,396 218,886 184,956 c. Other related party balances Loans to directors for the year ended 30 June 2018 amounted to $0 (2017: $1,499). d. Key management compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefit Post employment benefits Share-based payments 32. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Consolidated 2018 $ 2017 $ 1,206,795 1,145,551 71,250 62,593 524,380 363,453 1,802,425 1,571,597 Parent 2018 $ 2017 $ (761,781) (489,902) (761,781) (489,902) b. Year end receivable/ (payable) with related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Loss after income tax Total comprehensive income Receivable from related parties: Directors Payable to related parties: Other related party Consolidated 2018 $ - - 2017 $ 1,499 4,097 72 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 73 NOTES TO THE FINANCIAL STATEMENTS / continued NOTES TO THE FINANCIAL STATEMENTS / continued Statement of financial position 33. Commitments Operating leases are held for premises used for office space. Lease commitments net of incentive payments are: Total current assets Total non-current assets Total assets Total current liabilities Total liabilities Equity Issued capital Reserves Retained profits Total equity Guarantees entered into by the parent entity in relation to the debts of its subsidiaries Parent 2018 $ - 2017 $ 1,507 21,705,222 14,849,709 21,705,222 14,851,216 (33,750) 112.655 (33,750) 112,655 40,087,991 33,089,721 1,330,963 569,096 (19,679,982) (18,920,256) 21,738,972 14,738,561 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 Consolidated 2018 $ 2017 $ 507,020 548,036 461,506 257,357 104,480 - 1,516,562 361,837 The Group had no other commitments at 30 June 2018 (2017; $Nil). 34. Events after the reporting period In August 2018, the Board gave approval to issue further invitations to eligible employees to participate in the Xref Employee Option plan. Should 100% of the invitations be accepted 1,275,569 new employee share options will be issued. No other adjusting or significant non-adjusting events have occurred between the reporting date and the date of There are no guarantees entered into by the parent entity in relation to the debts of its subsidiary Inner Mongolia Plate authorisation. Mining Limited or any other Xref subsidiary in 2018 or 2017. Contingent liabilities The parent entity had no contingent liabilities in 2018 or 2017. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment in 2018 or 2017 74 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 75 Independent Auditor’s Report Directors’ Report In the directors’ opinion: > > > > 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 note 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 2018 and of its performance for the financial year ended on that date; and 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 behalf of the directors Lee-Martin Seymour Brad Rosser Managing Director Chairman 29 August 2018 29 August 2018 Sydney Sydney 76 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 77 INDEPENDENT AUDITOR’S REPORT / continued INDEPENDENT AUDITOR’S REPORT / continued 78 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 79 INDEPENDENT AUDITOR’S REPORT / continued INDEPENDENT AUDITOR’S REPORT / continued 80 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 81 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 23 July 2018 Report, is detailed below. Substantial Shareholders as at 23 July 2018, as disclosed in substantial holding notices given to the ASX and to the Company: Rank Name of Shareholder Shares % of Shares Substantial Shareholders Shareholding % Shares Issued Squirrel Holdings Australia Pty Ltd West Riding Investments Pty Ltd Industry Super Holdings Pty Ltd FIL Limited 30,857,613 30,857,612 10,941,897 8,435,033 20.89 20.89 7.41 5.71 Based on the market price at 23 July 2018 there were 125 shareholders with less than a marketable parcel of 1,021 shares at a share price of $0.49. Number of Ordinary Shares Held Number of Holders Ordinary Shares % of Total Issue Capital 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total 123 208 153 257 82 823 53,654 648,180 1,226,735 9,738,711 136,068,847 147,736,127 0.04 0.44 0.83 6.59 92.10 100.000 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 CS Third Nominees Pty Limited Citicorp Nominees Pty Limited UBS Nominees Pty Ltd J P Morgan Nominees Australia Limited Austral Capital Pty Ltd 30,857,613 30,857,612 26,309,701 6,548,841 4,441,603 4,110,414 3,095,141 3,000,000 Morgan Stanley Australia Securities (Nominee) Pty Limited 2,250,802 Parkstone House Pty Ltd Yeehah Pty Ltd CS Fourth Nominees Pty Limited Mr Tim Mahony + Ms Jacki Pervan Debuscey Pty Ltd Schindler Investment Haus Pty Ltd Brispot Nominees Pty Ltd Calama Holdings Pty Ltd National Nominees Limited First Trustee Company (NZ) Limited Est Mr John Alan MacBride Price Total of Top 20 Holdings Other Holdings Total Fully Paid Shares Issued 20.89 20.89 17.81 4.43 3.01 2.78 2.10 2.03 1.52 1.30 0.80 0.70 0.68 0.67 0.62 0.62 0.56 0.53 0.51 0.51 1,923,076 1,180,000 1,039,674 1,000,000 996,592 912,500 908,842 831,600 778,409 750,000 750,000 122,542,420 25,193,707 82.95 17.05 147,736,127 100.00 Performance Rights as at 23 July 2018 Name of Performance Holder Performance Shares the Holder is Entitled to Squirrel Holdings Australia Pty Ltd C Class Performance Rights: 8,333,333 West Riding Investments Pty Ltd C Class Performance Rights: 8,333,333 Total 16,666,666 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. 82 / Xref Limited / Annual Report 2018 Xref Limited / Annual Report 2018 / 83 SHAREHOLDER INFORMATION / continued Options as at 23 July 2018 Name of Option Holder Taycol Nominees Pty Ltd Yoix Pty Ltd Bear and Unicorn Properties Limited Jimbzal Pty Ltd Mr Timothy Lloyd Mahony + Jackie Tadranka Pervan

Continue reading text version or see original annual report in PDF format above