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2011
ANNUAL
REPORT
WEBFIRM GROUP LIMITED
webfirmgroup.com
85 Coventry Street
South Melbourne
Victoria, Australia 3205
T +61 3 8695 9199
F +61 3 9696 0700
webfirmgroup.com
ASX:WFM
Contents
Chairman’s Report .................................................................................................................................................. 2
Directors’ Report ..................................................................................................................................................... 3
Directors’ Shareholdings ....................................................................................................................................... 7
Remuneration Report ........................................................................................................................................... 11
Auditors Independence Declaration .............................................................................................................19
Consolidated Statement of Comprehensive Income ............................................................................ 20
Consolidated Statement of Financial Position ...........................................................................................21
Consolidated Statement of Changes in Equity ........................................................................................ 22
Consolidated Statement of Cash Flows ....................................................................................................... 23
Notes to the Financial Statements ................................................................................................................. 24
Directors’ Declaration ........................................................................................................................................... 71
Independent Audit Report to the Members ................................................................................................72
Corporate Governance Information .............................................................................................................74
Shareholder Information .....................................................................................................................................77
Corporate Directory ..............................................................................................................................................78
CHAIRMAN’S REPORT
2
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
DIRECTORS’ REPORT
3
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Chairman’s Report
In 2010, our primary objective was to build a unique platform that will transform the way that display
advertising is bought and sold online.
We laid firm foundations for Webfirm Group with the acquisition of the Adslot (ad auctioning technology)
and the subsequent acquisition of the QDC (ad builder) and Adimise (ad server) technologies. This
provided Webfirm Group with the necessary pieces to create a world-class, end-to-end, self-serve
platform for the efficient sale of online display advertising.
Our initial focus has been on selling this solution to major online classified portals looking to increase
their display advertising revenue. Adslot enables them to increase revenue, reduce costs and
significantly expand their potential advertiser-base by tapping into the vast market of small-to-medium
sized businesses (SMB’s) who are increasing their spend on display advertising.
For Adslot’s foundation customers, Realestate.com.au and Carsales.com.au, these SMB advertisers are
initially real estate agents and car dealers already using these websites to advertise property listings
and cars for sale. The Adslot end-to-end platform allows our customers to extend their reach to include
the long tail of SMB advertisers, which currently make up more than 70% of Google’s advertising revenue,
but are increasingly shifting their spend towards display advertising.
Having put the Adslot technology foundation in place, our focus during 2011 has been to:
• Raise sufficient funds to execute on the Adslot strategy;
• Attract an experienced team of people to bring together all the acquired technologies into a
seamless end-to-end product (there are now 28 people employed specifically on Adslot and
related technologies);
• Acquire major foundation customers and implement solutions to shape our products in preparation
for a global rollout;
• Restructure the Webfirm division cost-base to drive that division to profitability.
2012 will be a year of continued product development, customer acquisition and revenue growth as
we springboard off the foundations we have laid to build a truly unique and significant global business.
The Webfirm Group is very well placed to capitalise on the global growth of online display advertising
and the shift towards automated platforms for the management and sale of advertising in this market.
Mr Adrian Giles
Directors’ Report
Your Directors present their report, together with the financial report of Webfirm Group Limited ACN 001
287 510 (‘the Company’) and its controlled entities (“the Group”) for the financial year ended 30 June
2011 and the auditor’s report thereon.
Information on Directors
Mr Adrian Giles, Mr Andrew Barlow, Mr David Burden and Mr Anthony Du Preez were directors for the
whole financial year and up to the date of this report.
Mr Chris Morris was appointed as a non-executive director on 20 September 2010.
Mr Adrian Vanzyl resigned from his appointment as a non-executive director on 20 June 2011.
Ms Tiffany Fuller was appointed as a non-executive director on 20 June 2011.
Mr Adrian Giles (Age 37)
Executive Chairman
Adrian Giles is an entrepreneur specialising in the Internet and information
technology industry. In 1997, Adrian co-founded Australia’s first Search Engine
Optimisation company, Sinewave Interactive, with fellow entrepreneur Andrew
Barlow. In 1998 Adrian and Andrew co-founded Hitwise. Hitwise grew over 10 years
to become one of the most recognised global internet measurement brands with
over 300 staff operating successfully in the USA, UK, Australia, NZ, Hong Kong, and
Singapore. By monitoring more than 25 Million Internet users via more than 40 ISP
relationships worldwide, Hitwise provided competitive ratings of the most popular
businesses across more than 160 industries and in 6 key markets. Whilst positioning
the company for a NASDAQ listing in early 2007 Hitwise was sold to Experian (LSE:
EXPN) for US$240m. Throughout its growth Hitwise was ranked by Deloitte’s as one
of the fastest growing IT companies in the Asia Pacific region for five consecutive
years. Hitwise was also a winner of the Victorian Small Business Awards; was
awarded the ‘Most Innovative Digital Business’ in the UK for 2004; and was
awarded a finalist as ‘Most Innovative Company’ at the 2005 American Business
Awards in New York. Adrian was also a finalist in the 2003 Australian ‘Entrepreneur
of the Year’ awards. Adrian is also the Managing Director of Yarra Ventures an
advisory and private investment fund he formed after the sale of Hitwise.
Adrian is a member of the Remuneration Committee and the Audit & Risk
Committee.
DIRECTORS’ REPORT
4
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
DIRECTORS’ REPORT
5
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Mr Andrew Barlow (Age 38)
Executive Director
Dr Anthony Du Preez (Age 42)
Executive Director
Mr Barlow is an experienced entrepreneur who acts as an investor and mentor
to early-stage technology companies with unique IP, highly scalable business
models and strong executive teams. Mr Barlow co-founded Hitwise with Adrian
Giles in 1997, was Chairman and Managing Director of Hitwise from 1997 – 2000,
and Director of R&D from 2000 – 2002. Hitwise was ranked one of the Top 10 fastest
growing companies by Deloitte for five years running, before being sold
to Experian Group (LSX.EXPN) in May 2007 for US$240m. Mr Barlow is also a
co-founder of Adslot, a revenue optimisation platform for online media publishers,
which was acquired by Webfirm Group in February 2010. Mr Barlow is also a former
Chairman of Webfirm Group Limited (October 2007 – October 2009).
Mr Barlow is the Founder of Venturian, a privately-owned venture capital fund
with investments in a number of other technology ventures, including Nitro
PDF (the second biggest distributor of PDF editing software in the world),
Brandscreen (Asia’s leading demand side platform for online media buying) and
QMCodes (which makes print media interactive via mobile devices). Mr Barlow
has significant expertise in online media and business building with a strong
understanding of the UK and North America markets.
