APPENDIX 4D AND INTERIM FINANCIAL REPORT

Transcription

1 ASX ANNOUNCEMENT 28 FEBRUARY 2019 APPENDIX 4D AND INTERIM FINANCIAL REPORT Collaborate Corporation Limited (ASX:CL8) (Collaborate or the Company) is pleased to present its Appendix 4D and Interim Financial Report for the period ended 31 December Collaborate continued to focus its strategy on the areas of greatest potential and strongest alignment with the Company s capabilities during the first half of the 2019 financial year (H1FY19). Collaborate has been channelling its resources and strategic focus towards its mobility strategy owing to the large number of opportunities arising from significant changes in the highly valuable automotive industry and the rapid evolution of the ways in which consumers wish to access vehicles. The DriveMyCar and Carly offerings position Collaborate at the forefront of these mobility opportunities, while still leveraging the unique advantages of the peer-to-peer business model. Key initiatives announced or progressed during the period included: Roll out of short-term rentals enabling DriveMyCar to compete in the short-term rental market, delivering higher gross revenue per rental day and improving the ability to convert rental enquiries into confirmed bookings and increasing the awareness of the DriveMyCar offering. A pilot apartment car share programme was launched in collaboration with Hyecorp, a prominent residential apartment developer and a company associated with Hishenk, Collaborate s largest shareholder. DriveMyCar launched its largest ever fleet of new vehicles in conjunction with Peugeot providing vehicles for private renters and Uber drivers A supply agreement was signed with Custom Fleet, Australia and New Zealand s premier fleet management organisation. Custom Fleet provides vehicles in Sydney, Melbourne and Brisbane that were made available to private renters, business customers and Uber drivers on 22 December 2018, the benefits of which will flow in H2FY19. Due to high utilisation the fleet is being substantially expanded in Q1 FY19. LSH Auto trading as Mercedes-Benz Melbourne signed an agreement for the supply of vehicles to the DriveMyCar marketplace and the launch of a premium vehicle rental service in October LSH Auto, part of Lei Shing Hong Limited, is one of the world s largest dealer groups for Mercedes-Benz passenger vehicles. The first collaboration between DriveMyCar and LSH s Mercedes-Benz dealerships launched at Melbourne Airport in February Cricks Tweed is the latest automotive dealer to provide vehicles for rent via DriveMyCar. The Cricks Tweed dealership is situated in an ideal location to service the important Tweed Heads/Coolangatta and Gold Coast regions, combining potential demand from tourists, residents, local businesses and Uber drivers. Vehicles commenced being available for rental on 29 October. Suite 3, Level 7, 189 Kent Street, Sydney NSW 2000 Tel: E: shareholder@collaboratecorp.com W: ACN

2 Additional funding was secured via a heavily subscribed entitlement issue (which was subsequently fully subscribed upon acceptance of the shortfall offer) and the Board welcomed Michelle Vanzella as non-executive director and Paul Morris as strategic advisor, to the Board. In February 2019, the Board was further strengthened with the appointment of Mr Stephen Abolakian as a non-executive director. Challenges were experienced during the period which related to changes in registration requirements for rideshare vehicles and competitor price reductions driven by heavily discounted vehicles being sold to traditional rental companies by automotive manufacturers clearing excess stock. Rideshare registration issues have been resolved and rideshare revenue is once again increasing. Supply of competitively priced vehicles has been increased to curtail the short-term challenges posed by competitor price discounting. Despite the revenue challenges, the loss from continuing operations decreased by 7.4% through the reduction of fixed costs and other measures. In addition to advancing the DriveMyCar business, Collaborate is focusing on the consumer launch of the Carly vehicle subscription service, a new demand channel leveraging DriveMyCar operations, partners and technology platform. Go Auto described Carly as being seen in dealer circles as a potential for retailers to get cars out of the showroom door that are presently not getting finance approval. Collaborate has experienced very strong consumer and industry interest in Carly since its announcement and looks forward to providing further information on these ongoing exciting developments. Carly will launch in March The Board is appreciative of the ongoing support of shareholders and we, along with shareholders, look forward to the share price appropriately reflecting the progress being made. Collaborate has identified significant opportunities in the multi-billion dollar Australian automotive industry arising from generational changes in the way consumers wish to access cars. Collaborate, though its existing technology, partners and experience is well positioned to capitalise on the significant disruption that is underway and which is expected to accelerate in the future. Authorised by: Chris Noone CEO and Director Collaborate Corporation Limited About Collaborate Corporation Limited Collaborate Corporation Limited is listed on the Australian Securities Exchange (ASX:CL8). It is Australia s leading listed company focused on collaborative consumption, peer-to-peer or sharing economy business model with a strong focus on mobility solutions. Collaborate s core business is Australia s leading peer-to-peer car rental business, complemented by Australia s first truly flexible car subscription offering to be launched in March Other businesses include a leading peer-topeer caravan rental business; and a rental marketplace for under-utilised assets. Through our proprietary trust and reputation platform, we create trust between individuals and make it possible for people and companies to safely transact with each other in the sharing economy. 2

