2020
Annual Report
i
Xref Limited |Annual Report 2020
Contents
2020 Highlights
Chairman’s Report
Chief Executive Officer and Chief Strategy Officer Report
Directors’ Report
Independence declaration
Financial Statements
Notes to the financial statements
Director’s Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
2
4
6
8
24
25
31
74
75
80
84
General information
The financial statements cover Xref Limited as a consolidated entity consisting of Xref Limited and the entities it controlled at the end
of, or during, the year. The financial statements are presented in Australian dollars, which is Xref Limited’s functional and presentation
currency.
Xref Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal
place of business is:
Suite 17, 13 Hickson Road,
Dawes Point, New South Wales, Australia, 2000
A description of the nature of the Group’s operations and its principal activities are included in the directors’ report, which is not part of
the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 31 August 2020. The directors have
the power to amend and reissue the financial statements.
Xref Limited | Annual Report 2020 | 1
2020 Highlights
Total Cash Collections
Recognised Revenue
Cash Burn Rate
$10.7
million
$8.03
million
54%
reduction*
*Xref’s cash burn reduced 54% from H1 2020
to H2 2020.
Quarterly Cash Expenses vs Cash Collection
$6m
$4m
$2m
$0
Cash Inflow
Cash Outflow
Forecast
Q1 FY20
Q2 FY20
Q3 FY20
Q4 FY20
Development Timeline
Jun 2019
Aug
Oct
Feb 2020
Apr
Template Builder
Launched
Released Opt in
(people search)
support for Enterprise
customers
Launched Xref Lite
Released Unusual
Activity feature
CVCheck
Integrated to Xref
Jul
Sep
Integrated to ScreeningCanada /
ModoHR
Added Italian language to platform
Rapid ID Acquired
Integrated Rapid ID in Xref
Launched Candidate
Questionnaire based on
Criteria
Nov
Released Lever
multi-region
support
2 | Xref Limited | Annual Report 2020
Integrated to Greenhouse ATS
Integrated to PageUp
Released Checkr multi-region
support
Released OpenID SSO support
Mar
May
Integrated to
Linkedin ATS
Integrated to
CVCheck Platform
COVID-19 | Revenue Recovery
$125k
$100k
$75k
$50k
$25k
$0
Essential Services
Non Essential Services
Credit Usage
$800k
$600k
$400k
$200k
$0
29 Feb
30 Jun
F e b
M ar
A pr
M ay
Ju n
2.23m
120k
297k
220k
2.19m
129k
268k
202k
2.17m
137k
216k
217k
1.6m
1.6m
1.6m
1.63m
121k
172k
144k
1.2m
2019 - 3
2019 - 4
2020 - 1
2020 - 2
Quarterly Credit Usage | Region
Office
Australia
New Zealand
NA
EMEA
t
n
u
o
m
a
f
o
m
u
S
$2.4m
$2.2m
$2m
$1.8m
$1.6m
$1.4m
$1.2m
$1m
$800k
$600k
$400k
$200k
$0
Overseas Sales and Locations
Sales by Region
APAC
84%
NA
EMEA
9%
7%
Xref Limited | Annual Report 2020 | 3
Chairman’s Report
Welcome to the fifth annual report from Xref
It’s with great pride that I welcome shareholders to Xref’s annual
report for the 2020 financial year - a year that presented a number
of major challenges but through which Xref was able to not only
survive but thrive.
Until the beginning of the 2020 calendar year, Xref’s service
was predominantly used in sectors that are now considered
non-essential in a pandemic. Xref had a first-mover advantage
that made it a trusted provider of a vital recruitment solution.
However, when the COVID-19 pandemic took hold, Xref became
an important tool for organisations providing essential services.
Essential services organisations urgently needed to confidently
and efficiently increase their headcount and found they could rely
on Xref to validate their hires and ensure that, despite the urgency
in their decision-making, they were still placing the right people
into critical roles.
A foundation for success
The Company’s primary focus during the 2020 financial year
was to reach cash flow break-even and, despite the extremely
challenging market conditions, it made positive progress towards
doing so.
The leadership team had already taken steps to set the business
up for success prior to COVID-19, by streamlining operations,
preserving cash and pivoting the focus of the marketing function
from sales support to online lead generation.
When the pandemic hit the business recognised the increasing
demand from essential service organisations and both the team
and platform were agile enough to adapt and provide the service
required.
Both of these factors ensured that Xref has survived the initial and
ongoing effects of the global economic slowdown
Driving efficiencies and revenue
Building efficiencies in the acquisition, onboarding, support
and growth of clients has seen Xref evolve into a more lean
and productive organisation. By developing a host of channel
integrations, multi-regional capabilities, and self-serve features
and by redirecting marketing efforts, the business is now able to
operate far more efficiently.
4 | Xref Limited | Annual Report 2020
Since December 2019, Xref has scaled back event costs, travel,
development costs, office leases and has reduced headcount. As
a result cash expenses in the second half of the year decreased
by 35% when compared to the first half of the year and decreased
15% when compared to the same period last year. Overall, cash
burn in the second half of the year was $2.2m compared to $3.3m
in the same period last year, a 34% reduction. Compared to the
first half of the financial year Xref achieved a 54% reduction in
cash burn.
Cash was also bolstered by a $3.496m placement of ordinary
shares in December 2019. Subsequent to year-end a $5 million
debt facility was also established in July 2020.
Adapting to the new normal
The Xref team has quickly adapted to working from home,
ensuring no impact to the high level of service experienced by
clients. As businesses globally endeavour to do the same, Xref
has become a trusted partner, ensuring that remote teams are
able to confidently verify new recruits despite having often never
met them in person.
Through the introduction of Xref Lite, the business has also
made it possible for new clients to use the market-leading
reference checking service quickly and inexpensively. For
smaller organisations (which were not historically Xref’s target
market) the Lite product may remain their primary reference
checking service. For larger organisations, Lite provides a quick
and effective means to trial our services before moving to our
enterprise solution.
This self-serve variant of the platform enables Xref to support
organisations that have been forced to adapt almost overnight
to an entirely digital way of working, with a simple and intuitive
solution that meets a very real need for those hiring,
Outlook
Previous success gained through strategic partnerships and
ongoing platform evolution created a strong foundation that the
Xref platform and team could rely on when market conditions
became difficult.
Having demonstrated its ability to navigate extremely turbulent
circumstances, and allow clients to do the same, life during and
after COVID-19 looks very positive for the company. The strength
of the Xref leadership team and the difficult decisions they make
on behalf of the business continue to underpin its success.
Brad Rosser,
Chairman
Xref Limited | Annual Report 2020 | 5
Chariman’s Report
Chief Executive Officer and
Chief Strategy Officer Report
A year of achievements in spite of adversity
At the conclusion of FY20 we can say it has been a year of two
halves. The first half of the financial year included significant
milestones in the Xref journey, with notable partnerships formed,
further international expansion and the launch of Xref Lite.
The unanticipated challenges of the second half of the year
presented difficulties for businesses globally. However, despite
the turbulent market conditions, caused by fires and floods
across Australia and the pressures of COVID-19 globally, Xref
was able to maintain solid sales performance. .
Sales strength and cash stability
Regardless of economic uncertainty, the Xref service has
remained in demand and sales of $9.8million for the year paint
an impressive picture of what the platform and team are able to
achieve during a time of crisis.
Since November 2019 we have been primarily focused on
reaching cash flow break even and all signs were showing that
we would do so by the end of the second quarter. The impact of
COVID-19, however, put pressure on our cash flow and focused
our efforts to further reduce cash expenditure.
6 | Xref Limited | Annual Report 2020
Although we are close to cash flow break even, we recognise
the support we have had during the pandemic in the form of
government subsidies and we remain focused on achieving cash
flow break even under normal trading conditions in the 2021
financial year.
Creating a lean business
The stability of Xref during COVID-19 can be attributed, in a large
part, to the work done prior to the pandemic, to create a business
that is lean and focused on productivity.
Since December 2019, we have scaled back event costs, travel,
development costs, office leases and reduced headcount
from count from 98 to 61 people, including the closure of our
Norway office and the reallocation of Norwegian operations to
our UK team. Despite reducing our headcount, we have been
able to maintain productivity with a core team that is committed
to delivering results. These steps have resulted in a dramatic
reduction in cash expenses without compromising our ability to
grow.
International sales recovery
Landmark clients wins
On the 25th March 2020, New Zealand entered full lockdown
restrictions as a result of the COVID-19 pandemic. Credit usage
was upheld by the clients deemed ‘essential’ during the crisis
and despite an initial drop, sales started to grow from mid-April.
On the 8th June, a week after the New Zealand national holiday
(Queens Birthday) all restrictions were lifted. Sales and usage
immediately returned to peak levels.
Marketing-driven results
As part of our focus on improving the efficiencies of our
operations, we have redirected our marketing efforts from sales
support to online lead generation.
The marketing function has since been focused on:
» retargeting existing leads with digital campaigns;
» leveraging new lead opportunities through integration
partnerships;
» improving engagement with clients and prospects through
increased online resources; and
» driving awareness of the platform through growth of
presence on review sites, such as G2, and client case
studies on the Xref website.
New demands driven by COVID-19
Our focus on supporting organisations within the ‘trust’
economy, strengthened our position in an otherwise challenging
market. Of all Xref clients globally, 35% are deemed ‘essential
services’, operating within frontline sectors such as healthcare,
government, education, volunteer services, healthcare
recruitment, essential transport services, and even video
conferencing businesses. Prior to COVID-19, 50% of all credit
usage originated from these clients.
Xref credits used during the final quarter of the year - when
global lockdowns were in place and businesses around the world
were feeling the impact of COVID-19 - totalled $1.7 million. An
increase in usage from non-essential services saw usage grow by
12.5% in June compared to May.
The flexibility and agility of the Xref platform ensures we are seen
as a trusted provider during difficult times. The speed with which
the platform can be introduced to an organisation and its ability
to scale up and down with clients’ needs enables us to meet the
needs of those still hiring during the pandemic.
The number of active clients using the platform increased to more
than 1,100 during the first half of the year and, despite market
challenges, increased by a further 123 new clients in the second
half.
Between July and December 2019, 192 new clients joined Xref,
an increase of more than 67% on the number of new clients
joining in the previous corresponding period. Q2 was the most
successful for client acquisition, with 80 of the new clients added
during that time.
New clients during the first half of the year included the Ministry
of Social Development in New Zealand; Tourism Australia,
Tennis Australia, Cricket Australia, Knox Grammar School,
Sigma Healthcare and Schneider Electric in Australia; Turner
& Townsend, Kelly Service and Lenovo in the UK, Texas A&M
University, the University of Alberta and Mastery Schools in
the US, EY and Trondheim Kommune in Norway, and Brussels
Airlines in Belgium.
New clients introduced during the second half included
Fujitsu, TAFE, Datacom, Frucor Suntory, NSW Public Service
Commission and Zip Co in Australia; Land Information New
Zealand and Douglas Pharmaceuticals in New Zealand; Babylon
Health in Canada; Etsy in the United States; The Norwegian Tax
Administration and Wilhelmsen in Norway and The Telegraph
Media Group in the United Kingdom.
Changing market trends
In March 2020, in line with government directives in all the
regions we operate in, the Xref team began to work from home.
It was and continues to be our commitment that the service our
clients have come to expect and love is in no way jeopardised
by the increasingly dispersed nature of our team. Thankfully, as
a business that practices what we preach, with automation and
tech-based solutions in place wherever possible, we were able to
take our operations remote with no impact on the delivery of our
service.
COVID-19 accelerated global demand for remote working and,
as a result, employers’ desire to improve governance in this
environment is increasing and they are seeking better ways to
perform candidate verification. A reduction in the size of talent
acquisition teams across businesses globally has also increased
the need for efficiency, consistency and security of the hiring
processes adopted.
Our reliance on outbound direct sales activities is fast being
replaced by the need to capture growing market demand. We
have witnessed a rise in inbound leads as a result of our channel
partner integrations, global digital strategy and the network effect
generated through the numerous sectors and global regions we
are used in.
Xref Limited | Annual Report 2020 | 7
CEO and CSO Report
G2 measured Xref’s performance against its global competitors
for the March and June quarters and, as a result, the Company
joined the review platform’s ‘Leader’ quadrant and was awarded
the ‘High Performer’ badge for Enterprise and Mid-Market usage,
as well as the much-coveted ‘Users Love Us’ category.
Outlook
Despite all that this year has entailed, we have concluded it with
our usual commitment and determination for continued growth
in FY21.
We have a lean cost structure that will be pivotal in our drive to
reach cash flow break even and the changes made to our team
and operations have created a stronger foundation for growth
through both direct sales and indirect sales via partnerships.
While COVID-19 has undoubtedly had a devastating impact
globally, we are delighted with the results we have achieved when
faced with such a major global crisis and we are thrilled that we
have been able to continue to support the organisations that
need us most.
We look forward to another successful year ahead, with new
revenue streams coming from RapidID, more integrations and the
introduction of additional Xref products.
We have a strong board, focused leadership and dedicated team
to take advantage of the huge opportunity that lies ahead for us
as the world adjusts to the new normal.
Lee-Martin Seymour,
Tim Griffiths,
Chief Executive Officer,
Chief Strategy Officer,
Co-Founder
Co-Founder
Demand for self-serve solutions
Businesses are increasingly operating on a self-serve basis.