Andrew is Chair of the Remuneration Committee.
Mr David Burden (Age 49)
Managing Director Chief Executive Officer
David Burden is an entrepreneur and one of the true pioneers of interactive
marketing and services within Australia. David founded Australia’s largest and
best-recognised interactive and mobile services company Legion Interactive in
1994. As CEO from 1994 to 2006, David spearheaded the evolution and growth
of the product, the growth of the sales and marketing and Research & IT
Development teams, and guided the business through its MBO from the French
Lagardere Group in 2001, the acquisition of BlueSkyFrog (Australia’s first mobile
ringtone company) and MediaZoo and the subsequent push of the business into
the mobile space commencing in 1998. During his time at Legion, David was a
worthy Industry Activist with leading roles on the Premium Rate Advisory Council
(PRAC), the Telephone Information Services Standards (TISSC) and the Vice
Chairman of Australian Direct Marketing Association (ADMA). David was
also founding Chairman of ADMA’s Mobile Marketing Council which was
primarily responsible for the introduction of regulation and consumer protection
for mobile services.
Anthony Du Preez is the co-founder of both Tradeslot and Adslot. He has spent
the last 11 years designing and building auction-based markets for a range of
industries including logistics, supply chain, port capacity, forestry timber, energy,
and carbon permits. Anthony has developed a unique combinatorial auction
technology that can process premium ‘conditional bids’. This proven technology
enables the establishment of efficient auction based markets in complex sales
environments that have traditionally been served by face-to-face sales and
one-on-one negotiations. This unique and patented technology has significant
application for selling premium display/video ad space in the media sector.
Previously, Anthony worked as business development executive for Honeywell
Aerospace division in the North American and European markets. Anthony has
a Bachelor of Engineering (First Class Honours), and a MBA from the Melbourne
School. Anthony also completed an advanced management post graduate
certificate at Berkley University in San Francisco.
Mr Chris Morris (Age 63)
Non-Executive Director
Chris Morris is among Australia’s most accomplished entrepreneurs and business
leaders, having founded Computershare (ASX:CPU) in 1978 – one of Australia’s
most successful global technology companies. Mr Morris was Chief Executive
Officer of Computershare from 1990 to 2006, and Executive Chairman from 2006
to 2010. He is now Non-Executive Chairman of Computershare.
Mr Morris has extensive knowledge of the securities industry from both a national
and international perspective, and his diverse experience in building and
managing large enterprises will aid Webfirm Group in its international expansion
aspirations.
Chris is a member of the Remuneration Committee and also the Audit & Risk
Committee. Chris is also Chair of Car Parking Technologies Limited.
DIRECTORS’ REPORT
6
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
DIRECTOR’S SHAREHOLDINGS
7
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Ms Tiffany Fuller (Age 41)
Non-Executive Director
Ms Fuller is a qualified Chartered Accountant who has a 20 year career across
Chartered Accounting, Corporate Finance, Investment Banking and Private Equity.
Ms Fuller joined Rothschild Australia in 1997 in the Investment Banking Group after
8 years at Arthur Andersen in Audit, Corporate Finance and Management
Consulting in Australia, UK and the United States.
At Rothschild, Ms Fuller advised various public and private clients, was responsible
for managing a Microcap Fund on behalf of a number of Australia’s large
superannuation funds, and was a founding director of the Rothschild e-Fund, a
technology focused venture capital fund. In her roles Tiffany has worked closely
with emerging technology companies at Board level and as corporate adviser.
Tiffany is Chair of the Audit & Risk Committee. Tiffany is also a Non Executive
Director of Car Parking Technologies Limited.
Mr Brendan Maher (Age 43)
Company Secretary
Brendan Maher joined the Company on 15 November 2010 as a qualified
Chartered Accountant with 23 years experience gained both in Australia and
overseas with Arthur Andersen, National Westminster Bank and Skilled Group
Limited.
Mr Maher has extensive experience in financial reporting, corporate transactions
and was Company Secretary at ASX listed Skilled Group Limited prior to joining.
Mr Maher is a member of the Institute of Chartered Accountants in Australia and
also a member of the Australian Institute of Company Directors.
Directors’ shareholdings
The following table sets out each director’s relevant interest in shares or options in shares of the
company as at the date of this report.
Directors
Mr Adrian Giles
Mr Andrew Barlow
Mr David Burden
Mr Anthony Du Preez
Mr Chris Morris
Ms Tiffany Fuller
Ordinary Shares
Share Options
18,421,288
57,140,133
5,631,499
12,968,051
57,130,848
100,000
13,800,001
9,900,001
13,000,000
8,500,000
-
-
Remuneration of directors and senior management
Information about the remuneration of directors and senior management is set out in the remuneration
report of this directors’ report.
Principal activities
The company operates two main divisions:
The Adslot division allows media publishers to automate, control and optimise their premium advertising
inventory and listings, increasing their yield, while simultaneously introducing automation that improves
internal efficiencies, decreasing sales and administration costs; and
The Webfirm division offers online marketing services including website optimisation, hosting, search
engine marketing (paid search advertising), social media marketing and website amendments.
Directorships of other listed companies
Changes in state of affairs
Other than those disclosed on pages 3 to 6 of this Annual Report no director holds a Directorship in any
other listed companies in the three year period immediately before the end of the financial year.
A material addition to the nature of the activities during the year was the acquisitions of Adimise Pty
Ltd, Full Circle Online Pty Ltd and QDC IP Technologies Pty Ltd which added ad serving and automated
ad creation functionality to the Adslot platform providing a full end-to-end automated sale process for
online publishers to sell their advertising inventory.
Operating results
The consolidated operating loss after income tax attributable to the members of Webfirm Group Limited
is $10,341,829 (2010: Loss $4,218,601).
DIRECTOR’S SHAREHOLDINGS
8
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
DIRECTOR’S SHAREHOLDINGS
9
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Review of operations
Webfirm Division
The Webfirm Division offers products and services aimed at helping small and medium enterprise (SME)
customers grow their business online.
During the year, the Company made the decision to exit the highly competitive web-site creation
business and focus primarily on online marketing services including, search engine optimisation, paid
search marketing, social marketing, website hosting and web-site amendments. The web development
business was wound down in the second half of the year, and it is expected all outstanding website’s
will have been built and commissioned by September 2011.