3 Appendix 4D Half Year Report (ASX Listing rule 4.2A) Company Name: Collaborate Corporation Limited (the Company) ABN: Reporting Period: Half year ended 31 December 2018 Previous Reporting Period: Half year ended 31 December 2017 Result for Announcement to the Market The results of Collaborate Corporation Limited for the half year ended 31 December 2018 are as follows: Revenue Down 4.7% to 553,969 Loss from continuing operations Down 7.4% to (1,638,146) Net loss for the period attributable to members Down 7.4% To (1,638,146) Dividends No dividends have been paid or declared by the Company since the beginning of the current reporting period. No dividends were paid for the previous reporting period. Net Tangible Assets per Share 31 December December 2017 Net Tangible Assets per Share (cents) (0.02) 0.28 Explanation of results Collaborate Corporation Limited recorded operating revenue of 553,969 for the half year ended 31 December 2018 (2017: 581,352), being a decrease of 4.7%. Loss from continuing operations for the half year was 1,638,146 (2017: 1,769,657) and net loss for the period attributable to members was 1,638,146 (2017: 1,769,657). For further details on the current half year results, refer to the Review of Operations contained within this document. Interim review of accounts The interim financial statements have been reviewed by the Group s independent auditor. The review report is included within the interim financial report which accompanies this Appendix 4D. The independent auditor s review report contains an emphasis of matter in relation to going concern. The emphasis of matter draws attention to Note 1(b) of the interim financial report and states that the factors described in that going concern note to the interim financial statements, indicate the existence of material uncertainty that may cast significant doubt on the Group s ability to continue as a going concern. In Note 1(b), the Directors confirm their belief that the factors described in that note to the interim financial statements demonstrate that the Group will be able to pay its debts as and when they become due and payable and continue as a going concern.

4 ACN I N T E R I M F I N A N C I A L R E P O R T 3 1 D EC E M B E R

5 C O N T E N T S P a g e Directors Report... 1 Auditor s Independence Declaration... 4 Interim Financial Report Condensed Consolidated Statement of Comprehensive Income... 5 Condensed Consolidated Statement of Financial Position... 6 Condensed Consolidated Statement of Changes in Equity... 7 Condensed Consolidated Statement of Cash Flows... 8 Notes to the Consolidated Financial Statements... 9 Directors Declaration Independent Auditor s Review Report... 18

6 DIRECTORS REPORT The Directors present the financial report of the consolidated entity consisting of Collaborate Corporation Limited (the Company or Parent Entity) and its controlled entities (the consolidated entity or Group) for the half-year ended 31 December 2018 and the independent auditor s review report thereon: Directors and Company Secretary The following persons held office as Directors of the Company during or since the end of the half year period ended 31 December 2018 until the date of this report. Directors were in office for the entire period unless stated otherwise. Name Position Mr Chris Noone CEO/Executive Director Mr Adrian Bunter Non-Executive Director Mr Joshua Landau Non-Executive Director (resigned 1 September 2018) Ms Michelle Vanzella Non-Executive Director (appointed 1 September 2018) Mr Stephen Abolakian Non-Executive Director (appointed 14 February 2019) The following persons held office as Company Secretary of the Company during the half year ended 31 December 2018 until the date of this report. Ms Karen Logan Company Secretary Results The net loss after tax of the Group for the half-year was 1,638,146 (2017: loss of 1,769,657). The Group s gross revenue from continuing operations decreased by 4.7% to 553,969 in this half year, and gross profit from continuing operations decreased by 33.6% to 255,581. The net loss from continuing operations decreased by 7.4% to 1,638,146. Net assets decreased by 25% to 2,015,294. Review of Operations Collaborate continued to focus its strategy on the areas of greatest potential and strongest alignment with the Company s capabilities during the first half of the 2019 financial year (H1FY19). Collaborate has been channelling its resources and strategic focus towards its mobility strategy owing to the large number of opportunities arising from significant changes in the automotive industry and the rapid evolution of the ways in which consumers wish to access vehicles. The DriveMyCar and Carly offerings position Collaborate at the forefront of these mobility opportunities, while still leveraging the unique advantages of the peer-to-peer business model. Key initiatives announced during the period included short term rentals, apartment car share pilot, supply agreements with Peugeot, Custom Fleet, Lei Shing Hong and Cricks Tweed and restructuring of the marketing of DriveMyCar in collaboration with RACV. Additional funding was secured via a heavily subscribed entitlement issue (which was subsequently fully subscribed upon acceptance of the shortfall offer) and the Board welcomed Michelle Vanzella as non-executive director and Paul Morris as strategic advisor to the Board. H1FY19 revenue decreased by 4.7% and loss from continuing operations decreased by 7.4%. The decrease in gross profit was mainly as a result of increased insurance costs which in part arose due to late claim costs and invoices. Subsequent to the end of the period insurance claim costs have returned to normal levels, despite a number of hailstorms occurring in December During H1FY19 a number of actions were taken to reduce annual payroll costs by 312,000. The benefit of those cost reductions will be reflected in H2FY19. Subsequent to the end of the period further actions were taken to realise annualised savings of over 100,000. While a number of factors contributed to the small decline in revenue, Collaborate continued to focus its strategy on opportunities in the mobility industry and, notwithstanding additional investment in new products including Carly vehicle subscription, overall costs were also reduced. [1]