Reduced headcounts, stretched budgets and urgent hiring
needs all contribute to a requirement for solutions that can be
found, purchased and onboarded with ease and speed.
The Xref Lite platform was launched in October 2019, delivering
the core functionality and capability of the Xref platform, in a
self-service, single-user format.
Xref Lite dramatically reduces the time-to-purchase, allowing
for a one-day customer journey, whereby a potential user can
search for a solution, find Xref, create an account, use a free credit
and then buy credits for future use, transforming the way their
organisation references, all within the same day.
Xref Lite also significantly expedites the time taken to onboard
new clients, allowing Xref’s global sales and customer success
teams to exclusively focus on finding, securing and supporting
new enterprise users.
Integrations and acquisitions
Xref can acquire clients via the self-serve platform, our in-house
enterprise sales teams or via our channel partners and we
continued to launch new integration partnerships during FY20.
Integrations introduced with joint go to market campaigns
included:
» February — CVCheck was integrated into the Xref platform
» March — Xref was added to the LinkedIn Talent Hub
» April — Xref was integrated into the Greenhouse and
PageUp platforms
» May — Xref was added to the CVCheck platform
On 1st July 2019, we were also delighted to announce the
acquisition of RapidID. RapidID is a highly complementary and
strategically important acquisition for Xref. Its technology has
been integrated into Xref’s core platform and it now allows Xref’s
clients and channel partners to perform identity checks on
candidates.
Industry recognition
G2 is the world’s largest tech marketplace where businesses can
discover, review, and manage the technology they need.
G2 is considered the industry standard for comparing enterprise
technology platforms, particularly within the North American
market. To provide a review on G2, you must prove you are a
registered user of the platform, which offers consumers a degree
of trust when assessing their technology options.
8 | Xref Limited | Annual Report 2020
CEO and CSO Report Xref Limited | Annual Report 2020 | 9
CEO and CSO Report
Directors’ Report
The directors present their report, together with the financial statements, on the Group (referred to hereafter as the ‘Group’) 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 2020.
Directors
The following persons were directors of Xref Limited during the whole of the financial year and up to the date of this report, unless
otherwise stated:
• Lee-Martin Seymour
• Timothy Griffiths
• Timothy Mahony (Resigned: 22 November 2019)
• Brad Rosser
• Nigel Heap
Principal activities
During the financial year the Group continued to conduct its core activity which was to develop human resources technology that
automates the candidate reference process for employers.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of Operations
The loss for the Group after providing for income tax amounted to $10,056,090 (30 June 2019: $8,181,826).
Highlights of the financial year included:
• Sales — $9.8m -Remaining strong during 2020 despite the impact of COVID-19 in the second half of the financial year
• International sales — $2.56m - representing 26% of global sales
• Recognised revenue — $8.03m - despite the impact of COVID-19 across the recruitment sector usage of the platform continued
and the result for the year was pleasing.
• User growth — active users grew 19.5% during 2020 to over 11,100
• Xref Lite launch — delivering the core functionality and capability of the Xref platform, in a self-service, single-user format.
• Integrations — integrations completed with CVCheck, LinkedIn Talent Hub, Greenhouse and PageUp.
• Funding — a placement of ordinary shares to the value of $3.496 million in December 2019, and a $5 million debt facility entered into
in July 2020.
• Landmark clients — major enterprise accounts introduced during FY19, including Tourism Australia, Tennis Australia, Cricket
Australia, Fujitsu, TAFE, Datacom, Sigma Healthcare and Schneider Electric in Australia; Land Information New Zealand and
Douglas Pharmaceuticals in New Zealand; Turner & Townsend, Kelly Service, Lenovo and The Telegraph Media Group in the UK;
Texas A&M University, the University of Alberta, Etsy and Mastery Schools in the US; EY, Trondheim Kommune, The Norwegian Tax
Administration and Wilhelmsen in Norway.
10 | Xref Limited | Annual Report 2020
The company continued to capitalise on high demand for its core service, automated candidate referencing, in a growing human
resources technology market. The major drivers behind revenue growth included:
• Growth through integration — partnerships continue to be a major driver for growth, with major new integrations introduced to
drive growth into new regions and further increase the value of the Xref service for customers. Credit usage by customers through
an integration grew 36% during 2020 to $1.9 million.
• International expansion — The company continues to grow its operations globally, from its headquarters in Sydney and offices in
Toronto, London, and Auckland.
• Large addressable market — Xref has a large addressable market, including more than 180 million people in North America, 120
million people in Europe, and 15 million people in Australia and New Zealand.
Corporate
On 9 August 2019 Xref Limited acquired 100% of the ordinary shares of Rapid ID Pty Limited for the total consideration of $1,712,040.
Rapid ID is an ID verification and fraud prevention platform which aggregates leading customer verification technologies to offer its
clients a flexible and seamless integration for onboarding and risk analysis monitoring. The platform is able to perform GlobalID Checks,
AML & KYC Compliance, ID Document Verification and Biometric Verification. It was acquired to offer Xref’s clients with an integrated
method to verify the identity of the candidates they are working with.
During the last quarter of the financial year it was determined by the directors to close the Norway office and transfer management of
existing accounts and sales operations to the EMEA head office based in London. The subsidiary that operated out of Oslo Norway, Xref
AS is currently being wound up in accordance with Norwegian Corporations Law. There has been no major impact on the operations in
Norway with sales continuing to be made to Norwegian businesses out of Xref UK.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
The impact of the Coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential impact, positive
or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian
Government and other countries. Despite the impact, Xref recorded its lowest cash burn quarter since listing, in Quarter 4 2020 due
to a focus on cost reduction that has been ongoing since December 2019 combined with strong sales from those sectors deemed
essential services. This cost reduction focus, both prior to the outbreak of COVID-19 and after has been a financially positive outcome.
Management has reviewed the company’s cashflow forecast as a result of COVID-19 and made changes accordingly.
On July 8, 2020 the Board approved the issue of 2,674,632 new fully paid ordinary shares to 56 Xref staff. These shares were issued
at the then average volume-weighted share price of 18 cents. The shares were issued to replace the forgone earnings of all Xref staff
who were reduced to working 4 days per week for the last quarter of the financial year, including a proportion of individual performance
bonuses forgone for the same quarter which were also replaced with shares. Additionally shares were issued to members of the sales
team as part of a commission scheme restructure. This announcement was released to the market on 8 July 2020.
Xref returned to a five-day working week on the 1st July as a result of the successful fourth quarter.
On July 20, 2020, the Board approved the issue of 2,931,099 Options with an exercise price of 35 cents to 50 eligible employees as part
of the Xref Employee Option plan. The options vest on 15 January 2021 and are exercisable until 15 January 2024. This announcement
was released to the market on 20 July 2020.
On July 31, 2020 Xref entered into a secured $5m debt facility with Pure Asset Management to support the Company’s growth
strategies. This included the issue of 14,285,714 detached warrants at an exercise price of 35 cents which expire on July 31, 2024. Full
details of the facility were announced to the market on 31 July 2020.
Except for the above, no other matters or circumstances have arisen since the end of the financial year which significantly affected
or could significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future
financial years.
Xref Limited | Annual Report 2020 | 11
Directors’ Report
Likely developments and expected results of operation
The group anticipates continued growth across all business metrics and, having a strong pipeline of new business opportunities across
all markets in which it operates, continues to maintain a dynamic growth trajectory.
Despite the impacts of COVID-19 the group anticipates continued growth in revenue due to maintaining a strong pipeline of new
business opportunities across all markets in which it operates. The shift in the marketing strategy combined with a reduction in
operating cost structures will result in a lowering of the cost of customer acquisition & maintenance which supports Xref’s focus on
achieving cashflow profitability in the near term.
Environmental issues
The Group’s operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or
territory of Australia.
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 20 years recruitment experience across
many geographic and market sectors. For 13 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 and Nomination Committee
Interest in shares:
Interest in options:
31,101,476 ordinary shares
None
Contractual rights to shares:
8,333,333 performance rights
Name:
Title:
Timothy Griffiths
Chief Strategy Officer
Qualifications:
MBA
Experience and expertise:
Timothy Griffiths is a co-founder of Xref. Mr Griffiths, an MBA-qualified technologist, has 23
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
Member of Audit and Risk Committee
Interest in shares:
Interest in options:
30,857,613 ordinary shares
None
Contractual rights to shares:
8,333,333 performance rights
12 | Xref Limited | Annual Report 2020
Directors’ Report 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 and Risk Committee and Remuneration and Nomination Committee
Interest in shares:
Interest in options:
None
7,000,000 options
Contractual rights to shares:
None
Name:
Title:
Nigel Heap
Non-Executive Director
Qualifications:
LLB, AMP
Experience and expertise:
Nigel Hays 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 and Risk Committee
Interest in shares:
Interest in options:
18,000 ordinary shares
900,000 options
Contractual rights to shares:
None
Xref Limited | Annual Report 2020 | 13
Directors’ Report
Name:
Title:
Tim Mahony (Resigned: 22 November 2019)
Non-Executive Director
Qualifications:
BFinAdmin
Experience and expertise:
Timothy Mahony spent 19 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.
Other current directorships:
None
Former directorships (last 3 years):
None
Special responsibilities
Member of the Audit and Risk Committee and Remuneration and Nomination Committee
Interest in shares:
Interest in options:
Contractual rights to shares:
1,550,000 ordinary shares
None
None
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other types
of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Key Management Personnel
Chief Financial Officer
Mr James Solomons, BComm, FCA, CTA, GAICD
James is a chartered accountant with over 20 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 4 years of experience as Xero Australia’s Head of Accounting. A successful entrepreneur in his own right James has a deep
understanding of the need to find a balance between investing for growth whilst maintaining strong corporate governance processes
across the business.
Company Secretary
Mr Robert Waring, BEc, ACA, FCIS, ASIA, FAICD
Robert has more than 41 years of experience in financial and corporate roles, including more than 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, Cobalt Blue Holdings Limited and Vectus Biosystems Limited.
14 | Xref Limited | Annual Report 2020
Directors’ Report Meetings of directors
During the financial year, 12 meetings of directors (including committees of directors) were held. Attendances by each director during
the year were as follows:
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the 2019-20 financial year,
and the number of meetings attended by each Director were as follows:
Board meetings held
12
Audit and Risk
Committee meetings
held
2
Remuneration and
Nomination Committee
meetings held
0
*****Disclosure
Committee meetings
held
0
Attended
Attended
Attended
Attended
11
11
10
4
12
2
N/A
1
1
2
–
–
N/A
–
–
–
–
–
N/A
N/A
Directors
Brad Rosser**
Lee-Martin Seymour
Timothy Griffiths****
Timothy Mahony*
Nigel Heap***
*Ceased to be a Director on 22 November 2019 (and hence ceased to be the Chairman of the Audit and Risk Committee, and a member
of the Remuneration and Nomination Committee).
**Chairman of the Board, and Chairman of the Remuneration and Nomination Committee.
***Chairman of the Audit and Risk Committee from 17 December 2019, and joined as a member of the Remuneration and Nomination
Committee on 17 December 2019.
****Re-joined as a member of the Audit and Risk Committee on 17 December 2019.
*****Disclosure Committee established on 25 February 2020.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the
requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
• 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
Xref Limited | Annual Report 2020 | 15
Directors’ Report
Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the
results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for
shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors (‘the Board’)
ensures that executive reward satisfies the following key criteria for good reward governance practices:
• competitiveness and reasonableness
• acceptability to shareholders
• performance linkage / alignment of executive compensation
The Remuneration and Nomination Committee is responsible for determining and reviewing remuneration arrangements for its
directors and executives. The performance of the Group depends on the quality of its directors and executives. The remuneration
philosophy is to attract, motivate and retain high performance and high quality personnel.
The reward framework is designed to align executive reward to shareholders’ interests. The Board have considered that it should seek
to enhance shareholders’ interests by:
• having economic profit as a core component of plan design
• focusing on sustained growth in shareholder wealth, 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.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors’ fees and
payments are reviewed annually by the Remuneration and Nomination Committee. The Remuneration and Nomination Committee may,
from time to time, receive advice from independent remuneration consultants to ensure non-executive directors’ fees and payments are
appropriate and in line with the market. The chairman’s fees are determined independently to the fees of other non-executive directors
based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his
own remuneration.
ASX listing rules require the aggregate Non-Executive Directors’ remuneration be determined periodically by a general meeting. In
the Prospectus dated 23th December 2015, noted on Page 18 the current maximum annual aggregate remuneration for directors
was shown as $200,000. This has changed and a resolution was passed at the 2016 AGM that the maximum aggregate cash-based
remuneration payable to Non Executive Directors in any financial year be increased by A$300,000 from A$200,000 to A$500,000.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both
fixed and variable components. The executive remuneration and reward framework has four components:
• base pay and non-monetary benefits
• short-term performance incentives
• share-based payments
• other remuneration such as superannuation and long service leave
16 | Xref Limited | Annual Report 2020
Directors’ Report 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 Remuneration
and Nomination Committee based on individual and business unit performance, the overall performance of the Group and comparable
market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where
it does not create any additional costs to the Group and provides additional value to the executive.
The short-term incentives (‘STI’) program is designed to align the targets of the 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 Group’s direct competitors.