The result of this restructuring leaves the Webfirm Division with a significantly reduced cost base
moving forward and allows it to focus on the profitable and growing online marketing services area
of the business. The Directors have decided to undertake a strategic review of the Webfirm Division
to determine the future strategy and focus for this division. As a result of this and historic losses in the
division, the Directors have decided to write down the goodwill in this division to zero by taking a $2.5
million impairment charge this year.
During the year, the Company also decided to exit it’s search syndication business, and sold its AdFeed
Engine software.
Adslot Division
The Adslot Division provides advertising sales automation services that reduce selling costs and
increase advertising revenue for its publisher clients.
The Adslot Division was created via the acquisition of three core pieces of technology:
•
•
•
In February 2010, the Company acquired Adslot Pty Ltd which provides the core automated ad
sales and yield optimisation platform;
In July 2010, the Company acquired Adimise Pty Ltd which provides ad serving capability; and
In December 2010, the Company acquired QDC IP Technologies Pty Ltd which owned the DIY ad
creation software, Ad Builder.
During the year, the Company successfully integrated these separate pieces of technology to create
a complete end-to-end platform. The first full client implementation of the end-to-end platform will be
completed in September 2011 into SeLoger, France’s largest property portal.
The Company expects to leverage the learnings and sizable investment made in this product roll-
out for future clients, which will ensure faster and more efficient deployment, customisation and
implementation of the solution.
Corporate
The Company completed the acquisitions of Full Circle Online Pty Ltd, Adimise Pty Ltd and QDC IP
Technologies Pty Ltd through the year. It also raised over $20M in capital through an entitlement offer to
shareholders and a placement to sophisticated and professional investors.
Webfirm Group Limited is exposed to the rapidly evolving digital media industry and its associated risks,
however the existing and emerging opportunities make it an exciting space in which to operate. The
potential rewards from the emerging opportunities could be substantial.
Group revenues were down 2.6% on the previous year, to $5.4 million primarily due to the exit of the
search syndication business in Webfirm. The net loss after tax at $10.3 million was greater than FY10
primarily due to the investment in people in the Adslot division to create the end-to-end client platform
that will drive revenues in future years, the Depreciation and Amortisation charge (largely, amortisation
of acquired Adslot intangibles) and the Goodwill impairment charge.
This result included approximately $5.7 million in non-cash losses consisting of $2.7 million impairment
charge, $0.8 million of non-cash share based expenses, and $2.2 million in depreciation and
amortisation expenses.
Matters Subsequent to the end of the financial year
In August 2011 the purchaser of the AdFeed Engine, which was sold by us in September 2010,
exercised their right to terminate the Sale Agreement. As a result no further earn out payments under
that sale agreement will be earned by the Group. The amount carried at June 2011 for future earn out
entitlement has been collected, as such this has no impact of the reported profit of the Group.
Other than this there has not been any matter or circumstance occurring subsequent to the end of
the financial year that has significantly affected, or may significantly affect, the operations of the
consolidated entity, the results of those operations or the state of affairs of the consolidated entity
in future years.
Likely future developments and expected results
Disclosure of information regarding likely developments in the operations of consolidated entity in future
financial years and the expected results of those operations is likely to result in unreasonable prejudice
to the consolidated entity. Accordingly, this information has not been disclosed in this report.
Environmental regulations
The economic entity’s operations are not subject to any significant environmental regulations under
the Commonwealth, State or any other country in which the entity operates.
Dividends
The Directors do not recommend the declaration of a dividend. No dividend has been declared or
paid during the year.
Shares under option
Details of unissued shares or interests under option as at the date of signing this report are:
Issue Type
Expiry Date
Exercise Price
$
Number under
option
Options over ordinary shares
30 Jun 2012
0.100
6,200,003
Options over ordinary shares
22 Oct 2012
0.090
1,000,000
Options over ordinary shares
31 Jan 2013
0.053
51,700,000
Options over ordinary shares
31 Jan 2013
0.056
10,180,000
Options over ordinary shares
8 Jul 2014
0.151
2,000,000
Options over ordinary shares
29 Aug 2014
0.096
309,589
Options over ordinary shares
30 Sep 2014
0.116
3,000,000
Options over ordinary shares
30 Sep 2014
0.190
300,000
TOTAL
74,689,592
DIRECTOR’S SHAREHOLDINGS
10
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
REMUNERATION REPORT
11
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Details of shares or interests issued during or since the end of the financial year as a result of exercise of an option are:
Class of Share
Number of shares issued
Amount paid per share
Amount unpaid per share
Ordinary options
Ordinary options
Ordinary options
900,000
1,000,000
1,720,000
$0.100
$0.090
$0.056
Nil
Nil
Nil
Indemnification and Insurance of Officers
The Company has during the financial year, in respect of each person who is or has been an officer of the company or a
related body Corporate, made a relevant agreement for indemnifying against a liability incurred as an officer, including
costs and expenses in successfully defending legal proceedings.
Since the end of the financial year, the Company has paid premiums to insure all directors and officers of Webfirm Group
Limited and the Webfirm Group of companies, against costs incurred in defending any legal proceedings arising out of
their conduct as a director and officer of the Company, other than for conduct involving a wilful breach of duty or a
contravention of Sections 232(5) or (6) of the Corporations Act 2011, as permitted by section 241A(3) of the Corporations Act
2011. Disclosure of the premium amount is prohibited by the insurance contract.
Directors’ Meetings
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2011
and the number of meetings attended by each Director.
Remuneration Report
The remuneration report is set out under the following headings:
Section 1:
Non-executive directors remuneration
Section 2:
Executive Remuneration
Section 3:
Details of remuneration
Section 4:
Executive contracts of employment
Section 5:
Equity-based compensation
Section 1: Non-executive remuneration
Non-executive directors’ fees are reviewed annually and are determined by the Board. In making it’s determination it takes
into account fees paid to other non-executive directors of comparable companies and, where necessary, will seek external
advice.
Non-executive directors’ fees are within the maximum aggregate limit of $350,000 per annum agreed to by shareholders at
the Annual General Meeting held on 30 November 2009. To preserve the independence and integrity of their position, non-
executive directors do not receive performance based bonuses.
Non-executive directors fees are $50,000 per annum. In addition the Chair of the Audit & Risk Committee receives an
additional $25,000 in recognition of the additional workload of that position.