7 DIRECTORS REPORT Review of Operations (continued) On 29 October 2018 Collaborate completed the partially underwritten non-renounceable entitlement issue, raising 1,029,521, before costs, which represented take up of 90% of the total shares offered under the offer. The offer was made on a 1 for 8 basis to shareholders of the Company at an offer price of per share (Entitlement Issue), of which a total of 600,000 of the Entitlement Issue offer was underwritten by existing shareholders and officers of Collaborate. In November 2018, a number of non-related party underwriters reinvested underwriting fees paid to them and a further 800,000 shares were issued under the Shortfall Offer raising a further 12,000. Subsequent to the end of the quarter, the remainder of the shares under the Shortfall Offer were taken up by Hishenk, Collaborate s largest shareholder, on 22 January 2019 and raised a further 119,325. As of 31 December 2018 the Group remained debt-free. The DriveMyCar business unit continued to innovate and expand its strategic relationships during the period. Custom Fleet, Australia and New Zealand s premier fleet management organisation with over 2,400 customers in metropolitan and regional Australia, signed an agreement for the supply of vehicles which commenced rentals on 22 December These vehicles achieved high utilisation in early CY19 but did not make a material contribution to revenue in H1FY19. Rental of vehicles provided by Cricks Tweed commenced on 29 October, serving the Tweed Heads/Coolangatta and Gold Coast regions, combining potential demand from tourists, residents, local businesses and Uber drivers. In October 2018 DriveMyCar signed an agreement with LSH Auto, part of Lei Shing Hong Limited, one of the world s largest dealer groups for Mercedes-Benz passenger vehicles. The first collaboration between DriveMyCar and LSH s Mercedes-Benz dealerships is at Melbourne Airport. DriveMyCar provides a range of new Mercedes-Benz vehicles including A-Class, B-Class, CLA, and GLA vehicles available for rent to Melbourne residents and incoming visitors via the Mercedes-Benz Melbourne Airport dealership. The proposition launched in February In October 2018, DriveMyCar launched a guaranteed rental income offer for private vehicle owners. Private vehicle owners who list their car on DriveMyCar and meet the eligibility criteria will receive guaranteed income of 2,500 per annum. The income guarantee terms incentivise vehicle owners to make their vehicles available and accept bookings in order to qualify for the guarantee - thereby increasing the overall availability of vehicles in the DriveMyCar fleet. The ManageMyCar service was extended to Brisbane providing a convenient airport pick up location for vehicles. An Apartment Car Share pilot launched in October enabling residents of apartment developments to rent vehicles to and from other residents. The learnings from this initial pilot have been incorporated into the product and additional sites for the expansion of the pilot are currently being reviewed. In addition, short term rentals of between 2-6 days were launched enabling DriveMyCar to take advantage of a greater proportion of rental demand and also generate higher income per day for vehicle owners and DriveMyCar. A number of factors limited growth in DriveMyCar sales during the period including continued price discounting by competitors and a short term gap in vehicle supply during November that limited rental momentum into December. The number of vehicles available for rideshare rentals during H1FY19 was lower than the corresponding prior year period (PYP) as the available fleet size had been reduced and required to be rebuilt following changes in registration requirements for vehicles in NSW, Victoria & Queensland. Vehicles are now registered again for rideshare rentals in these three states. DriveMyCar maintains a Price Index which indicates a strong correlation between competitor prices and demand for DriveMyCar vehicles. The willingness of consumers to consider alternatives to traditional suppliers is related to prices charged by large established players. Competitors are believed to be discounting their prices because of the availability of heavily discounted vehicles being sold by manufacturers at low or zero margin, especially in the SUV category. VFACTS December 2018 data shows that sales of SUVs to rental companies increased 30% in 2018 vs 2017 PYP. As these sales are often not profitable for manufacturers and vehicles are held for a short period of time by the rental companies it is unlikely that the discounted prices can persist for the medium-long term. DriveMyCar seeks to counteract the impact of short-term competitor price discounting through diversified revenue streams including rideshare rentals for Uber drivers, accident replacement rentals, new initiatives such as apartment car share and the recently announced Carly subscription model (to be launched in March 2019) and new pick up locations via automotive car dealerships and airports. As DriveMyCar does not incur direct vehicle ownership costs, there is less requirement to operate heavily discounted promotions to recover high fixed costs and instead DriveMyCar focuses on cost containment. [2]