The Company’s 2020 Annual Meeting (“AGM”)
A Remuneration Report has been prepared for the 2020 year and a resolution will be put to the 2020 AGM to ask shareholders to
approve it.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
The key management personnel of the Group consisted of the following directors of Xref Limited:
• Lee-Martin Seymour – Managing Director & Chief Executive Officer
• Timothy Griffiths – Executive Director & Chief Strategy Officer
• Timothy Mahony – Non-Executive Director (Resigned: 22 November 2019)
• Nigel Heap – Non-Executive Director
• Brad Rosser – Chairman
And the Key Management Personnel:
• James Solomons – Chief Financial Officer
• Robert Waring – Company Secretary
Xref Limited | Annual Report 2020 | 17
Directors’ Report
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Cash salary
and fees
$
Cash bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
Leave
$
Share-
based
payments
Equity
settled
$
Total
$
169,845
17,215
47,667
292,519
292,519
277,738
72,100
1,169,603
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,635
4,528
25,889
25,889
24,485
-
82,426
-
-
-
-
-
-
-
-
48,787
218,632
-
-
-
-
18,850
52,195
318,408
318,408
27,562
329,785
-
72,100
76,349
1,328,378
2020
Non-Executive Directors:
Brad Rosser
Tim Mahony*
Nigel Heap
Executive Directors:
Lee-Martin Seymour
Timothy Griffiths
Other Key Management
Personnel:
James Solomons
Robert Waring
*Represents remuneration from 1 July 2019 to 22 November 2019.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Cash salary
and fees
$
Cash bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
Leave
$
Share-
based
payments
Equity
settled
$
Total
$
146,574
54,167
59,583
270,000
270,000
270,000
75,054
1,145,378
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,625
15,422
23,750
23,750
23,750
-
103,297
-
-
-
-
-
-
-
-
182,054
328,628
-
16,323
70,792
91,328
-
-
293,750
293,750
92,658
386,408
1,872
76,926
292,907
1,541,582
2019
Non-Executive Directors:
Brad Rosser
Tim Mahony
Nigel Heap
Executive Directors:
Lee-Martin Seymour
Timothy Griffiths
Other Key Management
Personnel:
James Solomons
Robert Waring
18 | Xref Limited | Annual Report 2020
Directors’ Report The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
2020
2019
2020
2019
2020
2019
Fixed Remuneration
At risk – STI
At risk - LTI
Non-Executive Directors:
Brad Rosser (Chairman)
Timothy Mahony
Executive Directors:
Lee-Martin Seymour
Timothy Griffiths
Other Key Management Personnel:
James Solomons
Robert Waring
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 ‘Group performance and link to remuneration’.
The maximum bonus values are established at the start of each financial year and amounts payable are determined in the final month of
the financial year by the Remuneration and Nomination 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:
Agreement
commenced:
Lee-Martin Seymour
Managing Director and Chief Executive Officer
1 July 2019
Term of agreement:
No fixed term
Details:
Base salary for the year ending 30 June 2020 of $285,000pa, plus superannuation, plus $20,000
car allowance to be reviewed annually by the Remuneration and Nomination Committee. 12 weeks
termination notice by either party. Discretionary bonus may be paid as per Remuneration and Nomination
Committee approval and KPI achievement. Non-solicitation and non-compete clauses exist.
Xref Limited | Annual Report 2020 | 19
Directors’ Report
Name:
Title:
Agreement
commenced:
Timothy Griffiths
Executive Director and Chief Strategy Officer
1 July 2019
Term of agreement:
No fixed term
Details:
Name:
Title:
Agreement
commenced:
Base salary for the year ending 30 June 2020 of $285,000pa, plus superannuation, plus $20,000
car allowance to be reviewed annually by the Remuneration and Nomination Committee. 13 weeks
termination notice by either party. Discretionary bonus may be paid as per Remuneration and Nomination
Committee approval and KPI achievement. Non-solicitation and non-compete clauses exist.
James Solomons
Chief Financial Officer
1 July 2019
Term of agreement:
No fixed term
Details:
Base salary for the year ending 30 June 2020 of $270,000, plus superannuation, plus $20,000 car
allowance to be reviewed annually by the Remuneration and Nomination Committee. 3 weeks termination
notice by either party. Discretionary bonus may be paid as per Remuneration and Nomination 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
Options granted carry no dividend or voting rights.
All options were granted over unissued fully paid ordinary shares in the company. The number of options granted was determined having
regard to the satisfaction of performance measures and weightings as described above in the section ‘Group 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 2020 are set out below:
Name
Nigel Heap
Brad Rosser
James Solomons
Robert Waring
Tim Mahony*
Number of options
granted during the year
2020
Number of options
granted during the year
2019
Number of options
vested during the year
2020
Number of options
vested during the year
2019
-
-
-
-
-
-
-
-
20,714
-
-
-
750,000
-
-
600,000
2,500,000
750,000
16,312
-
*Resigned 22 November 2019
There were no options granted to directors or key management personnel during the year ended 30 June 2020.
There were no options held by directors or key management personnel that were exercised or lapsed during the year ended 30 June 2020.
20 | Xref Limited | Annual Report 2020
Directors’ Report Performance rights
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 2020.
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 2020.
Additional disclosures relating to key management personal
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 Group, including their personally related parties, is set out below:
2020
Tim Mahony*
Nigel Heap
Lee-Martin Seymour
Timothy Griffiths
James Solomons
Robert Waring
Balance at beginning of
year
On exercise of options
Other changes during
the year
Balance at end of year
2,550,000
18,000
30,857,612
30,857,613
9,000
213,885
64,506,110
-
-
-
-
-
-
-
(1,000,000)
-
243,864
-
-
-
1,550,000
18,000
31,101,476
30,857,613
9,000
213,885
243,864
64,749,974
*Resigned 22 November 2019
There were no options granted to directors or key management personnel during the year ended 30 June 2020.
There were no options held by directors or key management personnel that were exercised or lapsed during the year ended 30 June
2020.
2020
Options over ordinary
shares
Brad Rosser
Nigel Heap
James Solomons
Robert Waring
Balance at the start
of the year
Granted
Exercised
Expired/ forfeited/
other
Balance at the end
of year
7,000,000
900,000
2,500,000
37,026
10,437,026
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,000,000
900,000
2,500,000
37,026
10,437,026
Payments for accounting services from Business Depot Sydney Pty Ltd (related entity of James Solomons) of $158,703 (ex GST) were
made.
Payments for company secretarial services from Oakhill Hamilton Pty Ltd (related entity of Robert Waring) of $72,100 (ex GST) were
made.
All transactions were made on normal commercial terms and conditions and at market rates.
Xref Limited | Annual Report 2020 | 21
Directors’ Report
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
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company
against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of
the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any
related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any
related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the
company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined
in note 9 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 the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 9 to the financial statements do not compromise the external
auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the
auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or
jointly sharing economic risks and rewards.
22 | Xref Limited | Annual Report 2020
Directors’ Report 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.
Corporate Governance
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
www.xref.com/investor-centre.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Lee-Martin Seymour
Managing Director
Brad Rosser
Chairman
31 August 2020
Xref Limited | Annual Report 2020 | 23
Directors’ Report
Independence declaration
31 August 2020
The Board of Directors
Xref Limited
14/13 Hickson Street
Dawes Point
SYDNEY NSW 2000
Dear Board Members
Xref Limited
Crowe Sydney
ABN 97 895 683 573
Level 15 1 O’Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowe.com.au
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the Directors of Xref Limited.
As lead audit partner for the audit of the financial report of Xref Limited for the financial year ended 30
June 2020, I declare that to the best of my knowledge and belief, that there have been no contraventions
of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
Crowe Sydney
Ash Pather
Partner
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an
equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership
is the Crowe Australasia external audit division. All other professional services offered by Findex Group Limited are conducted by a privately
owned organisation and/or its subsidiaries.
Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a
separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe
Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or
partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Sydney, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a
scheme approved under Professional Standards Legislation.
© 2020 Findex (Aust) Pty Ltd.
24 | Xref Limited | Annual Report 2020
Financial Statements
Statement of profit or loss and other comprehensive income
Revenue
Revenue
Total revenue
Expenses
Employee expenses
Overheads and administrative expenses
Depreciation and amortisation expense
Impairment of assets
Total expenses
Operating loss
Other income
Loss before income tax
Income tax expense
Loss after income tax expense for the year attributable to the owners of
Xref Limited
Other comprehensive income
Items that may reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Note
8
9
10
2020
$
2019
$
8,028,306
8,028,306
8,048,169
8,048,169
(12,612,388)
(11,195,253)
(5,395,134)
(5,348,287)
(667,655)
(1,134)
(87,993)
(1,106)
18,676,311
16,632,639
(10,648,005)
(8,584,470)
8
591,915
402,644
(10,056,090)
(8,181,826)
12
-
-
(10,056,090)
(8,181,826)
14,858
14,858
(136,425)
(136,425)
Total comprehensive income attributable to the owners of Xref Limited
(10,041,232)
(8,318,251)
Earnings per share for loss from continuing operations attributable to the
owners of Xref Limited
Basic earnings per share
Diluted earnings per share
28
28
(5.82)
(5.82)
(5.10)
(5.10)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Xref Limited | Annual Report 2020 | 25
Statement of financial position
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Capitalised commission
Prepayments
Total current assets
Non current assets
Rental bonds
Property, plant and equipment
Right of use assets
Intangibles
Total non current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Superannuation payable
Contingent consideration
Lease liability
Employee entitlements
Unearned revenue
Total current liabilities
Consolidated
2020
$
2019
$
Note
13
14
15
16
17
18
19
36
21
20
22
2,868,794
1,374,769
1,011,918
566,089
8,035,939
2,258,627
613,757
399,955
5,821,570
11,308,278
70,254
314,475
440,172
1,825,074
2,649,975
8,471,545
109,757
349,610
-
130,678
590,045
11,898,323
1,620,099
1,813,560
171,163
30,240
336,689
533,832
215,375
-
-
358,092
7,847,799
6,262,763
10,539,822
8,649,790
The above statement of financial position should be read in conjunction with the accompanying notes.
26 | Xref Limited | Annual Report 2020
Financial Statements Statement of financial position continued
Non current liabilities
Contingent consideration
Lease liability
Employee entitlements
Total non current liabilities
Total liabilities
Net (liabilities)/assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
36
24
23
Consolidated
2020
$
43,800
138,820
153,166
335,786
2019
$
-
-
89,668
89,668
10,875,608
8,739,458
(2,404,063)
3,158,865
25
26
53,235,226
48,832,200
(21,410,328)
(21,539,113)
(34,228,961)
(24,134,222)
(2,404,063)
3,158,865
The above statement of financial position should be read in conjunction with the accompanying notes.
Xref Limited | Annual Report 2020 | 27
Financial Statements
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28 | Xref Limited | Annual Report 2020
Financial Statements
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Xref Limited | Annual Report 2020 | 29
Financial Statements
Statement of cash flows
Cash flows from operating activities:
Receipts from customers and othes
Payments to suppliers, employees and others
Other revenue
Interest received
Note
2020
$
2019
$
12,108,020
10,431,625
(19,791,253)
(17,315,885)
(7,683,233)
(6,884,260)
205,402
94,890
1,724,281
133,522
Cash flows from operating activities
30
(7,382,941)
(5,026,457)
Cash flows from investing activities:
Payment for purchase of business, net cash acquired
Purchase of property, plant and equipment
Purchase of intangible asset
Cash flows from investing activities
Cash flows from financing activities:
Proceeds from issue of shares
Share issue transaction costs
Repayment of borrowings (lease liabilities)
Proceeds from Options Exercised
Cash flows from financing activities
(583,944)
-
(64,676)
(119,878)
-
(13,831)
(648,620)
(133,709)
3,496,001
-
(631,585)
8,000,000
(522,794)
-
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1,267,003
2,864,416
8,744,209
Net decrease in cash and cash equivalents held
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of financial year
(5,167,145)
3,584,043
13
8,035,939
2,868,794
4,451,986
8,035,939
The above statement of cash flows should be read in conjunction with the accompanying notes
30 | Xref Limited | Annual Report 2020
Financial Statements
Notes to the financial statements
Note 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.
Note 2. Basis of Preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for
for profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board (‘IASB’).
a. Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of
available for sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes
of property, plant and equipment and derivative financial instruments.
b. Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 5.
Note 3. Significant Accounting Policies
New Amended Accounting Standards and Interpretation adopted
AASB16 Leases
The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for lessees eliminates
the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use
assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense
recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense
on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the
lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest,
Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation
in profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the
principal portion of the lease payments are separately disclosed in financing activities. For lessor accounting , the standard does not
substantially change how a lessor accounts for leases.
Xref Limited | Annual Report 2020 | 31
Note 3. Significant Accounting Policies continued
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The impact of
adoption on opening retained profits as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Finance lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discount based on the weighted average incremental borrowing rates
Short-term leases not recognised as a right-of-use asset (AASB 16)
Low-value assets leases not recognised as a right-of-use asset (AASB 16)
Accumulated depreciation as at 1 July 2019 (AASB 16)
Right-of-use assets (AASB 16)
Lease liabilities - current (AASB 16)
Lease liabilities - non-current (AASB 16)
Tax effect on the above adjustments
Reduction in opening retained profits as at 1 July 2019
1-Jul-19
$
1,265,846
-
309,997
(173,024)
-
(488,152)
914,667
(492,453)
(475,509)
(2,090)
55,383
When adopting AASB 16 from 1 July 2019, the Group has applied the following practical expedients:
» accounting for leases with a remaining lease term of 12 months as at 1 July 2019 as short-term leases;
» excluding any initial direct costs from the measurement of right-of-use assets;
» using hindsight in determining the lease term when the contract contains options to extend or terminate the lease; and
» not apply AASB 16 to contracts that were not previously identified as containing a lease.