Board of Directors
Remuneration Committee
Section 2: Executive remuneration
The Board of Directors are responsible for determining and reviewing compensation arrangements for key management
personnel and the executive team. In June 2011 the Company established a Remuneration Committee who now makes
recommendations on remuneration of key management personnel.
The Board assesses the appropriateness of the nature and amount of emoluments of these employees on a periodic basis
by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit
from the retention of high quality executives. Executives’ remuneration consists of a fixed cash component, short-term
incentives in the form of cash bonuses, and long-term incentives in the form of equity based compensation linked to the
performance of the Company. The inclusion of equity-based compensation in executives’ remuneration provides a direct
link between their remuneration and shareholder wealth, otherwise there are no direct relationships.
Directors
Held
Attended
Held
Attended
Mr Adrian Giles
Mr Andrew Barlow
Mr David Burden
Mr Anthony Du Preez
Mr Adrian Vanzyl
Mr Chris Morris
Ms Tiffany Fuller
8
8
8
8
7
6
1
8
8
8
8
7
6
1
1
1
-
-
-
1
-
1
1
-
-
-
1
-
During the financial year 2011 all audit & risk matters have been attended to by the full board in consultation with the
Company’s auditors. The Company formed an Audit & Risk Committee in July 2011.
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.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of
the Corporations Act 2001.
Auditor’s Independence Declaration
The auditor’s independence declaration for the year ended 30 June 2011 has been received and can be found on page
19 of the financial report.
REMUNERATION REPORT
12
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
REMUNERATION REPORT
13
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Section 3: Details of remuneration
Section 3: Details of remuneration (Continued)
Details of the remuneration of the directors and the key management of the Company and its controlled entities are set out
in the following tables.
The key management personnel of Webfirm Group Limited and its controlled entities include the following directors and
executive officers:
Directors
Position
Date appointed/resigned
Mr Adrian Giles
Mr Andrew Barlow
Mr David Burden
Non-Executive Director
Non-Executive Chairman
Executive Chairman
Non-Executive Director
Executive Director
Chief Executive Officer
Managing Director
Mr Adrian Vanzyl
Non-Executive Director
Appointed 19 December 2007
From 8 October 2009
From 13 April 2010
Appointed 16 February 2010
From 13 April 2010
Appointed 6 February 2008
From 8 April 2008
Appointed 28 April 2008
Resigned 20 June 2011
Consolidated
Short-term benefits
Long term
benefits
Post-
employment
benefits
Share-
based
payment
Entity
2011
Name
Salary
& fees
Bonus
Other
Termination
benefits
Super-
annuation
Options
& rights
Total
% of
remuneration
that consists
of options
Executive
directors
Mr A Giles
$
86,213
Mr A Barlow
67,740
$
-
-
$
-
-
Mr D Burden
308,354
87,000
2,755
$
-
-
$
$
%
89,473
175,686
61,333
129,073
15,199
93,799
507,107
14,884
61,330
265,492
50.9%
47.5%
18.5%
23.1%
Mr Anthony Du Preez
Executive Director
Appointed 22 February 2010
Mr A Du Preez
173,191
9,001
7,086
Mr Chris Morris
Non-Executive Director
Appointed 20 September 2010
Ms Tiffany Fuller
Non-Executive Director
Appointed 20 June 2011
Executive Officers
Mr Gavan Flower
Company Secretary/Chief Financial Officer
Resigned 13 September 2010
Mr Damian Element
Company Secretary/Chief Financial Officer
Appointed 13 September 2010
Resigned 15 November 2010
Non-executive
directors
Mr A Vanzyl (i)
48,750
Mr C Morris (ii)
37,500
Ms T Fuller (iii)
2,083
Other key
management
personnel
Mr Brendan Maher
Company Secretary/Chief Financial Officer
Appointed 15 November 2010
Mr G Flower (iv)
38,169
-
-
-
-
-
-
-
-
-
-
54,840
103,590
52.9%
-
-
37,500
2,083
-
-
(1,323)
19,584
3,075
32,015
91,520
35.0%
Mr Mathew Chamley**
Regional General Manager – Webfirm Pty Ltd
Appointed 28 July 2009
** Mr Mathew Chamley’s employment ceased on 20 July 2011.
Mr D Element (v)
103,858
5,000
1,640
Mr B Maher (vi)
155,500
Mr M Chamley
139,615
-
-
8,171
17,431
-
-
-
375
10,133
-
-
110,873
173,804
14,788
44,784
216,618
Totals
1,160,973
101,001
35,760
19,584
58,454
437,574
1,813,346
-
-
20.7%
24.1%
(i) to 20 June 2011
(ii) from 20 September 2010
(iii) from 20 June 2011
(iv) to 13 September 2010
(v) to 15 November 2010
(vi) from 15 November 2010
Bonuses
Bonuses appearing in the table above were paid for the year ended 30 June 2011 as follows:
Name
Amount Paid
Amount available
in future periods
Total Bonus
Opportunity
Assessment Criteria
Mr D Burden
Mr A Du Preez
Mr D Element
$
87,000
9,001
5,000
$
12,500
28,333
-
$
161,200
40,000
25,000
New client signings, client platform
volumes, divisional performance
New client signings, product launch
and product pilots
Reporting, Governance and other
performance related KPI’s
$
-
-
-
-
-
-
-
REMUNERATION REPORT
14
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
REMUNERATION REPORT
15
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Section 3: Details of remuneration (Continued)
Section 4. Executive contracts of employment
Consolidated
Short-term benefits
Long term benefits
Entity 2010
Post-
employment
Benefits
Share-based
payment
Formal contracts of employment for all members of the key management personnel are in place. Contractual terms for most
executives are similar but do, on occasions, vary to suit different needs. The following table summarises the key contract
terms.
Name
Salary
& fees
Bonus
Other
Termination
benefits
Super-
annuation
Shares Options
Total
&
rights
Long
service
leave
employee
benefits
% of
remune-
ration that
consists of
options
Length of contract
Open ended
Fixed Remuneration
Remuneration comprises salary and statutory employer superannuation contributions.
$
$
$
%
Incentive Plans
Eligible to participate. Incentive criteria and award opportunities vary for each executive.