8 DIRECTORS REPORT Review of Operations (continued) The co-branded RACV/DriveMyCar proposition reverted to DriveMyCar branding during the period. After reviewing results of the co-branded pilot, it was concluded that a single DriveMyCar brand marketed nationally was the most effective way to attract and convert customers via PR, paid marketing and organic search. The focus on the single DriveMyCar brand requires customers to undergo fewer steps to make a booking and improves conversions. RACV continues to promote DriveMyCar via the RACV website. In September 2018, the Board of Directors was strengthened with the appointment of Michelle Vanzella as an independent, non-executive director of Collaborate. Michelle brings to the Board expertise in strategic growth and innovation, customer strategy and analytics, consumer marketing and the application of emerging technologies to business growth at an ideal time for Collaborate as it leverages strategic partnerships and a unique business model to accelerate growth. In November 2018 Collaborate appointed respected automotive industry veteran Mr Paul Morris as a strategic advisor to the Company. Mr Morris has had a long and distinguished career in the automotive industry in Australia and Europe working in a number of senior strategy, operational and sales roles with leading companies. Most recently Mr Morris was chief operating officer of the ASX-listed Automotive Holdings Group Limited, Australia s largest automotive retailer with 183 franchised dealerships representing 27 automotive manufacturers. Mr Morris joined Collaborate as a strategic advisor as the DriveMyCar business unit accelerates its efforts to engage with automotive dealers and manufacturers to help them navigate the ongoing shift in consumer preferences and mobility needs which are increasingly moving online and favouring access to mobility solutions in preference to traditional vehicle ownership. Following the end of the period, in February 2019, the Board of Directors was further strengthened with the appointment of Mr Stephen Abolakian as a non-executive director of Collaborate. Stephen brings to the Board strong business expertise with experience across property development, finance, capital raising, operations and human resources. Stephen is the Managing Director of Hyecorp Property Group, a diversified Australian property group covering property development, construction and funds management. Hyecorp is associated with Hishenk, the largest shareholder of Collaborate. Auditor s independence declaration under Section 307C of the Corporations Act 2001 Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the Company with an Independence Declaration in relation to the review of the interim financial report. This Independence Declaration is set out on page 4 and forms part of this Directors Report for the half-year ended 31 December This report is signed in accordance with a resolution of the Board of Directors made pursuant to section 306(3) of the Corporations Act Chris Noone CEO and Executive Director Dated at Sydney, New South Wales, this 28 th day of February [3]

9 AUDITOR S INDEPENDENCE DECLARATION As lead auditor for the review of the consolidated financial report of Collaborate Corporation Limited for the half-year ended 31 December 2018, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and b) any applicable code of professional conduct in relation to the review. Perth, Western Australia 28 February 2019 N G Neill Partner

10 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2018 Consolidated Notes 31 Dec Dec 2017 Revenue from continuing operations 3 553, ,352 Cost of sales (298,388) (196,251) Gross profit 255, ,101 Corporate and administrative expenses (1,388,429) (1,604,495) Research and development expenses (491,211) (581,129) (1,879,640) (2,185,624) Results from continuing activities (1,624,059) (1,800,523) Finance income 2,685 30,866 Finance costs (16,772) - Net financing costs (14,087) 30,866 Loss before income tax (1,638,146) (1,769,657) Income tax benefit/(expense) - - Loss from continuing operations (1,638,146) (1,769,657) Other comprehensive income - - Total comprehensive result for the period (1,638,146) (1,769,657) Loss per share for loss attributable to the ordinary equity holders of the parent: Basic (loss)/earnings per share (cents per share) (0.25) (0.29) Diluted (loss)/earnings per share (cents per share) (0.25) (0.29) The above condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes [5]

11 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018 Notes 31 Dec 2018 Consolidated 30 Jun 2018 CURRENT ASSETS Cash and cash equivalents 350, ,667 Trade and other receivables 5 392, ,373 Other current assets 94,795 74,092 Total Current Assets 837,734 1,303,132 NON-CURRENT ASSETS Property, plant and equipment 35,224 42,193 Right of use asset (office lease) 8(a) 288,097 - Goodwill 2,079,699 2,079,699 Intangible assets 4 63,160 70,670 Total Non-Current Assets 2,466,180 2,192,562 TOTAL ASSETS 3,303,914 3,495,694 CURRENT LIABILITIES Trade and other payables 6 851, ,930 Lease Liabilities 8(c) 158,425 - Other liabilities 7 97, ,021 Total Current Liabilities 1,107, ,951 NON-CURRENT LIABILITIES Lease Liabilities 8(c) 141,555 - Other liabilities 7 39,096 30,845 Total Non-current Liabilities 180,651 30,845 TOTAL LIABILITIES 1,288, ,796 NET ASSETS 2,015,294 2,685,898 EQUITY Issued capital 9 32,621,832 31,669,303 Reserves 1,076,897 1,179,681 Accumulated losses 11 (31,683,435) (30,163,086) TOTAL EQUITY 2,015,294 2,685,898 The above condensed consolidated statement of financial position should be read in conjunction with the accompanying notes. [6]