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary
information about the parent entity is disclosed in note 33.
a. Basis of consolidation
The Group financial statements consolidate the financial statements of the Parent and all entities over which the Parent is deemed to
have controlling relationship (defined as “subsidiaries”). An entity is defined as a subsidiary when the Group is exposed, or has rights to
variable returns from its relationship with the entity and has the ability to affect those returns through its power over the entity.
When the Group has less than a majority of the voting power or similar rights of another entity, the Group considers all relevant facts and
circumstances in assessing whether it has power over the other entity.
The Group re assesses whether or not it controls another entity if facts and circumstances indicate that there are changes in one or
more of the three elements of control. The financial statements of subsidiaries are included in the 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 position, performance and
cash flows.
32 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 3. Significant Accounting Policies continued
A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction that
is, as transactions with owners in their capacity as owners, recorded in the statement of movements in equity.
If the Group loses control over a subsidiary, it:
» derecognises the assets (including goodwill) and liabilities of the subsidiary;
» derecognises the carrying amount of any non controlling interest;
» derecognises the cumulative carrying amount of foreign currency translation; differences recorded in reserves;
» recognises the fair value of the consideration received;
» recognises the fair value of any investment retained;
» recognises any surplus or deficit in profit or loss; and
» reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss, or retained
earnings as appropriate.
» Interests in subsidiaries are held at cost less impairment in the Parent.
b. Foreign currency translation
The financial statements are presented in Australian dollars, which is Xref Limited’s functional and presentation currency.
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)”.
Translation differences on non monetary financial assets and liabilities such as equities held at fair value through profit and loss are
recognised in the Statement of Comprehensive Income as part of the fair value gain or loss. Translation differences on nonmonetary
financial assets, such as equities classified as available for sale, are included in fair value movements disclosed within other
comprehensive income.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than
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;
ii.
income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions); and
iii. all resulting exchange differences are recognised in other comprehensive income.
Xref Limited | Annual Report 2020 | 33
Notes to the Financial Statements
Note 3. Significant Accounting Policies continued
The assets and liabilities of foreign operations, including any goodwill, are translated to AUDs at exchange rates at the reporting date.
The income and expenses of foreign operations, are translated to AUDs at exchange rates at the dates of the transactions.
Foreign currency differences are recognised on other comprehensive income, and presented in the foreign currency translation
reserve within equity.
When a foreign operation is disposed of such that control is lost, the cumulative amount of the translation reserve related to the foreign
operation is reclassified to the reported surplus or deficit as part of the gain or loss on disposal.
c. Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held on call with banks, other short term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
d. Trade debtors and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To
measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
e. Contract assets - capitalised commission
Contract assets are recognised when the Group has transferred services to the customer but where the Group is yet to establish an
unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes. Contract assets include
commissions paid and are amortised as performance obligations are met and an unconditional right to consideration is established.
Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained or which are not otherwise
recoverable from a customer are expensed as incurred to profit or loss. Incremental costs of obtaining a contract where the contract
term is less than one year is immediately expensed to profit or loss.
f. Trade creditors and other payables
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Creditors are classified as current liabilities if payment is due within one year or less. If not, they are presented as non current liabilities.
Trade creditors and other payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
g. Unearned revenue
Contract liabilities represent the Group’s obligation to transfer goods or services to a customer and are recognised when a customer
pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier)
before the Group has transferred the goods or services to the customer.
h. Refund liabilities
A cooling off period of 28 days exists within all contracts. After this period has passed no refunds are provided even if the client does
not use their purchased credits. If a client exercises their right to cancel their purchase during this cooling off period they can be
refunded an amount equal to the value of credits not used.
34 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 3. Significant Accounting Policies continued
i. Property, plant and equipment
Items of 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 plant and equipment is recognised as an asset if, and only if, it is probable
that future economic benefits or service potential will flow to the Group and the cost of the item can be measured reliably. The carrying
amount of the replaced part is derecognised.
In most instances, an item of plant and equipment is recognised at its cost. Where an asset is acquired at no cost, or for a nominal cost,
it is recognised at fair value at the acquisition date.
All repairs and maintenance expenditure is charged to profit or loss in the year in which the expense is incurred.
When an item of 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 plant and equipment of their expected useful
lives as follows:
The depreciation rates used for each class of depreciable asset are shown below:
Office Furniture
Office Equipment
Computer Equipment
Office Fit Out
10-20 years
3-20 years
3-5 years
6-20 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
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 plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and
losses between the carrying amount and the disposal proceeds are taken to profit or loss.
j. Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net
of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of
costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the
asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the
depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease
liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12
months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
Xref Limited | Annual Report 2020 | 35
Notes to the Financial Statements
Note 3. Significant Accounting Policies continued
k. Intangibles
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.
Internally developed intangible assets:
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is
recognised in the reported profit or loss when incurred.
Development activities include a plan or design for the production of new or substantially improved products. Development
expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and
to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly
attributable to preparing the asset for its intended use. Other development expenditure is recognised in the reported surplus and
deficit when incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and any impairment losses.
Patents and trademarks
Significant costs associated with patents and trademarks are deferred and amortised on a straight line basis over the period of their
expected benefit, being their finite life of 10 years.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more
frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment
losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
l. Impairment of non financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of
the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which
the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
36 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 3. Significant Accounting Policies continued
m. Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised
cost or fair value depending on their classification. Classification is determined based on both the business model within which such
assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a
financial asset, it’s carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets
at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the
purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition
where permitted. Fair value movements are recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments which the Group intends to hold for the
foreseeable future and has irrevocably elected to classify them as such upon initial recognition.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or
fair value through other comprehensive income. The measurement of the loss allowance depends upon the Group’s assessment at the
end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition,
based on reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss
allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event
that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk
has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit
loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the
instrument discounted at the original effective interest rate.
For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other
comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset’s
carrying value with a corresponding expense through profit or loss.
n. 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.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and uncertainties associated with the present obligation.
Provisions are discounted to their present values, where the time value of money is material. The increase in the provision due to the
passage of time is recognised as an interest expense.
All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
Xref Limited | Annual Report 2020 | 37
Notes to the Financial Statements
Note 3. Significant Accounting Policies continued
o. Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the
lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be
readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives
receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination
penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a
change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty
of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-
of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
p. Employee benefits
Short term employee benefits
Employee benefits, previously earned from past services, that the Group expect to be settled within 12 months of reporting date are
measured based on accrued entitlements at current rate of pays.
These include salaries and wages accrued up to the reporting date and annual leave earned, but not yet taken at the reporting date.
The Group recognises a liability and an expense for bonuses where they are contractually obliged or where there is a past practice that
has created a constructive obligation.
Termination benefits
Termination benefits are recognised as an expense when the Group is committed without realistic possibility of withdrawal, to
terminate employment, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.
Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy,
it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than
12 months after the reporting date, then they are discounted to their present value.
Long term benefits
The Group’s net obligation in 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.
38 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 3. Significant Accounting Policies continued
q. Revenue
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for
transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer;
identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable
consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the
relative stand alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance
obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates
and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined
using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining
principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable
consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as
deferred revenue in the form of a separate refund liability
Group Sales
The Group has two main sources of Sales. The sale of candidate referencing credits through Xref and the sale of ID verification checks
through RapidID.
For Xref sales, when customers use a credit the service has been performed. Revenue is recognised at the point in time when the
customer uses the service.
For RapidID sales, when customers take an ID Check the service has been performed. Revenue is recognised at the point in time when
the customer uses the service.
Rendering of services
Revenue from a contract to provide services is recognised over time as the services are rendered based on agreed rates.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the
financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
r. 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.
Xref Limited | Annual Report 2020 | 39
Notes to the Financial Statements
Note 3. Significant Accounting Policies continued
Deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability, unless the related
transaction is a business combination or affects the tax or accounting profit. Deferred tax on temporary differences associated with
investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group
and it is probable that reversal will not occur in the foreseeable future.
Deferred tax assets are recognised to the extent that it is probable that taxable surpluses will be available in future years, against which
the deductible temporary differences or tax losses can be utilised.
Deferred tax is measured at the tax rates that are expected to apply when the asset is realised or the liability settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax
consequences that would follow from the manner in which the Group expects to recover the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from
the same taxation authority.
Changes in deferred tax assets or liabilities are recognised as a component of income tax in profit or loss, except where they relate to
items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised
in other comprehensive income or equity, respectively.
s. Goods and services tax (GST)
All amounts in these financial statements are shown exclusive of GST, except for receivables and payables that are stated inclusive of
GST.
The net amount of GST recoverable from, or payable to the 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.
t. 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.
u. 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.
v. 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.
w. 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.
40 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 3. Significant Accounting Policies continued
x. Going Concern
The financial report shows that a loss of $10,056,090 (2019: 8,181,826) has been incurred, there is also a deficiency of net current
assets of $4,718,252 (2019: 2,658,488 a positive current asset position) and a deficiency of net assets of $2,404,063 (2019 : 3,158,865
a positive net asset position). The financial report has been prepared on the going concern basis which assumes that the company will
be able to meet its commitments, realise its assets, and discharge its liabilities in the ordinary course of business.
This basis has been adopted by the directors of the company as they have;
• Prepared a cashflow forecast for the period to September 2021 which indicates that they will be able to meet their obligations. The
forecast includes what the Directors believe to be the impact of COVID-19 on the business.
• Additional net funding of $4,825,000 has been received in July 2020, refer to note 35 for further details. The directors are confident
that the covenants will be met.
•
Post year end and up to 21 August 2020, the unaudited management accounts show that the business results are consistent with
the forecast. The directors therefore remain confident that the achievement of their forecast will continue to 30 September 2021.
Given the Directors expectations, the financial statements have been prepared on the going concern basis which contemplates that
the business will continue as normal and therefore realise its assets and extinguish its liabilities in the normal course of business.
y. Business combination
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other
assets are acquired.
The consideration transferred is the sum of the acquisition date fair values of the assets transferred, equity instruments issued or
liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non controlling interest in the acquiree. For
each business combination, the non controlling interest in the acquiree is measured at either fair value or at the proportionate share of
the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and
other pertinent conditions in existence at the acquisition date .
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the
acquisition date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition date fair value. Subsequent changes in
the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration
classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition date fair value of assets acquired, liabilities assumed and any non controlling interest in
the acquiree and the fair value of the consideration transferred and the fair value of any pre existing investment in the acquiree is
recognised as goodwill. If the consideration transferred and the pre existing fair value is less than the fair value of the identifiable net
assets acquired , being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer
on the acquisition date , but only after a reassessment of the identification and measurement of the net assets acquired, the non
controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts
recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained
about the facts and circumstances that existed at the acquisition date. The measurement period ends on either the earlier of (i)
12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value.
Xref Limited | Annual Report 2020 | 41
Notes to the Financial Statements
Note 4. New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not
been early adopted by the Group for the annual reporting period ended 30 June 2020.
Note 5. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, 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.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on
the Group based on known information. This consideration extends to the nature of the products and services offered, customers,
supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific notes, there does
not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to
events or conditions which may impact the Group unfavourably as at the reporting date or subsequently as a result of the Coronavirus
(COVID-19) pandemic.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime
expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for
each group. These assumptions include recent sales experience, historical collection rates, the impact of the Coronavirus (COVID-19)
pandemic and forward-looking information that is available. The allowance for expected credit losses, as disclosed in note 14, is
calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other
indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 3. The recoverable
amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of
assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash
flows. Refer to note 18 for further information.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised
in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be
exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In
determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to
exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of
the asset to the Group’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties;
existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it
is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant
change in circumstances.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future
lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the
Group estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use
asset, with similar terms, security and economic environment.
42 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 5. Critical accounting judgements, estimates and assumptions continued
Employee benefits provision
As discussed in note 3, the liability for employee benefits expected to be settled more than 12 months from the reporting date are
recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the
reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and
inflation have been taken into account.
Share-based payment transactions
The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value is determined by using either the Binomial or Black Scholes model taking into account the
terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity settled
share based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period
but may impact profit or loss and equity.
Impairment
An impairment loss is recognised for the amount by which the asset’s or cash generating unit’s carrying amount exceeds its recoverable
amount. To determine the recoverable amount, management estimates expected future cash flows from each cash generating unit and
determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected
future cash flows management makes assumptions about future operating results. These assumptions relate to future events and
circumstances.
Determination of variable consideration
Judgement is exercised in estimating variable consideration which is determined having regard to past experience with respect to
refund where the customer maintains a right of refund pursuant to the customer contract or where goods or services have a variable
component. Revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative
revenue recognised under the contract will not occur when the uncertainty associated with the variable consideration is subsequently
resolved.