$
$
Executive directors
Mr A Giles
68,750
Mr A Barlow
49,314
Mr D Burden
341,753
Mr A Du Preez (i)
56,250
Non-executive directors
Mr A Vanzyl
50,000
-
-
-
-
-
$
-
-
(14,231)
9,098
-
Other key management personnel
Mr D Element (ii)
209,779
25,000
43,533
Mr G Flower (iii)
18,185
Mr A Beecher (iv)
52,439
Mr M Chamley (v)
134,999
Mr J Edis (iv)
75,340
Mr S Jones (vi)
94,812
-
-
-
-
-
1,323
(10,235)
34,573
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
14,461
5,063
-
21,427
1,637
2,410
199,635
268,385
74.4%
136,581
185,895
73.5%
210,180
552,163
38.1%
137,425
207,836
66.1%
122,030
172,030
70.9%
91,094
390,833
29.7%
-
21,145
-
9,254
53,868
17.2%
-
-
-
-
-
-
-
14,841
1,000
22,045
207,458
10.6%
(5,360)
50,314
(11,252)
4,820
-
9,254
123,116
9,710
30,963
-
9,532
1,000
12,560
158,577
7.3%
7.9%
Totals
1,151,621
25,000
68,411
81,277
(11,252)
74,191
2,000
950,058
2,341,306
40.6%
(i)
from 16 February 2010
(ii)
to 28 May 2010
(iii)
from 24 May 2010
(iv) to 31 August 2009
(v)
from 1 July 2009
(vi) to 8 April 2010
Notice Period
All members of the key management, including executive directors, have a notice period of
between two and six months with the exception of Mr Giles and Mr Barlow who may terminate
their contract of employment immediately upon their notice.
Resignation
Employment may be terminated by giving notice consistent with the notice period.
Retirement
There are no financial entitlements due from the Company on retirement of an executive.
Termination by the
Company
The Company may terminate the employment agreement by providing notice consistent with the
notice period or payment in lieu of the notice period.
Redundancy
Payments for redundancy are discretionary and are determined having regard to the particular
circumstances. There are no contractual commitments to pay redundancy over and above any
statutory entitlement.
Termination for
serious misconduct
The Company may terminate the employment agreement at any time without notice, and the
executive will be entitled to payment of remuneration only up to the date of termination.
Section 5: Equity-based compensation
Employee share ownership plan (ESOP)
The Company has operated an ownership-based scheme for executives and senior employees of the Group. This was
approved by shareholders at the 2009 Annual General Meeting. Awards were made under this plan up to October 2010
such that senior employees and an executive were granted options to purchase parcels of ordinary shares at an exercise
prices ranging from 9.6 cents to 19.0 cents per ordinary share.
Each share option converts into one ordinary share of Webfirm Group Limited on exercise. No amounts are paid or payable
by the recipient on receipt of the option. The options carry no voting rights. Options may be exercised at any time from the
date of vesting to the date of their expiry.
All Option tranches are based on the individual remaining an employee of the Group. The plan rules allow departed
employees to retain their options for a period of time based on the length of their service with the Company and the nature
of their separation from the Company. The board considered these conditions appropriate to ensure the objective of
maintaining key staff within the Company. The issue of share options are not subject to performance conditions.
There is no board policy in place to limit the executive and senior employees exposure to the risk in relation to the options
issued.
The following table shows grants of share-based compensation to directors and senior management under the ESOP for
the current financial year:
REMUNERATION REPORT
16
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
REMUNERATION REPORT
17
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Section 5: Equity-based compensation (continued)
During the Financial year
Name
Option
Series
Number
Granted
Number Vested
% of Grant
Vested
% of Grant
Forfeited
% of
Compensation
for the year
Consisting
of Options
Section 5: Equity-based compensation (continued)
Details of options over ordinary shares in the company provided as remuneration of directors and the key management
personnel of the Company are set out below:
Options Granted During the Year
Options Vested During the Year
Name
2011
2010
2011
2010
Mr G Flower (i)
Issued on
30 Aug 10
3,000,000
309,589
10.32%
89.68%
35.0%
Number
$
Number
$
Number
$
Number
$
(i) These options were issued under the ESOP to Mr Gavan Flower under his Employment Agreement. Upon Mr Flower’s resignation
from the Company on 13 September 2010; 2,690,411 of these options were forfeited on that date with balance 309,589 retained.
These vested on 8 April 2011. The Company has valued these options in accordance with accounting standards at $32,015 which
was expensed this year.
The following options were granted to key management personnel during the year:
Options - 2011
Issue Date
Number of
Options
Expiry Date
Exercise Price
$
Value of
options at
grant date
$
Fair Value
Per Option
$
Date vested and
exercisable
Directors
Mr Adrian Giles
Mr David Burden
Mr Andrew Barlow
Mr Adrian Vanzyl
Mr Chris Morris
Ms Tiffany Fuller
Mr Anthony Du Preez
-
-
-
-
-
-
-
30-Aug-2010
3,000,000
29-Aug-2014
0.096
344,700
0.1149
08-Apr-2011
Other Key Management Personnel
11,800,000
$275,919
5,900,000
$85,141
6,566,667
$164,626
13,000,000
$303,979
6,500,000
$93,799
6,500,000
$151,989
7,900,000
$184,726
3,950,000
$57,001
4,616,667
$119,029
7,000,000
$163,681
3,500,000
$50,507
4,166,667
$108,571
-
-
-
-
-
-
-
-
-
-
-
-
8,500,000
$198,755
4,250,000
$61,330
4,250,000
$99,378
-
-
-
-
-
-
-
-
-
-
344.700
The following options were granted to key management personnel during the prior year:
Options - 2010
Issue Date
Number of
Options
Expiry Date
Exercise Price
$
16-Feb-2010
27,600,000
31-Jan-2013
16-Feb-2010
24,100,000
31-Jan-2013
16-Feb-2010
2,300,000
31-Jan-2013
16-Feb-2010
2,300,000
31-Jan-2013
0.053
0.053
0.056
0.056
Value of
options at
grant date
$
Fair Value
Per Option
$
Date vested and
exercisable
645,371
0.0234
16-Feb-2010
563,530
0.0234
01-Feb-2011
161,081
143,083
1,513,065
0.0231
0.0231
16-Feb-2011
16-Feb-2012
The exercise price of the options is based on a pre-set exercise price. Options granted carry no dividend or voting rights.
There is no Board policy in place to limit the executive employees’ exposure to risk in relation to securities issued as
remuneration.