12 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2018 Notes Issued Capital Reserves Accumulated losses Total Balance at 1 July ,671, ,834 (27,199,726) 5,417,161 Loss for the period - - (1,769,657) (1,769,657) Total comprehensive loss for the period - - (1,769,657) (1,769,657) Issue of share capital Share issue costs (1,750) - - (1,750) Share-based payment expense - 261, ,857 Expiration of options - (20,167) 20,167 - Balance at 31 December ,669,303 1,187,524 (28,949,216) 3,907,611 Balance at 1 July ,669,303 1,179,681 (30,163,086) 2,685,898 Impact of adoption of AASB (8,599) (8,599) 31,669,303 1,179,681 (30,171,685) 2,677,299 Loss for the period - - (1,638,146) (1,638,146) Total comprehensive loss for the period - - (31,809,831) 1,039,153 Issue of share capital 1,041, ,041,521 Share issue costs 9 (88,992) - - (88,992) Share-based payment expense 10-23,612-23,612 Expiration of options - (126,396) 126,396 - Balance at 31 December ,621,832 1,076,897 (31,683,435) 2,015,294. The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes [7]

13 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2018 Notes 31 Dec 2018 Consolidated 31 Dec 2017 Cash flows from operating activities Receipts from customers 1,510,554 1,531,200 Payments to suppliers and employees (2,897,351) (2,894,245) Interest received 1,541 30,866 Net cash used in operating activities (1,385,256) (1,332,179) Cash flows from investing activities Increase in rental bonds - (66,257) Net cash used in investing activities - (66,257) Cash flows from financing activities Proceeds from issue of shares 1,041,521 - Payment of share issue costs (90,709) (23,505) Payment of transaction costs for borrowings (16,500) - Net cash provided by/ (used in) financing activities 934,312 (23,505) Net decrease in cash held (450,944) (1,421,941) Cash and cash equivalents at the beginning of the period 801,667 3,637,813 Cash and cash equivalents at the end of the period 350,723 2,215,872 The above condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes. [8]

14 1. SIGNIFICANT ACCOUNTING POLICIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Reporting entity Collaborate Corporation Limited the (Company or Parent Entity) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The consolidated financial statements of the Company for the half-year ended 31 December 2018 comprise the Company and its subsidiaries (Consolidated Entity or Group). The annual financial report of the consolidated entity for the year ended 30 June 2018 is available upon request from the Company s registered office or may be viewed on the Company s website, (b) Basis of Preparation Statement of Compliance The consolidated interim financial statements are general purpose financial statements which have been prepared in accordance with the requirements of the Corporations Act 2001, applicable accounting standards including AASB 134 Interim Financial Reporting, Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board ( AASB ). Compliance with AASB 134 ensures compliance with IAS 34 Interim Financial Reporting. The interim financial report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the group as in the full financial report. It is recommended that this interim financial report be read in conjunction with the annual financial report for the year ended 30 June 2018 and considered together with any public announcements made by the Company during the half-year ended 31 December 2018 in accordance with the continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules. Basis of measurement The interim financial statements have been prepared on the accruals basis and the historical cost basis. All amounts are presented in Australian dollars, unless otherwise noted. For the purpose of preparing the interim financial statements, the half-year has been treated as a discrete reporting period. Going concern These financial statements have been prepared on a going concern basis which assumes the Group realising its assets and extinguishing its liabilities in the normal course of business. The Directors acknowledge that stakeholders may be concerned regarding the ability of the Group to continue as a going concern due to the Group having incurred a net loss of 1,638,146 during the half year (Dec 2017: loss of 1,769,657). The Directors are of the opinion that there are reasonable grounds to believe that the Group will be able to continue as a going concern after consideration of the following factors: The Group held cash and cash equivalents of 350,723, as at 31 December 2018; The Directors remain committed to the long-term business plan, including ongoing review of current products and the potential introduction of new products that are anticipated to contribute to improved results as the business units progress; The plans and forecasts reviewed by the Directors for the next twelve months anticipate the business will continue to produce improved results; [9]