Internally generated software and research costs
Management monitors progress of internal research and development projects by using a project management system. Significant
judgement is required in distinguishing research from the development phase.
To distinguish any research type project phase from the development phase, it is the Group’s accounting policy to require a detailed
forecast of sales or cost savings expected to be generated by the intangible asset. The forecast is incorporated into the Group’s overall
budget forecast as the capitalisation of development costs commences. This ensures that managerial accounting, impairment testing
procedures and accounting for internally generated intangible assets are based on the same data.
Management has determined that for the 2020 financial year that no expenditure be capitalised as an asset. The basis for this decision
is that over the past 6 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.
Deferred tax assets
The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group’s latest
approved budget forecast, which is adjusted for significant non taxable income and expenses and specific limits to the use of any
unused tax losses or credits. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it
can be utilised without a time limit, that deferred tax asset is usually recognised in full.
Research and Development Refundable Tax Offset
There were no costs identified in the group in 2020 that were attributable to research and development costs.
Xref Limited | Annual Report 2020 | 43
Notes to the Financial Statements
Note 6. Group Information
The preliminary consolidated financial statements of the Group include
Name
Xref Limited
Xref (AU) Pty Limited
Xref (UK) Limited
Xref Referencing (CA) Limited
Xref AS*
Xref LLC
Xref (NZ) Limited
Rapid ID Pty Ltd
Principal place of business/ Country of incorporation
Australia
Australia
United Kingdom
Canada
Norway
United States
New Zealand
Australia
2020
%
2019
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
*During the last quarter of the financial year it was determined by the directors to close the Norway office and transfer management of
existing accounts and sales operations to the EMEA head office based in London. The subsidiary that operated out of Oslo Norway, Xref
AS is currently being wound up in accordance with Norwegian Corporations Law. There has been no major impact on the operations in
Norway with sales continuing to be made to Norwegian businesses out of Xref UK.
Note 7. Operating Segments
There are two operating segments (candidate referencing and ID verification) for the year ended 30 June 2020. 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 two business segments.
Geographical Information
2020
$
2019
$
6,770,895
8,148,721
548,509
407,665
281,201
1,020,215
299,153
956,787
530,713
375,708
-
-
9,327,638
10,011,929
Sales to external customers – candidate referencing
Australia
Canada
United Kingdom
Norway
New Zealand
United States
44 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 7. Operating Segments continued
Revenue from external customers – candidate referencing
Australia
Canada
United Kingdom
Norway
New Zealand
United States
Sales to external customers – identification verification
Australia
Revenue from external customers – identification verification
Australia
Non current operating assets
Global
Australia
Canada
United Kingdom
Norway
New Zealand
Total Non current operating assets
The information above is based on the location of the customers
2020
$
2019
$
6,155,195
6,754,930
509,032
342,772
160,594
452,158
161,446
772,576
375,108
145,555
-
-
7,781,197
8,048,169
2020
$
487,075
487,075
2020
$
247,109
247,109
2020
$
1,440,976
929,863
269,683
8,817
-
636
2,649,975
2019
$
-
-
2019
$
-
-
2019
$
106,990
330,751
104,060
30,047
2,475
15,722
590,045
Xref Limited | Annual Report 2020 | 45
Notes to the Financial Statements
Note 8. Revenue and Other Income
Revenue from contracts with customers
The disaggregation of revenue from contracts with customers is as follows:
Sales Xref
Less adjustment for unearned revenue
Sales Rapid ID
Less cost of sales – Rapid ID
Total revenue
Other income
Interest Income
Government subsidies
Research & Development Tax Offset
Other Income
2020
$
2019
$
9,327,638
10,011,929
(1,546,441)
(1,963,760)
7,781,197
8,048,169
487,075
(239,966)
247,109
8,028,306
45,154
527,422
-
19,339
-
-
8,048,169
8,048,169
183,258
-
205,402
13,984
Total revenue and other income
8,620,221
8,450,813
Revenue from external customers
Service performed at a point in time
Services transferred over time
2020
$
2019
$
7,553,095
7,913,524
475,211
134,645
8,028,306
8,048,169
46 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 9. Overheads and administrative expenses
Accounting and consulting fees
Auditing or reviewing the financial report
Directors Fees
Legal expenses
Marketing fees
Consulting and professional fees
Share based payment
Administration expense
Foreign exchange loss
Operating lease payments
Administrative expenses
Auditors remuneration
Fees charged by Audit Firm:
Financial statement audit and review
Note 10. Depreciation, amortisation and impairment expenses
Depreciation, amortisation and impairment expenses
Depreciation of property, plant and equipment
Depreciation right of use asset
Note 11. Research and development costs
Research and development costs expensed
2020
$
320,160
90,797
12,675
122,652
862,200
440,765
130,662
2019
$
195,741
85,578
145,047
192,543
1,572,628
461,320
619,682
3,014,063
1,358,171
89,692
311,468
(42,129)
759,706
5,395,134
5,348,287
90,797
85,578
2020
$
99,811
567,844
667,655
2019
$
87,933
-
87,933
2020
$
-
2019
$
472,189
The 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 expensed amount to $0
(2019:$472,189). $0 (2019: $304,235) are recognised in employee expenses.
During the 2020 financial year significant development work was undertaken on the Xref & RapidID platforms. New features,
improvements to the existing features as well as continual updates to ensure the platform remained accessible 24/7 to its users around
the world. To qualify for the government R&D Offsets, development work undertaken must meet a stringent set of criteria. Ongoing
development work with respect to features and the platform generally does not automatically qualify for inclusion in the R&D Offset
scheme. For 2020, despite the development work carried out as well as the release of two new products also, the development work did
not qualify.
Xref Limited | Annual Report 2020 | 47
Notes to the Financial Statements
Note 12. Income Tax Expense
Xref Limited has operating subsidiaries in Australia, the UK, Norway, New Zealand, USA and Canada which are expected to accumulate
tax losses prior to returning a profit.
a. Reconciliation of effective tax rate:
Loss before income tax expense
Tax at the statutory rate of
Tax effect of:
Deferred tax asset not recognised
Permanent differences
Adjustment for foreign tax rates
b. Deferred tax assets and liabilities
2020
$
2019
$
(10,056,090)
(8,181,826)
27.50%
27.50%
(2,765,425)
(2,250,002)
(2,617,925)
(1,999,462)
(24,309)
(86,361)
(123,191)
(164,179)
(2,765,425)
(2,250,002)
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 $7,527,590 (2019:
$5,173,286).
Note 13. Current assets – cash and cash equivalents
Cash at bank and in hand
Rental Bonds
The carrying amount of cash and cash equivalents approximates their fair value.
Cash at bank earns interest at floating rates on a daily deposit balances.
2020
$
2019
$
2,793,337
7,960,482
75,457
75,457
2,868,794
8,035,939
48 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 14. Current assets – Trade and Other Receivables
Trade receivables
Less: allowance for expected credit losses
Research and development incentive grant
Other receivables
Interest receivable
2020
$
2019
$
1,196,209
1,899,415
-
1,196,209
1,899,415
-
178,560
-
178,560
205,402
104,074
49,736
359,212
Total current trade and other receivables
1,374,769
2,258,627
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Balance at end of the year
-
-
-
-
(165,000)
-
165,000
-
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 statistics for similar financial assets.
As at 30 June 2020, the ageing analysis of trade receivables post due but not impaired is detailed as follows:
0-30 days overdue
30-90 days overdue
90 days+ overdue
2020
$
2019
$
1,131,724
1,876,873
64,485
22,542
-
-
1,196,209
1,899,415
Xref Limited | Annual Report 2020 | 49
Notes to the Financial Statements
Note 15. Current assets – Capitalised Commission
Capitalised Commission at cost Credit Sales
Capitalised Commission at cost Subscriptions
Capitalised Commission at cost People Search
Reconciliations
Reconciliation of the written down values at the beginning and end of the current and
previous financial year are set out below:
Opening Balance
Retrospective adjustment as at 1 July 2018
Opening Balance
Additions
Recognition as expenses
Balance adjustment due to forex
Closing balance
Note 16. Non current assets – property, plant and equipment
Office furniture at cost
Less: Accumulated depreciation
Office equipment at cost
Less: Accumulated Depreciation
Computer Equipment at cost
Less: Accumulated depreciation
Office Fitout
Less: Accumulated depreciation
Total property, plant and equipment
50 | Xref Limited | Annual Report 2020
2020
$
990,155
21,723
40
2019
$
604,256
9,180
321
1,011,918
613,757
-
398,833
613,757
1,215,852
(770,926)
(46,765)
1,011,918
2020
$
96,387
(24,651)
71,736
143,771
(93,525)
50,246
317,660
-
1,010,836
(807,601)
11,689
613,757
2019
$
85,635
(16,633)
69,002
131,865
(69,408)
62,457
266,989
(189,541)
(124,564)
128,119
102,749
(38,375)
64,374
314,475
142,425
101,122
(25,396)
75,726
349,610
Notes to the Financial Statements Note 16. Non current assets – property, plant and equipment continued
Reconciliations
Reconciliations of the carrying value at the beginning and end of the current and previous financial year are set out below:
Year ended 30 June 2018
Additions
Disposals
Depreciation
Balance at 30 June 2019
Additions
Disposals
Depreciation
Office
Furniture
$
63,354
12,720
-
Office Fitout
$
Office
Equipment
$
Computer
Equipment
$
Total
$
86,726
65,272
106,753
322,105
4,338
15,778
87,042
119,878
-
-
(3,081)
(3,081)
(7,072)
(15,338)
(18,593)
(48,289)
(89,292)
69,002
10,752
-
75,726
62,457
142,425
349,610
1,627
5,809
46,488
64,676
-
(8,018)
(12,979)
(18,020)
(60,794)
(99,811)
Balance at 30 June 2020
71,736
64,374
50,246
128,119
314,475
Note 17. Non current assets – right of use assets
Right of use assets Land and Buildings
Less: Accumulated depreciation
Total
2020
$
1,496,169
(1,055,997)
440,172
2019
$
-
-
-
Additions to the right-of-use assets during the year were $0
The Group leases land and buildings for its offices under agreements which have terms remaining of no longer than 2.5 years as at 30
June 2020. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated.
Xref Limited | Annual Report 2020 | 51
Notes to the Financial Statements
Note 18. Non current assets – intangibles
Goodwill at cost
Website
Patents, trademarks and other rights
Cost
Accumulated amortisation and impairment
Preliminary expenses
Cost
Domain: Xref.com
Reconciliations
2020
$
1,333,986
325,000
61,337
(2,239)
59,098
2019
$
-
-
11,337
(1,106)
10,231
-
13,457
106,990
106,990
1,825,074
130,678
Reconciliations of the carrying value at the beginning and end of the current and previous financial year are set out below:
Patents,
trademarks
and other
rights
$
10,963
374
(1,106)
Licenses and
franchises
$
Domain:
Xref.com
$
Website
Development
$
Goodwill
$
Preliminary
expenses
$
Total
$
-
-
-
106,990
-
-
-
-
-
-
-
-
-
-
-
117,953
13,457
13,831
-
(1,106)
13,457
130,678
10,231
-
106,990
Consolidated
Balance at 1 July
2018
Additions
Impairment expense
Balance at 30 June
2019
Additions through
business combination
Impairment expense
(1,134)
-
-
50,000
-
-
325,000
1,333,986
-
1,708,986
-
-
(13,457)
(14,590)
Balance at 30 June
2020
9,097
50,000
106,990
325,000
1,333,986
-
1,825,074
52 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 18. Non current assets – intangibles continued
Impairment testing
Goodwill acquired through business combination has been allocated to the following cash-generating units:
RapidID
Consolidated
2020
$
1,333,986
1,333,986
2019
$
-
-
The recoverable amount of the consolidated entity’s goodwill has been determined as the higher of the asset’s value in use and its fair
value less cost of disposal using a discounted cash flow model, based on a 5 year projection period approved by management and the
board, together with a terminal value.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the discounted cash flow model for the computer retailing division:
• 16.75% pre-tax discount rate;
• 49% per annum average projected revenue growth rate;
• 2% per annum average improvement in gross margin;
• 16% per annum average increase in operating costs and overheads;
• 2.5% terminal value growth rate.
The discount rate of 16.75% pre-tax reflects management’s estimate of the time value of money and the Group’s weighted average cost
of capital adjusted for RapidID, the risk free rate and the volatility of the share price relative to market movements.
Management have estimated a 49% growth in accordance with the acquisition strategy and have no reason to revise this estimation
based on current performance.
Synergies achieved following the acquisition of RapidID combined with cost efficient customer acquisition strategies has result in the
operational costs budgeted initially being lower than forecast
There were no other key assumptions for RapidID.
Based on the above, the recoverable amount of RapidID exceeded the carrying amount by $342,000.
Sensitivity
As disclosed in note 5, the directors have made judgements and estimates in respect of impairment testing of goodwill. Should these
judgements and estimates not occur the resulting goodwill carrying amount may decrease. The sensitivities are as follows:
• Sales would need to decrease by more than 6.1% over the forecast period for RapidID before goodwill would need to be impaired,
with all other assumptions remaining constant.
• The discount rate would be required to increase by 1.37% for RapidID before goodwill would need to be impaired, with all other
assumptions remaining constant.