Mr D Element
Mr B Maher
Mr M Chamley
-
-
-
3,500,000
$81,840
-
-
-
-
-
-
4,000,000
$92,400
2,000,000
$26,308
Mr G Flower
3,000,000
$344,700
-
-
309,589
$32,015
Mr S Jones
Mr J Edis
Mr J Beecher
-
-
-
-
-
-
600,000
$13,860
-
-
-
-
-
-
-
-
-
-
3,500,000
$81,840
-
-
-
-
-
-
-
-
-
-
-
-
The assessed fair value at issue date of the options granted to the executive is allocated equally over the period from
issue date to vesting date, and the amount is included in the remuneration tables above. Fair values at issue date are
independently determined using the binomial option pricing model that takes into account the exercise price, the term of
the option, the share price at issue date and the expected price volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option. The model inputs for options granted during the year ended 30
June 2011 included:
Model Input
Grant Date
Exercise Date
Expiry Date
Exercise Price
Price at Effective Grant Date
Expected Volatility
Expected Dividend Yield
Risk Free Interest Rate
Class #1
30/08/10
08/04/11
29/08/14
$0.096
$0.07
102.9%
0%
4.80%
REMUNERATION REPORT
18
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
AUDITORS INDEPENDENCE DECLARATION
19
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Section 5: Equity-based compensation (continued)
The model inputs for options granted during the year ended 30 June 2010 included:
Auditors Independence Declaration
Model Input
Grant Date
Exercise Date
Expiry Date
Exercise Price
Price at Grant Date
Expected Volatility
Expected Dividend Yield
Risk Free Interest Rate
Class #1
16/02/10
16/02/10
31/01/13
$0.053
$0.040
100.4%
0%
4.76%
Class #2
16/02/10
01/02/11
31/01/13
$0.053
$0.040
100.4%
0%
4.76%
Class #3
Class #4
16/02/10
16/02/11
31/01/13
$0.056
$0.040
100.4%
0%
4.76%
16/02/10
16/02/12
31/01/13
$0.056
$0.040
100.4%
0%
4.76%
Details of options exercised and lapsed during the year appear in the following table:
2011
Name
Directors
Balance
at the start
of the year
(Number)
Granted during
the year as
compensation
(Number)
Exercised
during
the year
(Number)
Forfeited/
during
the year
(Number)
Lapsed during
the year
(Number)
Balance
at the end
of the year
(Number)
Vested and
exercisable
at the
year end
(Number)
Mr A Giles
13,800,001
Mr A Barlow
11,900,001
Mr D Burden
13,000,000
Mr A Vanzyl
9,000,001
Mr A Du Preez
8,500,000
-
-
Mr C Morris
Ms T Fuller
Other key
management
personnel
Mr D Element
4,700,000
Mr M Chamley
4,000,000
-
-
-
-
-
-
-
-
-
Mr G Flower
Mr B Maher
-
-
3,000,000
-
-
-
-
-
-
-
-
(800,000)1
-
-
-
-
-
-
-
-
-
-
-
-
(2,690,411)2
-
-
13,800,001
13,800,001
(2,000,000)
9,900,001
9,900,001
-
-
-
-
-
13,000,000
13,000,000
9,000,001
9,000,001
8,500,000
8,500,000
-
-
-
-
(400,000)
3,500,000
3,500,000
-
-
-
4,000,000
2,000,000
309,589
309,589
-
-
Totals
64,900,003
3,000,000
(800,000)
(2,690,411)
(2,400,000)
62,009,592
60,009,592
1 The fair value of options exercised during the period was $48,000.
2 The fair value of options forfeited during the year was $295,138
This marks the end of the audited remuneration report.
This report is made in accordance with a resolution of directors.
Adrian Giles
Chairman
29 August 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
20
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
21
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2011
Consolidated Statement of
Financial Position
As at 30 June 2011
Total revenue from continuing operations
Other income
Website publishers & related costs
Depreciation and amortisation expenses
Finance costs
Salaries and employment related costs (including contractors)
Telephone and internet
Share based payment expense
Marketing costs
Lease – rental premises
Impairment of intangibles
Impairment of receivables
Listing & registrar fees
Legal fees
Travel expenses
Audit and accountancy fees
Other expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense
Other comprehensive income
Foreign exchange translation
Revaluation of available for sale investments
Total other comprehensive income
Total comprehensive income attributable to the members
of Webfirm Group Limited
Notes
3
3
4
4
4
4
4
5
2011
$
2010
$
5,348,965
5,461,139
75,781
110,664
(1,318,599)
(486,969)
(2,182,718)
(652,165)
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Total current assets
(44)
(1,778)
NON-CURRENT ASSETS
(5,480,766)
(5,365,034)
(175,268)
(183,297)
(822,835)
(932,809)
(125,567)
(127,299)
(584,281)
(308,706)
(2,749,184)
(165,025)
(340,717)
(222,805)
(325,410)
(184,038)
(255,765)
(320,272)
(404,052)
(207,803)
(127,912)
(153,431)
(975,542)
(375,848)
(10,341,309)
(4,218,081)
Trade and other receivables
Property, plant & equipment
Other financial assets
Intangible assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Other liabilities
Provisions
Total current liabilities
(520)
(520)
NON-CURRENT LIABILITIES
(10,341,829)
(4,218,601)
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
(44)
106,335
106,291
(6,882)
-
(6,882)
(10,235,538)
(4,225,483)
2011
Cents
(1.66)
(1.66)
2010
Cents
(1.42)
(1.42)
Notes
7
8
8
9
10
11
12
13
14
14
15
16
2011
$
18,352,609
1,391,435
19,744,044
200,000
197,039
212,664
10,486,968
11,096,671
2010
$
3,807,779
1,739,976
5,547,755
200,000
129,133
-
8,409,435
8,738,568
30,840,715
14,286,323
1,470,270
1,110,587
164,603
2,745,460
6,884
6,884
2,752,344
28,088,371
76,547,875
5,830,556
1,146,296
1,175,912
124,197
2,446,405
12,692
12,692
2,459,097
11,827,226
50,874,027
4,901,430
(54,290,060)
(43,948,231)
28,088,371
11,827,226
Earnings per share (EPS) from loss from continuing operations
attributable to the ordinary equity holders of the company
Basic earnings per share
Diluted earnings per share
17
17
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
22
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
CONSOLIDATED STATEMENT OF CASH FLOWS
23
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Consolidated Statement of
Changes in Equity
For the year ended 30 June 2011
2011
Consolidated Statement of
Cash Flows
For the year ended 30 June 2011
Balance at 1 July 2010
50,874,027
4,901,430
(43,948,231)
11,827,226
Receipts from trade and other debtors (inclusive of GST)
4,628,338
6,351,083
Notes
Issued
Capital
Reserves
Accumulated
Losses
Total
Equity
$
$
$
$
CASH FLOWS FROM OPERATING ACTIVITIES
Notes
2011
$
2010
$
-
-
-
-
-
(44)
106,335
106,291
-
-
-
(44)
106,335
106,291
Interest received
Government grants and other receipts
Payments to trade creditors, other creditors and
employees (inclusive of GST)
-
(10,341,829)
(10,341,829)
106,291
(10,341,829)
(10,235,538)
Interest paid
903,194
75,781
119,996
110,664
(9,599,365)
(10,918,694)
(44)
(1,778)
Movement in foreign exchange translation reserve
Increase in available for sale investment reserve
Other comprehensive income
Loss attributable to members of the company
Total comprehensive income
Transactions with equity holders in their capacity as equity holders
Contributions of equity, net of transaction costs