15 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS During the 6 months to 31 December 2018, the Company raised 1,041,521 before costs through a nonrenounceable entitlement issue, which was partly underwritten by existing shareholders; and officers of the Company; The Group has a demonstrated ability to access various capital raising mechanisms as and when required. These capital funding mechanisms are available via existing shareholders of the Group as well as potential new shareholders. For example, subsequent to period end, (a) the Group secured a controlled placement facility with Acuity Capital for up to 3 million of equity over a 30-month period, and (b) raised a further 119,325 through a shortfall offer under the entitlement Issue prospectus dated 14 September 2018; The Group also received an R&D tax incentive rebate of 325,259 for the 2018 financial year in January The Directors believe that the above indicators demonstrate that the Group will be able to pay its debts as and when they become due and payable and to continue as a going concern. Accordingly, the Directors also believe that it is appropriate to adopt the going concern basis in the preparation of the financial statements. Should the Group not be successful in generating sufficient funds from the above initiatives, there will exist a material uncertainty that may cast significant doubt on the ability of the Group to continue as a going concern and, therefore, whether it will be able to realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should it not continue as a going concern. Significant accounting judgements, estimates and assumptions The preparation of the interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing this consolidated interim financial report, the significant judgments made by management in applying the consolidated entity s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 June 2018, except for the impact of the new standards and interpretations effective from 1 July 2018 as described below. The Directors have reviewed the ongoing validity of the assumptions made in the last annual impairment assessment of goodwill and, on the basis of trading results against those originally forecast, have concluded that no impairment indicators are present to necessitate a full impairment review as at 31 December Significant accounting policies The accounting policies and methods of computation adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards. (i) Adoption of new and revised standards The Group has adopted new and revised Accounting Standards that are mandatory for the current reporting period. The significant accounting policies and nature of changes are set out below: Initial adoption of AASB 15 Revenue from Contracts with Customers AASB 15 replaces AASB 118 Revenue and AASB 111 Construction Contracts and related interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. AASB 15 establishes a comprehensive framework for determining how much and when revenue is recognised, including in respect of multiple element arrangements. The core principle of AASB 15 is that it requires identification of discrete performance obligations within a transaction and associated transaction price allocation to these obligations. [10]

16 Significant accounting policies (continued) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Revenue is recognised upon satisfaction of these performance obligations, which occur when control of goods or services is transferred, rather than on transfer of risks or rewards. Revenue received for a contract that includes a variable amount is subject to revised conditions for recognition, whereby it must be highly probable that no significant reversal of the variable component may occur when the uncertainties around its measurement are removed. The Group has adopted AASB 15 using the modified retrospective method of adoption (without practical expedients) with the effect of initially applying this standard recognised at the initial application date, being 1 July Accordingly, the information presented for 31 December 2017 and 30 June 2018 has not been restated. The effect of the application of AASB 15 has been applied to all contracts at the date of initial application. Rendering of Services The Group operates in peer-to-peer marketplaces which makes it possible for individuals and companies to transact with each other for mutual benefit. The trusted marketplaces allow customers from the general public to rent vehicles or assets from owners who want to supply them. Based on the substance of the contracts, according to AASB 15, entities in the Group act as agents for owners, whereby through their websites, the Group is able to provide to potential renters or customers, a choice of assets, being cars, motorhomes, campervans, trailers or equipment for rent, which is supplied by owners. Entities in the Group are appointed by owners to arrange and administer the rental of vehicles or assets with renters over the rental period. The Group recognises revenue from amounts received from renters less amounts paid to owners. The performance obligation of the Group is satisfied over-time, as entities fulfil their performance obligation of co-ordinating and managing the rental services on behalf of owners. This accounting treatment is not materially impacted under the provisions of AASB 15. There is no material impact to profit and loss, net assets or opening accumulated losses on the adoption of this new standard in the current or comparative years. Advances received from customers Renters are required to pay a deposit bond upon confirmation of rental. These deposits are refunded to the renter at the end of the rental period when returned in accordance with rental agreement. The current accounting treatment recognises these deposits held as amounts owing to renters on the statement of financial position. This accounting treatment is not materially impacted under the provisions of AASB 15. There is no material impact to profit and loss, net assets or opening accumulated losses on the adoption of this new standard in the current or comparative years. Initial adoption of AASB 9 Financial Instruments AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement and makes changes to a number of areas including classification of financial instruments, measurement, impairment of financial assets and hedge accounting model. Under AASB9, on initial application, a financial instrument is classified at amortised cost or fair value. The classification is based on the Group s business model for managing financial assets and their contractual cash flow characteristics. Financial assets are measured at amortised costs if the business holds assets to collect contractual cash flows and contractual terms represent cash flows which are payments of principal and interest and not designated as fair value through profit and loss. The Group s financial assets are classified as amortised cost under the new classification and there is no material impact to profit or loss or net assets on the adoption of this new standard in the current or comparative years. The Group has applied AASB 9 retrospectively with the effect of initially applying this standard recognised at the date of initial application, being 1 July 2018 and has elected not to restate comparative information. Accordingly, the information presented for 31 December 2017 and 30 June 2018 has not been restated. The Group has applied AASB 9 Financial Instruments impairment model in its assessment of allowance for impairment loss on trade receivables. The Group applies an expected credit loss methodology (instead of the incurred loss prescribed in AASB 139) and uses a provisions matrix to estimate expected credit loss. The provision matrix is based on management s assessment of probable default rates based on ageing categories. [11]