Management believes that other reasonable changes in the key assumptions on which the recoverable amount of RapidID’s goodwill is
based would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount.
Xref Limited | Annual Report 2020 | 53
Notes to the Financial Statements
Note 19. Current liabilities – trade and other payables
Trade payables
GST payable
Accrued salaries, wages and related costs
Non Trade payables and accrued expenses
2020
$
384,362
211,715
142,182
881,840
2019
$
450,452
240,551
876,029
246,528
1,620,099
1,813,560
Refer to note 28 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.
Note 20. Current liabilities – employee entitlements
Annual leave
2020
$
2019
$
533,832
358,092
Short–term employee entitlements represent the Group’s obligation to its current and former employees that are expected to be settled
within 12 months of balance date. These consist of accrued holiday entitlements at the reporting date.
Note 21. Current liabilities – lease liability
Current lease liability
2020
$
336,689
2019
$
-
54 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 22. Current liabilities – Unearned Revenue
Unearned Revenue
Balance brought forward
Unearned revenue movement
Credits sold
Add: Opening conditional credits
Less: Usage
Less: Closing conditional credits
Opening balance revaluation due to forex
Total
Unsatisfied performance obligations
2020
$
2019
$
6,262,763
4,268,871
9,327,638
10,011,929
1,881,476
1,445,795
(8,651,412)
(7,612,488)
(1,011,261)
(1,881,476)
1,546,441
1,963,760
38,595
30,132
7,847,799
6,262,763
The performance obligations associated with the unearned revenue balance are expected to be satisfied within 12 months from the
date of the balance sheet
Under Xref’s business model, clients purchase Xref credits to use our candidate referencing platform. The value of credits 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 been issued an invoice but will not
have paid. The value of these unpaid credit sale invoices are the ‘conditional credits’ above and represents trade debtors (less goods &
services tax). In addition, clients that have subscribed to People Search or an Xref Subscription pay for 12 months in advance and each
month a proportion of the upfront payment is recognised as revenue.
Note. 23 Non current liabilities – Employee entitlements
Long service leave
Note 24. Non-current liabilities – lease liability
Non current lease liability
2020
$
153,166
2020
$
138,820
2019
$
88,668
2019
$
-
Xref Limited | Annual Report 2020 | 55
Notes to the Financial Statements
Note 25. Equity – issued capital
Ordinary shares - fully paid
178,055,751
165,578,370
53,235,226
48,832,200
2020
Shares
2019
Shares
2020
$
2019
$
Balance
Issued for cash
Capital Raising Costs
Option conversion
Issued for acquisition of Rapid ID
Issued under share based remuneration
Issued for cash
Capital raising costs
Date
Shares
1 July 2018
147,736,127
13,333,334
-
4,508,909
30 June 2019
165,578,370
1,583,442
300,000
10,593,939
-
30 June 2020
178,055,751
Issue price/
exercise price
$
0.60
-
0.23
0.57
0.46
0.33
-
-
Total
$
40,087,991
8,000,000
(522,793)
1,267,003
48,832,200
900,000
138,000
3,496,000
(130,974)
53,235,226
Xref issued 1,583,442 fully paid ordinary shares at $0.568 per share, to the two vendors of Rapid ID Pty Ltd (RapidID) in consideration
for the payment of the purchase of Rapid ID and its related technology. The Company issued 300,000 shares to RapidID’s Queensland-
based founder, Ashley Hoey, who has joined Xref along with his project development team of two staff members.
Xref issued 10,593,939 shares at $0.33 per share to institutions and professional investors on16 December 2019 with the aim of growth
and marketing capability, technology development and working capital requirements, and other general corporate purposes.
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.
Capital risk management
The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for
shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total
borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the
current company’s share price at the time of the investment. The Group is not actively pursuing additional investments in the short term
as it continues to integrate and grow its existing businesses in order to maximise synergies.
The Group is not subject to certain financing arrangements covenants during the financial year ended 30 June 2020. The capital risk
management policy remains unchanged from the 30 June 2019 Annual Report.
56 | Xref Limited | Annual Report 2020
Notes to the Financial Statements
Note 26. Equity – other equity reserves
Foreign currency reserve
Options reserve
Consolidation reserve
Foreign currency reserve
2020
$
(361,629)
1,797,122
2019
$
(376,487)
1,683,195
(22,845,821)
(22,845,821)
(21,410,328)
(21,539,113)
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to
Australian dollars.
Performance Rights 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.
Performance Rights Reserve Balance
Class C
Number Granted
16,666,666
Performance Right
Reserve
$
Weighted Average
Fair Value
$/Right
-
-
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).
The Class B Conversion Event was achieved and the Class B shares were issued 10 March 2017.
Class C Conversion Event
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 were in escrow until 8 February 2018.
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.
Xref Limited | Annual Report 2020 | 57
Notes to the Financial Statements
Note 26. Equity – other equity reserves continued
a. Share option reserve
Issued Date
Expiry Date
Average excise
price in $A per
share
Options
Option Reserve
$A
At 30 June 2017 (b)
07/12/2016
25/11/2022
At 30 June 2017 (a)
07/12/2016
25/11/2021
Granted (c)
Granted (d)
Granted (e)
Granted (f)
Granted (g)
Granted (h)
Granted (i)
Granted (j)
Granted (k)
Granted (l)
Granted (m)
Closing balance
22/09/2017
03/07/2021
22/09/2017
03/07/2021
22/03/2018
05/02/2022
22/03/2018
12/02/2021
22/03/2018
12/02/2022
22/03/2018
12/02/2023
04/12/2018
03/09/2021
04/12/2018
03/09/2022
04/12/2018
03/09/2023
04/12/2018
01/08/2022
04/12/2018
29/11/2022
30/06/2019
At 30 June 2017 (b)
07/12/2016
25/11/2022
At 30 June 2017 (a)
07/12/2016
25/11/2021
Granted (c)
Granted (d)
Granted (e)
Granted (f)
Granted (g)
Granted (h)
Granted (i)
Granted (j)
Granted (k)
Granted (l)
Granted (m)
Closing balance
22/09/2017
03/07/2021
22/09/2017
03/07/2021
22/03/2018
05/02/2022
22/03/2018
12/02/2021
22/03/2018
12/02/2022
22/03/2018
12/02/2023
04/12/2018
03/09/2021
04/12/2018
03/09/2022
04/12/2018
03/09/2023
04/12/2018
01/08/2022
04/12/2018
29/11/2022
30/06/2020
0.700
0.700
0.585
0.580
0.660
0.700
0.700
0.700
0.700
0.700
0.660
0.660
0.700
0.700
0.700
0.585
0.580
0.660
0.700
0.700
0.700
0.700
0.700
0.660
0.660
0.700
2,500,000
5,400,000
811,480
95,390
208,116
1,000,000
750,000
750,000
300,000
300,000
300,000
315,664
308,214
646,920
180,879
21,444
21,810
69,670
69,635
56,460
20,730
21,806
11,904
27,275
2,500,000
226,448
15,230,650
1,683,195
2,500,000
5,400,000
746,025
95,390
187,661
1,000,000
750,000
750,000
300,000
300,000
300,000
315,664
357,000
646,920
166,289
21,444
19,667
69,670
69,635
84,022
20,730
28,620
32,850
27,275
2,500,000
253,000
15,144,740
1,797,122
58 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 26. Equity – other equity reserves continued
The options have been valued using a binominal 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
09-02-16
2.47yr
26-11-16
26-11-16
$0.70
25-11-21
5.00 yr
$0.47
2.19%
40%
Nil
09-02-16
5.00yr
25-11-16
25-11-16
$0.70
25-11-22
6.00 yr
$0.47
2.70%
40%
Nil
09-02-16
1.63 yr
22-09-17
22-09-17
$0.59
03-07-21
3.77 yr
$0.75
2.30%
40%
Nil
Xref Limited | Annual Report 2020 | 59
Notes to the Financial Statements
Note 26. Equity – other equity reserves continued
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
60 | Xref Limited | Annual Report 2020
09-02-16
1.63 yr
22-09-17
02-09-17
$0.58
03-07-21
3.77 yr
$0.75
2.30%
40%
Nil
09-02-16
2.11 yr
22-03-18
22-03-18
$0.66
05-02-22
3.88 yr
$0.57
2.40%
26.37%
Nil
09-02-16
2.11 yr
22-03-18
22-03-18
$0.70
01-02-21
2.87 yr
$0.57
2.16%
26.30%
Nil
Notes to the Financial Statements
Note 26. Equity – other equity reserves 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
i)
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 = 3 year Government Bond (04/12/2018)
Expected volatility
Dividends expected on the shares
09-02-16
2.11 yr
22-03-18
22-03-18
$0.70
12-02-22
2.87 yr
$0.70
2.40%
26.34%
Nil
09-02-16
2.11 yr
22-03-18
22-03-18
$0.70
12-02-23
4.90 yr
$0.57
2.40%
26.35%
Nil
09-02-16
2.82yr
04-12-18
04-12-18
$0.70
03-09-21
2.75 yr
$0.48
1.99
38.63%
Nil
Xref Limited | Annual Report 2020 | 61
Notes to the Financial Statements
Note 26. Equity – other equity reserves continued
j)
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 (04/12/2018)
Expected volatility
Dividends expected on the shares
k)
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 (04/12/2018)
Expected volatility
Dividends expected on the shares
l)
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 (04/12/2018)
Expected volatility
Dividends expected on the shares
62 | Xref Limited | Annual Report 2020
09-02-16
2.82yr
04-12-18
04-12-18
$0.70
03-09-22
3.75 yr
$0.48
2.17%
39.19%
Nil
09-02-16
2.82 yr
04-12-18
04-12-18
$0.70
03-09-23
4.75yr
$0.48
2.17%
40.42%
Nil
09-02-16
2.82 yr
04-12-18
04-12-18
$0.66
01-08-22
3.66 yr
$0.48
2.17%
39.23%
Nil
Notes to the Financial Statements
Note 26. Equity – other equity reserves continued
m)
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 (04/12/2018)
Expected volatility
Dividends expected on the shares
Class A Vesting Event
09-02-16
2.82 yr
04-12-18
04-12-18
$0.70
29-11-22
3.99 yr
$0.48
2.17%
39.90%
Nil
Upon the Group, during any six month reporting period of the company that ends on or prior to 30 months after the date of issue of the
rights, achieving Credit Sales of $A2,500,000 or more.
Class B Vesting Event is the same as a Performance Right Class B Conversion Event Upon the Company achieving a 20 day Volume
Weighted Average Market Price of the shares equal to or greater than $0.50 within two years after the date of issue of the rights and a
minimum sale in the UK of either 1000 credits or £25,000 (whichever comes first). The Class B Conversion Event was achieved and the
Class B shares were issued 10 March 2017.
Class A and B option expense is being recognised over the two years during which the options may be exercised. If the options were to
be exercised, the full remaining option expense if any would be immediately recognised and the Option Reserve figure transferred to
Issued Capital.
The weighted average contractual life of the performance rights for the 2020 year was 0.55 years (2019: 1.55 years)
Option movements for the period
No options were issued during the 2020 financial year. The number of options lapsed during the 2020 financial year were 85,910 due to
staff departures.
Option movements during the previous year
During the year ended 30 June 2019, 190,295 options lapsed and 4,508,909 options were exercised. As approved at the 28 November
2018 AGM, 2,500,00 options were issued to 5 senior staff members of the company as a key component of their remuneration by the
company. The Chief Operating Officer (COO) was issued with 900,000 with 300,000 vesting on date of issue and expiring on the
3 September 2021, the second tranche of 300,000 options vesting on 3 September 2019 and expire if not exercised by 3 September
2022, and the third tranche of 300,000 options vesting on 3 September 2020 and expire if not exercised by 3 September 2023).
Xref Limited | Annual Report 2020 | 63
Notes to the Financial Statements
Note 26. Equity – other equity reserves continued
Options vested and therefore exercisable
Options Vested Nigel Heap
Options Vested Brad Rosser
Options Vested James Solomons
Options Vested Employees and contractors
Options Vested Employees and Contractors
Options Vested Employees
Options Vested Sharon Blesson
Options Vested Senior Staff
Expiry Date
2020
2019
25/11/2021
900,000
900,000
25/11/2021
7,000,000
4,500,000
01/02/2021
2,500,000
1,750,000
03/07/2021
05/02/2022
01/08/2022
30/09/2021
841,415
187,661
315,664
600,000
906,870
208,116
-
300,000
29/12/2022
2,500,000
2,000,000
14,844,740
10,564,986
The weighted average share price for the current financial year was $0.234 (2019: $0.555).
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.
Note 27. Equity – Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 28. 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 2019 and 30 June 2020. The effect of including the share options in the
calculation would be anti dilutive. Hence the diluted earnings per share is the same as the basic earnings per share.
The following reflects the income and share data used in the basic and diluted EPS computations.
Loss after income tax attributable to the owners of Xref Limited
(10,056,090)
(8,181,826)
2020
$
2019
$
Weighted average number of ordinary shares used in calculating basic earnings per share
172,871,318
160,330,586
Weighted average number of ordinary shares used in calculating diluted earnings per share
172,871,318
160,330,586
Basic earnings per share
Diluted earnings per share
64 | Xref Limited | Annual Report 2020
Cents
(5.82)
(5.82)
Cents
(5.10)
(5.10)
Notes to the Financial Statements Note 29. Financial instruments
a. Classification of financial instruments
The carrying amounts presented in the statement of financial position relate to the following categories of financial assets and liabilities.