Increase in employees share based payments reserve
Balance 30 June 2011
2010
16
16
15
16
25,673,848
-
-
822,835
25,673,848
822,835
-
-
-
25,673,848
822,835
26,496,683
76,547,875
5,830,556
(54,290,060)
28,088,371
Notes
Issued
Reserves
Accumulated
Capital
Losses
Total
Equity
Balance at 1 July 2009
37,358,173
3,975,503
(39,729,630)
1,604,046
$
$
$
$
Movement in foreign exchange translation reserve
16
Other comprehensive income
Loss attributable to members of the company
Total comprehensive income
-
-
-
(6,882)
(6,882)
-
-
(6,882)
(6,882)
-
(4,218,601)
(4,218,601)
Transactions with equity holders in their capacity as equity holders
Contributions of equity, net of transaction costs
Increase in employees share based payments reserve
15
16
13,515,854
-
-
932,809
13,515,854
932,809
-
-
-
13,515,854
932,809
14,448,663
Balance 30 June 2010
50,874,027
4,901,430
(43,948,231)
11,827,226
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Net cash outflows from operating activities
25
(3,992,096)
(4,338,729)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
(293,429)
(54,313)
Proceeds from sale of fixed assets
Net cash acquired via acquisition of subsidiary
19
Payments for intangible assets
Payments for available-for-sale financial assets
42,903
108,344
(776,888)
(106,329)
-
146,150
(224,959)
-
Net cash outflows from investing activities
(1,025,399)
(133,122)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Payments for equity raising costs
Net cash inflows from financing activities
Cash at the beginning of the financial year
Effects of exchange rate changes on cash
20,122,497
(510,233)
19,612,264
7,515,854
-
7,515,854
14,594,769
3,044,003
3,807,779
(49,939)
695,376
68,400
CASH AT THE END OF THE FINANCIAL YEAR
7
18,352,609
3,807,779
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
(6,882)
(4,218,601)
(4,225,483)
Net increase in cash held
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
24
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
25
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements
For the year ended 30 June 2011
1. Summary of Signficant Accounting Policies
The financial report covers Webfirm Group Limited (“Company”) and controlled entities (“Group”).
Separate financial statements for Webfirm Group Limited as an individual entity are no longer
presented as a consequence of a change to the Corporations Act 2001. However limited financial
information for Webfirm Group Limited, as an individual entity is included in Note 27. Webfirm Group
Limited is a listed public company, incorporated and domiciled in Australia. The financial report is for
the financial year ended 30 June 2011 and is presented in Australian dollars.
The principal accounting policies adopted in the preparation of the financial report are set out
below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australian
Accounting Standards, other authoritative pronouncements of the Australian Accounting
Standards Board (AASB) and the Corporations Act 2001.
Compliance with IFRS
Australian Accounting Standards include International Financial Reporting Standards as adopted
in Australia. Compliance with Australian Accounting Standards ensures that the financial
statements and notes of Webfirm Group Limited comply with International Financial Reporting
Standards (IFRS).
Adoption of new and revised standards
The following new standards and amendments to standards are mandatory for the first time for
the financial year beginning 1 July 2010:
•
•
•
•
•
AASB 2009-5
Annual Improvements Project
Further Amendments to Australian Accounting Standards arising from the
AASB 2009-8
based Payment Transactions
Amendments to Australian Accounting Standards – Group Cash-settled Share-
AASB 2009-10
Issues
Amendments to Australian Accounting Standards – Classification of Rights
AASB Interpretation 19
2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19, and
Extinguishing Financial Liabilities with Equity Instruments and AASB
AASB 2010-3
Improvements Project.
Amendments to Australian Accounting Standards arising from the Annual
The adoption of these standards did not have any impact on the current period or any prior
period and is not likely to affect future periods.
Historical cost convention
These financial statements have been prepared under the historical cost convention as
modified by the revaluation of available-for-sale financial assets. Under the historical cost
convention assets are recorded at the amount of cash or cash equivalents paid or the fair value
of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded
at the amount of proceeds received in exchange for the obligation, or in some circumstances at
the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal
course of business.
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
1. Summary of Signficant Accounting Policies (continued)
(a) Basis of preparation (Continued)
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS 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 estimates and associated assumptions
are based on historical experience and other factors that are considered relevant. Actual results
may differ from these estimates. The estimates and associated assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period of the revision and
future periods if the revision affects both current and future periods.
(b) Going concern
Management continue to invest resources into achieving a significant expansion of the business
which includes successfully launching the Adslot division. The Group has however incurred net
cash outflows from operations of $4.0m for the year, and management anticipate incurring
further net cash outflows from operations until such time as sufficient revenue growth is
achieved.
Accordingly the ability of the Group to continue as a going concern is dependent upon
revenue growth in the Adslot division. During 2011 Adslot earned revenues from its first three
clients and has contracted with a fourth client from which revenues will commence flowing
early in the next financial year. During FY 2012 the Group expects more clients to be signed up
with Adslot, however it is likely net operating cash flows from operation will be negative in FY
2012. However the directors believe the Group can continue to pay its debts as and when they
fall due for the following reasons:
•
•
•
The Group has a cash position as at 30 June 2011 of $18.3m;
Whilst the revenue from the Webfirm division is anticipated to be flat, the division is expected
to make positive net cash flows from its operations on existing revenue levels in FY 2012; and
Management could reduce the level of resources dedicated to expanding the business if so
required.
Accordingly the directors believe there exists a reasonable expectation that the Group can
continue to pay its debts as and when they fall due, and the financial report has been prepared
on a going concern basis.