17 Early adoption of AASB 16 Leases NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AASB 16 Leases requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under AASB 117 Leases. AASB 16 is effective from 1 July 2019 and the Group has chosen to early adopt the standard. In applying the transitional provisions of AASB 16, the Group has used a modified retrospective approach with the cumulative effect of initial application of the standard recognised in accumulated losses. The impact on the Groups statement of financial position is a recognition of a liability to make lease payments (i.e. lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e. right-of-use asset). The Group separately recognises interest expense on the liability and depreciation on the right-of-use asset in its profit or loss statement. The revised definition of a lease found in AASB 16 impacts the Group s rental agreements for office premises and warehouse. The rental agreement for its office premises commenced in November 2017, on a 3-year term, with an option to renew for a further one year. As management is not able to be sufficiently ascertain that the lease will be further renewed at the end of the lease term, according to AASB 16, the non-cancellable period for which the Group has the right to use the underlying asset is 3 years. The Group measures the right-of-use asset and lease liability for its office premises lease using a 4% discount rate (based on contractual annual rental rate increase). The rental agreement for its warehouse commenced in May 2017 and ends within 12 months from the date of initial application of AASB 16 (i.e. in May 2019). The Group applies the practical expedient in AASB 16 Appendix C, C10 which allows the Group to account for the warehouse lease in the same way as short-term leases. The quantitative effects as a result of adopting AASB 16 are detailed in notes 8 and 11. (ii) Standards and interpretations in issue not yet adopted The Directors have also reviewed new and revised standards and interpretations in issue not yet adopted that are relevant to the Group and effective for the half-year reporting periods beginning on or after 1 January The Directors have determined that there is no material impact of the new and revised standards and interpretations in issue not yet adopted and therefore no material change is necessary to the Group s accounting policies. [12]

18 2. SEGMENT INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Group operates predominantly in one business segment being the collaborative consumption business. Accordingly, only one operating segment has been identified and no further disclosure is required in the financial statements. 3. REVENUE FROM CONTRACTS WITH CUSTOMERS The Group derives its revenue from the provision of services over time in the following major category. This is consistent with the revenue information that is disclosed for the reportable segment under AASB 8 (see note 2). Six Months to 31 Dec 2018 Overtime Revenues from collaborative consumption activities 553,969 Total Revenue 553,969 The Group recognised an impairment loss on receivables from customers in the condensed consolidated statement of comprehensive income, amounting to 28,694 for the six months ended 31 December INTANGBILE ASSETS 31 Dec Jun 2018 Carrying value of trademarks 5,169 5,169 Carrying value of domain names and software development costs 57,991 65,501 63,160 70, TRADE AND OTHER RECEIVABLES 31 Dec Jun 2018 Trade receivables 48,092 53,860 Other receivables 18,865 32,470 Research and Development Tax Incentive 325, , , , TRADE AND OTHER PAYABLES 31 Dec Jun 2018 Trade payables 288, ,456 Deposits held 194, ,945 Other payables and accruals 368, , , , OTHER LIABILITIES 31 Dec Jun 2018 Current Provision for annual leave 84,809 94,212 Deferred income 12,813 18,809 97, ,021 Non-current Provision for long service leave 39,096 30,845 39,096 30,845 A provision has been recognised for employee entitlements relating to long service leave (LSL). In calculating the present value of future cash flows in respect of the provision, the probability of LSL being taken is based on managements' expectations of employee retention. [13]

19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8. LEASES 31 Dec 2018 (a) Right of Use Asset (ROU) ROU asset (office lease) 471,432 ROU asset (office lease) - accumulated depreciation (183,335) Carrying value of ROU at period end 288,097 Reconciliation of each class of underlying asset: Carrying value of ROU (office lease) - at initial application 366,669 ROU asset (office lease) - depreciation (78,572) Carrying value of ROU (office lease) - at end of period 288,097 (b) Lease Liability Lease Liability (office lease) at initial application 373,743 Less: Principle repayments during the period (73,763) Carrying value of Lease Liability at period end 299,980 (c) Lease Liability (contractual maturity) Carrying amount < 12 months > 12 months Lease liability at , , ,555 The Group measures the right-of-use asset and lease liability for the lease on office premises using a 4% discount rate (based on contractual rental increase rate) over a 3-year lease term. In the current period, 8,722 of corresponding interest expense on the liability and 78,572 of depreciation on the right-of-use asset has been recognised in the condensed consolidated statement of comprehensive income. The Group applies the practical expedient in AASB 16 Appendix C, C10 which allows the Group to account for the warehouse lease in the same way as short-term leases. The Group recognised 34,100 of leasing expense in the current period in relation to the warehouse premises. 9. ISSUED CAPITAL 31 Dec Jun ,552,556 (30 June 2018: 619,117,857) fully paid ordinary shares 32,621,832 31,669,303 (a) Ordinary shares The following movements in issued capital occurred during the period: Six months to 31 December 2018 Year to 30 June 2018 Number of Number of Shares Shares At beginning of period 619,117,857 31,669, ,117,857 31,669,303 Issue of shares at each at entitlement issue 69,434,699 1,041, Less: transaction costs arising on share issue - (88,992) - - At end of period 688,552,556 32,621, ,117,857 31,669,303 [14]