Group 2020
Financial assets
Cash and cash equivalents
Trade debtors and other receivables
Total
Financial liabilities
Trade creditors and other payables
Lease liabilities
Total
Group 2019
Financial assets
Cash and cash equivalents
Trade debtors and other receivables
Total
Financial liabilities
Trade creditors and other payables
Total
Loans and
receivables at
amortised cost
$
2,868,794
1,374,769
4,243,563
-
-
-
Loans and
receivables at
amortised cost
$
8,035,939
2,258,628
10,294,567
-
-
Available-for- sale
financial assets
$
Financial liabilities
at amortised cost
$
-
-
-
-
-
-
-
-
-
1,791,263
475,509
2,266,772
Available-for- sale
financial assets
$
Financial liabilities
at amortised cost
$
Total
$
2,868,794
1,374,769
4,243,563
1,791,263
475,509
2,266,772
Total
$
8,035,939
2,258,628
10,294,567
-
-
-
-
-
-
-
-
2,387,028
2,387,028
2,387,028
2,387,028
b. Financial instrument risk management
The Group is exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity Risk
• Market Risk
The Group are exposed to market risk through their use of financial instruments and specifically to currency risk, interest rate risk and
certain other price risks, which result from both its operating and investing activities.
The Group has a series of policies to manage the risk associated with financial instruments. Policies have been established which do
not allow transactions that are speculative in nature to be entered into and the Group is not actively engaged in the trading of financial
instruments. As part of this policy, limits of exposure have been set and are monitored on a regular basis.
Xref Limited | Annual Report 2020 | 65
Notes to the Financial Statements
Note 29. Financial instruments continued
i. Credit risk
Credit risk is the risk that a third party will default on its obligation to the Group, causing the Group to incur a loss.
The Group 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 14.
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 remained stable from 16% in the 2019 year to 15% in 2020, with a decrease in revenue of 4%
due to the impact of COVID-19. In the second half of the financial year, there was significant cost reduction. The raise of debt funding
combined with ongoing strong cost control is enabling adequate management of liquidity 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:
Contractual cash-flow maturities
Carrying
amounts
Total
contractual
cash-flows
0-6 months
6-12 months
1 - 2 years
2-5 years
Later than 5
years
-
-
-
1,620,099
1,620,099
1,620,099
171,164
171,164
171,164
475,509
475,509
475,509
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
2,266,772
2,266,772
2,266,772
Contractual cash-flow maturities
Carrying
amounts
Total
contractual
cash-flows
0-6 months
6-12 months
1 - 2 years
2-5 years
Later than 5
years
-
-
-
1,813,561
1,813,561
1,813,561
215,375
215,375
215,375
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
2,028,936
2,028,936
2,028,936
66 | Xref Limited | Annual Report 2020
Group 2020
Non-derivative
financial
liabilities
Trade creditors
and other
payables
Superannuation
payable
Lease liabilities
Group 2019
Non-derivative
financial
liabilities
Trade creditors
and other
payables
Superannuation
payable
Notes to the Financial Statements
Note 29. Financial instruments continued
iii. Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return.
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 United States dollar, 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
United States Dollar
Total
2020
$
130,958
103,130
74,723
279,411
164,724
752,946
2019
$
290,205
227,165
157,041
-
13,631
688,042
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
New Zealand Dollar
United States Dollar
Total impact of potential change in exchange rate
Foreign exchange risk
5%
$
6,548
5,157
3,736
10%
$
13,096
10,313
7,472
13,971
27,941
20%
$
26,192
20,626
14,945
55,882
8,236
37,647
16,472
75,295
32,945
150,589
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),
Norwegian Krone (NOK), New Zealand Dollar (NZD) and United States Dollar (USD).
The Group monitors foreign expenditure, seeking favorable 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.
Xref Limited | Annual Report 2020 | 67
Notes to the Financial Statements
Note 29. Financial instruments 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 2020 – Group
Australia
United
Kingdom
Canada
Norway
New Zealand
United States
Financial Assets
3,189,920
117,939
Financial Liabilities
1,599,080
79,774
141,051
248,804
74,723
-
439,116
125,568
166,515
-
Net statements of financial
position exposure
1,590,840
38,165
(107,753)
74,723
313,548
166,515
Long-term exposure
30 June 2020 – Group
Australia
Financial Assets
Financial Liabilities
Net statements of financial
position exposure
50,948
33,768
17,180
United
Kingdom
-
-
-
Canada
Norway
New Zealand
United States
63,351
105,052
-
74,726
(41,701)
(74,726)
-
-
-
-
-
-
Short-term exposure
30 June 2019 – Group
Australia
Financial Assets
Financial Liabilities
9,285,158
1,964,604
United
Kingdom
307,455
124,554
Canada
Norway
New Zealand
United States
443,798
106,402
244,525
151,872
-
13,631
15,722
-
Net statements of financial
position exposure
7,320,554
182,901
337,396
92,653
(15,722)
13,631
Long-term exposure
30 June 2019 – Group
Australia
United
Kingdom
Canada
Norway
New Zealand
United States
Financial Assets
Financial Liabilities
Net statements of financial
position exposure
50,948
24,245
18,843
-
-
-
50,948
24,245
18,843
-
-
-
15,722
15,722
-
-
68 | Xref Limited | Annual Report 2020
Notes to the Financial Statements
Note 29. Financial instruments continued
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 3+/- % change in exchange rates for the year ended at 30 June 2020 (2019: 3%).
The percentage movement has been determined based on the average exchange rate market volatility for the AUD in the previous
12 months.
Group
2020
2019
Loss for the
year
Equity
Loss for the
year
Equity
3% (2019: 3%) increase in AUD against foreign currencies
(10,142,335)
(2,444,029)
(8,144,314)
2,963,850
3% (2019: 3%) decrease in AUD against foreign currencies
(10,007,031)
(2,366,425)
(8,059,861)
3,342,526
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis
above is considered to be representative of the Group’s exposure to currency risk.
Interest rate risk
Interest rate risk is the risk that cash flows from a financial instrument will fluctuate because of changes in market interest rates.
Revenue of the Group is exposed to interest rate risk on interest bearing financial assets only as it has immaterial bank overdraft
balances. The Group 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.
Note 30. Cash Flow Information
Reconciliation of net cash flow from operating activities to operating profit after tax.
Operating profit/(loss) after income tax
Non cash flows in profit:
Unearned income
Options expense
Foreign exchange
Depreciation, amortisation, impairment
(increase)/decrease in trade and other receivables
(increase)/decrease in other assets
(increase)/decrease in prepayments
(increase)/decrease in contract assets
increase/(decrease) in trade and other payables
increase/(decrease) in employee benefits
increase/(decrease) in other financial liabilities
Net cash used in operating activities
2020
$
2019
$
(10,056,090)
(8,181,826)
1,547,442
130,611
82,498
667,656
883,858
39,503
(105,445)
(398,161)
(414,054)
239,241
-
619,682
(136,425)
87,993
886,100
10,439
(170,069)
(613,757)
341,900
117,609
48,137
(7,382,941)
(5,026,457)
Xref Limited | Annual Report 2020 | 69
Notes to the Financial Statements
Note 31. Contingencies
In the opinion of the Directors, the Company did not have any contingent assets or liabilities at 30 June 2020 (30 June 2019: None).
Note 32. Related Parties
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
Total
b. Other related party balances
2020
$
2019
$
230,802
206,479
Other related party balances Loans to directors for the year ended 30 June 2020 amounted to $0 (2019: $0).
c. Key management compensation See Information below
Short term employee benefit
Post employment benefits
Share based payments
Total
Note 33. Parent entity
Set out below is the supplementary information about the parent entity.
Statement of Profit or Loss and Other Comprehensive Income
Loss after income tax
Total comprehensive income
Statement of Financial Position
Assets
Total non current assets
Total Assets
Liabilities
Total current liabilities
Total non-current liabilities
Total Liabilities
70 | Xref Limited | Annual Report 2020
2020
$
2019
$
1,169,639
1,145,378
82,427
76,349
103,297
292,907
1,328,415
1,541,582
2020
$
2019
$
(130,661)
(130,661)
(619,682)
(619,682)
34,730,398
30,253,229
34,730,398
30,253,229
30,240
43,800
74,040
-
-
30,253,229
Notes to the Financial Statements Note 33. Parent entity continued
Equity
Issued capital
Reserves
Retained profits
Total Equity
2020
$
2019
$
53,235,227
48,832,200
1,797,122
1,683,195
(20,375,991)
(20,262,166)
34,656,358
30,253,229
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
There are no guarantees entered into by the parent entity in relation to any of its subsidiaries in 2019 or 2020.
Contingent liabilities
The parent entity had no contingent liabilities in 2020 and 2019.
Capital commitments Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment in 2020 and 2019
Note 34. Operating lease not capitalised
Operating leases are held for premises used for office space. Lease commitments net of incentive payments are:
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
The Group had no other commitments at 30 June 2020 (2019: $Nil).
Note 35. Events Occurring After the Reporting Date
2020
$
2019
$
-
-
-
-
797,727
345,561
122,558
1,265,846
The impact of the Coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential impact, positive
or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian
Government and other countries. Despite the impact, Xref recorded its lowest cash burn quarter since listing, in Quarter 4 2020 due
to a focus on cost reduction that has been ongoing since December 2019 combined with strong sales from those sectors deemed
essential services. This cost reduction focus, both prior to the outbreak of COVID-19 and after has been a financially positive outcome.
Management has reviewed the company’s cashflow forecast as a result of COVID-19 and made changes accordingly.
On July 8, 2020 the Board approved the issue of 2,674,632 new fully paid ordinary shares to 56 Xref staff. These shares were issued
at the then average volume-weighted share price of 18 cents. The shares were issued to replace the forgone earnings of all Xref staff
who were reduced to working 4 days per week for the last quarter of the financial year, including a proportion of individual performance
bonuses forgone for the same quarter which were also replaced with shares. Additionally shares were issued to members of the sales
team as part of a commission scheme restructure. This announcement was released to the market on 8 July 2020.
Xref returned to a five-day working week on the 1st July as a result of the successful fourth quarter.
Xref Limited | Annual Report 2020 | 71
Notes to the Financial Statements
Note 35. Events Occurring After the Reporting Date continued
On July 20, 2020, the Board approved the issue of 2,931,099 Options with an exercise price of 35 cents to 50 eligible employees as part
of the Xref Employee Option plan. The options vest on 15 January 2021 and are exercisable until 15 January 2024. This announcement
was released to the market on 20 July 2020.
On July 31, 2020 Xref entered into a secured $5m debt facility with Pure Asset Management to support the Company’s growth
strategies. Net of establishment costs the amount received was $4.825m. This included the issue of 14,285,714 detached warrants at
an exercise price of 35 cents which expire on July 31, 2024. Full details of the facility were announced to the market on 31 July 2020.
Note 36. Business combination
On 9 August 2019 Xref Limited acquired 100% of the ordinary shares of Rapid ID Pty Limited for the total consideration of $1,712,040.
Rapid ID is an ID verification and fraud prevention platform which aggregates leading customer verification technologies to offer its
clients a flexible and seamless integration for onboarding and risk analysis monitoring. The platform is able to perform GlobalID Checks,
AML & KYC Compliance, ID Document Verification and Biometric Verification. It was acquired to offer Xref’s clients with an integrated
method to verify the identity of the candidates they are working with.
In addition Rapid ID remains as a standalone product servicing the needs of clients outside of the HR sector which opens up
opportunities for Xref’s platform in new sectors. The goodwill of $1,333,986 represents the expected synergies from merging this
business with Xref along with the significant opportunity to increase Rapid ID’s revenues through sales to Xref’s client base. Rapid ID is
built on the same technology as Xref and utilises the same backend applications to manage the business thus providing opportunities
to streamline its cost base without any impact to revenue.
The acquired business contributed revenues of $247,109 and loss after tax of $304,109 to the Group for the period from 9 August
2019 to 30 June 2020. If the acquisition occurred on 1 July 2019, the full year contributions would have been revenues of $258,023 and
loss after tax of $351,564. The values identified in relation to the acquisition of Rapid ID are final as at 30 June 2020.
72 | Xref Limited | Annual Report 2020
Notes to the Financial Statements Note 36. Business combination continued
Set out below are summaries of options granted under the plan:
Cash and cash equivalents
Trade receivables
Other receivables
Prepayments checks
Plant and equipment
Intangible assets
Trade payables
Other payables
Employee expenses
Loans
Net assets acquired
Goodwill
Acquisition date fair value for the total consideration transferred
Representing:
Cash consideration
Equity consideration
Ashley Hoey Tranche 1 Shares
Ashley Hoey Tranche 2 Shares
Ashley Hoey Tranche 3 Shares
Total consideration
Cash used to aquire business, net of cash aquired:
Aquisition date fair value of total consideration transferred
Less: cash and cash equivalents
Net cash used
Fair value
$
16,056
14,220
7,399
60,689
1,836
375,000
(24,737)
(15,103)
(2,306)
(55,000)
378,054
1,333,986
1,712,040
600,000
900,000
138,000
30,240
43,800
1,712,040
600,000
(16,056)
583,944
RapidID’s founder, Ashley Hoey, joined Xref to continue development of the RapidID platform and immediately received 300,000 shares
at an issue price of $0.46 per share and a total transactional value of $138,000. On the 1st Anniversary (08/08/2020) of his employment,
he will receive another 300,000 shares (Tranche 1) and a further 300,000 shares (Tranche 2) on the 2nd Anniversary (08/08/2021).