20 9. ISSUED CAPITAL (CONTINUED) (b) Options Details of options issued during the period: NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Class Expiry Date Exercise Price () Number of Options Employee Options 3-Sept ,719,214 Employee Options 01-Oct ,272 No options were exercised during the half year. The following options expired during the half year: Class Expiry Date Exercise Price () Number of Options Executive A Options 28-Nov ,334 Executive B Options 28-Nov ,334 Director Options 28-Nov ,000,000 Officer Options 30-Nov ,000,000 1 This is the adjusted exercise price following completion of the Entitlement issue in October 2018, pursuant to the ASX announcement dated 29 October SHARE BASED PAYMENTS The following share-based payment arrangements were entered into during the half year: Grant date Expiry date Exercise Price () Balance at the start of the year Granted Exercised/ lapsed Vested Balance at the end of the period 3-Sep-18 3-Sep ,719,214-2,719,214 2,719, Oct-18 1-Oct , , ,272 For the options granted during the half-year ended 31 December 2018, the valuation model inputs used to determine the fair value at the grant date are outlined below: Grant date Expiry date Share price at grant date () Exercise price () Expected volatility Dividend yield Risk-free interest rate Fair value at grant date (). 3-Sep-18 3-Sep % 0.00% 1.99% 21, Oct-18 1-Oct % 0.00% 2.07% 2,279 [15]

21 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. ACCUMULATED LOSSES Six months to 31 Dec 2018 Consolidated Year to 30 Jun 2018 Movement in retained earnings were as follows: Accumulated losses at beginning of the year (30,163,086) (27,199,726) Adjustments (adoption of AASB 16) (1) (8,599) - (30,171,685) (27,199,726) Transfer from reserves 126,396 28,010 Loss for the period (1,638,146) (2,991,370) Accumulated losses at end of the period (31,683,435) (30,163,086) (1) Impact due to early adoption of standard Recognition of ROU asset and lease liability at adoption 97,690 - Cumulative effect on RE for ROU depreciation from commencement till initial application Recognition of interest expense on lease liability owing at initial application 12. FINANCIAL INSTRUMENTS (104,763) - (1,526) - (8,599) - The methods and valuation techniques used for the purposes of measuring fair value are unchanged compared to the previous reporting period. The carrying value of the current receivables and current payables are considered to be a reasonable approximation of their fair value. 13. EVENTS SUBSEQUENT TO REPORTING DATE Subsequent to period end: 1. the Group announced the execution of a controlled placement deed with an Acuity Capital for up to 3 million of equity over a 30-month period (CPD). Under the CPD: (a) 20,000,000 Shares were issued as collateral shares for nil consideration; and (b) 2,500,000 Shares were issued in lieu of cash payment for the transaction fee. Full details of the CPD are set out in the ASX release dated 10 January ,955,033 Shares were issued on 22 January 2019 pursuant to the shortfall offer under the entitlement issue prospectus dated 14 September 2018, raising a total of 119,325, before costs. 3. the Group also received R&D Tax incentive rebate on 30 January 2019 of 325,259 for the 2018 financial year. Other than noted above, there has been no additional matter or circumstance that has arisen after balance date that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. [16]

22 DIRECTORS DECLARATION 1. In the opinion of the Directors of Collaborate Corporation Limited: (a) the accompanying interim financial statements and notes are in accordance with the Corporations Act 2001 including: (b) (i) giving a true and fair view of the Group s financial position as at 31 December 2018 and of its performance for the half-year then ended; and (ii) complying with Australian Accounting Standards, the Corporations Regulations 2001, professional reporting requirements and other mandatory requirements. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (c) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. 2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with Section 295A of the Corporations Act This declaration is signed in accordance with a resolution of the Board of Directors made pursuant to section 303(5) of the Corporations Act Chris Noone CEO and Executive Director Dated at Sydney, New South Wales this 28 th day of February [17]

23 INDEPENDENT AUDITOR S REVIEW REPORT To the members of Collaborate Corporation Limited Report on the Condensed Half-Year Financial Report Conclusion We have reviewed the accompanying half-year financial report of Collaborate Corporation Limited ( the company ) which comprises the condensed consolidated statement of financial position as at 31 December 2018, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory notes, and the directors declaration, for the Group comprising the company and the entities it controlled at the half-year end or from time to time during the half-year. Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Collaborate Corporation Limited is not in accordance with the Corporations Act 2001 including: (a) (b) giving a true and fair view of the Group s financial position as at 31 December 2018 and of its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations Material uncertainty related to going concern We draw attention to Note 1(b) in the half-year financial report, which indicates that a material uncertainty exists that may cast significant doubt on the entity s ability to continue as a going concern. Our conclusion is not modified in respect of this matter. Directors responsibility for the half-year financial report The directors of the company are responsible for the preparation of the half-year 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 half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group s financial position as at 31 December 2018 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of the company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with