Xref Limited | Annual Report 2020 | 73
Notes to the Financial Statements
Director’s Declaration
The directors of the Company declare that:
1. the financial statements and notes for the year ended 30 June 2020 are in accordance with the Corporations Act 2001 and:
a. comply with Accounting Standards, which, as stated in basis of preparation Note 2 to the financial statements, constitutes explicit
and unreserved compliance with International Financial Reporting Standards (IFRS); and
b. give a true and fair view of the financial position and performance of the consolidated group;
2. the Chief Executive Officer and Chief Finance Officer have given the declarations required by Section 295A that:
a. the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the
Corporations Act 2001;
b. the financial statements and notes for the financial year comply with the Accounting Standards; and
c. the financial statements and notes for the financial year give a true and fair view.
3. In the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable with the continuing support of creditors.
At the date of this declaration, there are reasonable grounds to believe that the companies which are party to this deed of cross
guarantee will be able to meet any obligations or liabilities to which they are, or may become subject to, by virtue of the deed.
This declaration is made in accordance with a resolution of the Board of Directors.
Lee-Martin Seymour
Managing Director
31 August 2020
Sydney
Brad Rosser
Chairman
31 August 2020
Sydney
74 | Xref Limited | Annual Report 2020
Crowe Sydney
ABN 97 895 683 573
Level 15 1 O’Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowe.com.au
Independent Auditor’s Report to the Members of
Xref Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Xref Limited (the Company and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion, the accompanying financial report of Group is in accordance with the Corporations Act
2001, including:
(a) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial
performance for the year then ended;
(b) and complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an
equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership
is the Crowe Australasia external audit division. All other professional services offered by Findex Group Limited are conducted by a privately
owned organisation and/or its subsidiaries.
Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a
separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe
Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or
partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Sydney, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a
scheme approved under Professional Standards Legislation.
© 2020 Findex (Aust) Pty Ltd.
Xref Limited | Annual Report 2020 | 75
Independent Auditor’s Report
Xref Limited
76
Emphasis of Matter – COVID-19
We draw attention to Note 5 of the financial statements, which describes the effects of the World
Health Organisation’s declaration of a global health emergency on 31 January 2020 relating to the
spread of COVID-19. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key Audit Matter
How we addressed the Key Audit Matter
Business Combination
In the current year, the Group acquired 100%
ordinary shares of RapidID Pty Limited for a total
consideration of $1,712,040, disclosed as per Note
36.
We critically analysed the Group’s business
combination workings to ensure its appropriateness
with AASB 3 Business Combinations, including
performing the following procedures:
RapidID Pty Limited is an ID verification and fraud
prevention platform which aggregates leading
customer verification technologies to offer its clients
a flexible and seamless integration for onboarding
and risk analysis monitoring.
a) We thoroughly reviewed the acquisition
agreement to ensure the acquisition met the
definition of business combination under
AASB 3 Business Combinations.
b) We obtained the fair value assessment
performed by the independent valuers on the
balance sheet of RapidID as at 30 June 2019
as well as the contingent consideration
payable. We performed a review to challenge
the assumptions and estimates used within
the different valuation reports to ascertain
their appropriateness.
Goodwill Impairment
The acquisition of Rapid ID resulted in a recognition
of Goodwill on consolidation of $1,333,986. The
Goodwill represents the expected synergies from
merging Rapid ID with Xref along with the significant
opportunity to increase Rapid ID’s revenue through
Xref’s client base.
We obtained management’s discounted cashflow
forecast for the cash generating unit Rapid ID Pty
Limited, critically evaluated the key assumptions and
estimates used which have been disclosed as per Note
18, to ascertain impairment, including performing the
following procedures:
As per the requirements of AASB 136 Impairment of
Assets, an annual review of Goodwill for the cash
generating unit (CGU) Rapid ID Pty Limited was
performed based on a discounted cashflow. Given
the CGU is loss making, the other revenue
generating assets were also taken into
consideration for the purposes of impairment
testing.
a) We discussed with management the basis for
using the significant assumptions and inputs
used in the discounted cashflow, and
challenged its appropriateness.
b) Obtained reports of relevant industries to
incorporate the fluctuations of the market and
counter management’s long-term growth rates
utilised in the calculation.
© 2020 Findex (Aust) Pty Ltd
www.crowe.com.au
76 | Xref Limited | Annual Report 2020
Independent Auditor’s Report
Xref Limited
77
Key Audit Matter
How we addressed the Key Audit Matter
Going Concern Assessment
The Group incurred a loss of $10,056,090 (2019:
$8,181,826), deficiency in net current assets of
$4,718,252 (2019: $2,658,488 net current asset
position) and a deficiency of net assets of
$2,404,063 (2019: $3,158,865 net asset position).
Notwithstanding the continued losses, net current
asset deficiency and net asset deficiency, the
financial statements have been prepared on a going
concern basis based on the actions undertaken by
management as outlined in Note 3(x) of the financial
report.
c) We interrogated the discount cashflow
forecast using different inputs as a means to
perform a sensitivity analysis.
We critically analysed the Group’s cashflow forecast,
including the potential impact of COVID-19, that was
used to support the going concern assessment,
including performing the following procedures:
a) We compared the prior year cash flow
forecast prepared by management with the
actual cashflows achieved and obtained
justification from management on variances in
order to evaluate the validity of management’s
current forecasting processes.
b) We interrogated the cashflow forecast using
different inputs as a means to perform a
sensitivity analysis.
c) We discussed with management the
significant assumptions and inputs used in the
cashflow forecast, comparing the inputs used
with historical results, and obtained
reasonable justification for those inputs that
differ from historical results.
d) We reviewed post balance date performance
of the entity up to the date of signing the audit
report to determine if the business
performance was consistent with
management’s expectations.
e) We confirmed the receipt of $4,825,000
funding post year end.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s Annual Report for the year ended 30 June 2020, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
© 2020 Findex (Aust) Pty Ltd
www.crowe.com.au
Xref Limited | Annual Report 2020 | 77
Independent Auditor’s Report
Xref Limited
78
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the group financial report. The
auditor is responsible for the direction, supervision and performance of the group audit. The
auditor remains solely responsible for the audit opinion.
© 2020 Findex (Aust) Pty Ltd
www.crowe.com.au
78 | Xref Limited | Annual Report 2020
Independent Auditor’s Report
Xref Limited
79
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during the audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in the auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in the auditor’s report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the remuneration report included on pages 15 to 22 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the remuneration report of Xref Limited, for the year ended 30 June 2020, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
Crowe Sydney
Ash Pather
Partner
31 August 2020
Sydney
© 2020 Findex (Aust) Pty Ltd
www.crowe.com.au
Xref Limited | Annual Report 2020 | 79
Shareholder Information
Information relating to shareholders, as required by ASX Listing Rule 4.10, and not disclosed elsewhere in this Annual Report, is detailed
below.
Substantial Shareholders of the Company as at 11 August 2020, based on Substantial Shareholder Notices received by the ASX and
the Company:
Substantial Shareholders
Squirrel Holdings Australia Pty Ltd
West Riding Investments Pty Ltd
National Nominees Ltd ACF Australian Ethical Investment Limited
Shareholding % Shares Issued
30,857,613
30,857,612
9,266,725
18.64
18.64
5.20
Based on the market price at 11 August 2020 there were 318 shareholders with less than a marketable parcel of 3,226 shares at a share
price of $0.155.
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
148
334
255
587
109
1,433
58,978
1,102,465
2,037,678
20,908,649
156,622,613
180,730,383
0.03
0.61
1.13
11.57
86.66
100.00
80 | Xref Limited | Annual Report 2020
Top 20 Holders of Ordinary Shares as at 11 August 2020
Rank
Name of Shareholder
Shares
% of Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Squirrel Holdings Australia Pty Ltd
West Riding Investments Pty Ltd
Netwealth Investments Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
UBS Nominees Pty Ltd
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
CS Fourth Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
Kembla No 20 Pty Ltd
Mijon Investments Pty Ltd
Brispot Nominees Pty Ltd
TDF Properties Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 2
Parkstone House Pty Ltd
First Trustee Company (NZ) Limited
Lynter Pty Ltd
Gang-Gang Pty Ltd
Schindler Investment Haus Pty Ltd
Total of Top 20 Holdings
Other Holdings
Total Fully Paid Shares Issued
Performance Rights as at 11 August 2020
30,857,613
30,857,612
16,435,130
12,994,773
12,171,139
5,195,668
4,113,187
3,927,212
1,864,227
1,475,301
1,300,000
1,232,004
1,166,425
1,100,000
1,056,840
1,019,410
1,000,000
1,000,000
920,000
912,500
130,599,041
50,131,342
180,730,383
17.07
17.07
9.09
7.19
6.73
2.87
2.28
2.17
1.03
0.82
0.72
0.68
0.65
0.61
0.58
0.56
0.55
0.55
0.51
0.50
72.23
27.77
100.00
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. The abovenamed two holders own 100% of the securities in the Performance Right class
of equity securities. The C Class Conversion Event Upon the Group occurs during any six-month reporting period of the Company
that ends on, or prior to, five years after the date of issue of the Performance Rights, being 20 January 2021, and achieving EBITDA of
A$2,500,000 or more. The Performance Rights were in escrow until 8 February 2018.
Xref Limited | Annual Report 2020 | 81
Shareholder Information
Options as at 11 August 2020
Name of Option Holder
Brad Rosser
Brad Rosser
Nigel Heap
48 employees and contractors (under Employee Option Plan)
14 employees (under Employee Option Plan)
Shares the Option
Holder is Entitled to
Exercise Price
Option Expiry Date
4,500,000
2,500,000
900,000
889,394
144,685
$0.70
25 November 2021
$0.70
25 November 2022
$0.70
25 November 2021
$0.585
3 July 2021
$0.66
5 February 2022
James Solomons (under Employee Option Plan)
1,000,000
$0.70
12 February 2021
James Solomons (under Employee Option Plan)
James Solomons (under Employee Option Plan)
31 employees and contractors (under Employee Option Plan)
750,000
750,000
303,711
$0.70
12 February 2022
$0.70
12 February 2023
$0.66
1 August 2022
Five senior staff members (under Employee Option Plan)
2,500,000
$0.70
29 November 2022
Sharon Blesson (under Employee Option Plan)
Sharon Blesson (under Employee Option Plan)
Sharon Blesson (under Employee Option Plan)
50 employees and contractors (under Employee Option Plan)
Total
300,000
300,000
300,000
2,931,099
18,068,889
$0.70
3 September 2021
$0.70
3 September 2022
$0.70
3 September 2023
$0.35
15 January 2024
Warrants as at 11 August 2020
Name of Warrant Holder
Warrants the Holder is Entitled to
Exercise Price
Pure Asset Management Pty Ltd
14,285,714
$0.35
Expiry Date
23 July 2024
Voting Rights
At general meetings of the Company, all fully paid ordinary shares carry one vote per share without restriction. On a show of hands, every
member present at a general meeting, or by proxy, shall have one vote and, upon a poll, each share shall have one vote. Performance
Rights holders, Option holders and Warrant holders have no voting rights until the Performance Rights are converted, the Options are
exercised and the Warrants are exercised, respectively.
On-Market Buy-Back
There is no current on-market buy-back of shares in the Company.
82 | Xref Limited | Annual Report 2020
Shareholder Information This page has been left intentionally blank.
Xref Limited | Annual Report 2020 | 83
Shareholder Information
Corporate Directory
PLACE OF BUSINESS
DIRECTORS
LEADERSHIP TEAM
AUDITORS
Brad Rosser
Chairman
Lee-Martin Seymour
Tim Griffiths
Nigel Heap
Australia (Head Office and
Registered Office)
Suite 17, 13 Hickson Road
Dawes Point, NSW 2000
Tel: +61 2 8244 3099
United Kingdom
46 New Broad Street
London
Canada
Suite 202
1 Adelaide Street East
Toronto, Ontario
United States
Suite 500
13809 Research Blvd
Austin, Texas
New Zealand
Level 10
11 Britomart Place
Auckland
84 | Xref Limited | Annual Report 2020
Lee-Martin Seymour
Chief Executive Officer,
Co-Founder
Tim Griffiths
Chief Strategy Officer,
Co-Founder
James Solomons
Chief Financial Officer
Sharon Blesson
Chief Operating Officer
COMPANY SECRETARY
Robert Waring
Website
xref.com
Crowe Sydney
Level 15
1 O’Connell Street
Sydney NSW 2000
Tel: +61 2 9262 2155
STOCK EXCHANGE
The company’s
ordinary shares are listed
on the ASX under code XF1
SHARE REGISTRY
Computershare
Investor Services Pty Ltd
Yarra Falls,
452 Johnston Street
Abbotsford, Victoria
Australia 3067
www.investorcentre.com/au
Tel: 1300 850 505
(within Australia)
Tel: + 61 3 9415 4000
(outside Australia)
xref.com
86
Xref Limited |Annual Report 2020
Financial Statements