(c) Principles of consolidation
Subsidiaries
The consolidated financial statements comprise those of the Company, and the entities it
controlled at the end of, or during, the financial year. Control is achieved where the Company
has the power to govern the financial and operating policies of an entity so as to obtain benefit
from its activities. All intra-group transactions, balances, income and expenses between entities
in the Group included in the financial statements have been eliminated in full. Where an entity
either began or ceased to be controlled during the year, the results are included only from the
date control commenced or up to the date control ceased. The accounting policies adopted in
preparing the financial statements have been consistently applied by entities in the Group.
Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity
information in Note 27.
NOTES TO THE FINANCIAL STATEMENTS
26
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
27
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
1. Summary of Signficant Accounting Policies (continued)
1. Summary of Signficant Accounting Policies (continued)
(c) Principles of consolidation
Business combinations
Acquisition of subsidiaries and businesses are accounted for using the acquisition method. The
consideration for each acquisition is measured at the aggregate of the fair values (at the date
of exchange) of assets given, liabilities incurred or assumed and equity instruments issued by the
Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit
or loss as incurred.
Foreign Currency Exchange
In preparing the financial statements of the individual entities, transactions in currencies other
than the entity’s functional currency are recorded at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at the balance date.
Exchange differences are recognised in profit or loss in the period in which they arise.
On consolidation, the assets and liabilities of the Group’s foreign operations are translated into
Australian dollars at exchange rates prevailing on the balance sheet date. Income and expense
items are translated at the average exchange rates for the period. Exchange differences arising,
if any, are classified as equity and transferred to the Group’s foreign currency translation reserve.
(d) Cash and cash equivalents
For the purposes of the Consolidated Statement of Cash Flows, cash includes deposits at call
which are readily convertible to cash and are not subject to significant risk of changes in value,
net of bank overdrafts.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any
impairment in value. The carrying values of property, plant and equipment are reviewed for
impairment when events or changes in circumstances indicate the carrying value may not be
recoverable. Leasehold improvements are depreciated over the estimated useful life using the
straight-line method with any balance written off at termination of lease.
Depreciation is calculated on a straight line basis for all plant and equipment. The estimated
useful lives, residual values and depreciation method are reviewed at the end of each annual
reporting period, with the effect of any changes recognised on a prospective basis.
The gain or loss arising on disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amount of asset
and is recognised in profit or loss.
The following depreciation rates are used for each class of depreciable asset:
Computer Equipment
20 – 40% per annum
Plant & Equipment
20 – 25% per annum
Leasehold Improvements
20% per annum
(f) Receivables
Trade receivables are recognised initially at fair value and thereafter are measured at amortised
cost, less provision for impairment. They are non-derivative financial assets with fixed or
determinable amounts not quoted in an active market. Trade accounts receivable are generally
settled between 14 and 60 days and carried at amounts recoverable.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to
be uncollectible are written off. A provision for doubtful receivables is established when there
is objective evidence that the Group will not be able to collect all amounts due according to
the original terms of the receivables. The amount of the provision is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at
the effective interest rate. The amount of the provision is recognised in profit or loss. Subsequent
recoveries of amounts previously written off are credited against the allowance account.
(g) Investments and other financial assets
Financial assets are recognised when the group entity becomes a party to the contractual
provisions of the instrument.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets carried
at fair value through profit or loss are expensed in profit or loss.
Loans and receivables are subsequently carried at amortised cost using the effective interest
method.
Available-for-sale financial assets are subsequently carried at fair value. Gains or losses arising
from changes in available-for-sale financial assets are presented in other comprehensive income
in the period in which they arise.
(h) Trade and other creditors
Trade accounts payable and other creditors represent liabilities for goods and services provided
to the Group prior to the end of the financial year and which are unpaid. The amounts are
unsecured and are usually paid within 45 days of recognition.
(i) Borrowings
Borrowings are initially recognised at fair value (less transaction costs) and subsequently
measured at amortised cost. Any difference between the proceeds and the redemption
amount is recognised in the consolidated statement of comprehensive income over the period
of the borrowing using the effective interest method.
(j) Finance costs
Finance costs are recognised as expenses in the period in which they are incurred except
where they are incurred in the construction of a qualifying asset in which case the finance costs
are capitalised as part of the asset.
NOTES TO THE FINANCIAL STATEMENTS
28
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
29
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
1. Summary of Signficant Accounting Policies (continued)
1. Summary of Signficant Accounting Policies (continued)
(k) Income tax
Long service leave
The income tax expense or revenue for the period is the tax payable on the current period’s
taxable income based on the national income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to temporary differences between the
tax bases of assets and liabilities and their carrying amounts in the financial statements, and to
unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates
expected to apply when the assets are recovered or liabilities are settled, based on those
tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax
rates are applied to the cumulative amounts of deductible and taxable temporary differences
to measure the deferred tax asset or liability. An exception is made for certain temporary
differences arising from the initial recognition of an asset or a liability. No deferred tax asset or
liability is recognised in relation to these temporary differences if they arose in a transaction,
other than a business combination, that at the time of the transaction did not affect either
accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses
only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the
carrying amount and tax bases of investments in controlled entities where the parent entity is
able to control the timing of the reversal of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also
recognised directly in equity.
Tax consolidation legislation
Webfirm Group Limited and its wholly-owned Australian controlled entities have implemented
the tax consolidation legislation. The head entity, Webfirm Group Limited, and the controlled
entities in the tax consolidated group account for their own current and deferred tax amounts.
These tax amounts are measured as if each entity in the tax consolidated group continues to
be a stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Webfirm Group Limited also recognises
the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from controlled entities in the tax consolidated group.
(l) Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non monetary benefits and annual leave expected
to be settled within 12 months of the reporting date are recognised in other payables in respect
of employees’ services up to the reporting date and are measured at the amounts expected to
be paid when the liabilities are settled.
Long service leave liability commences to be accrued for staff at four (4) year anniversary date.
The liability for long service leave expected to be settled within 12 months of the reporting date
is recognised in provisions for employee entitlements and is measured at the amount expected
to be paid when the liabilities are settled. The liability for long service leave expected to be
settled more than 12 months from the reporting date, is recognised in the non-current provision
for employee benefits and is measured as the present value of the estimated future cash
outflows to be made by the Group in respect of services provided by employees up to
reporting date.
Share-based compensation benefits
Equity-settled share-based payments with employees and other providing similar services are
measured at the fair value of the equity instrument at the grant date. The fair value at grant date
is determined using a binomial option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk-free interest rate for
the term of the option.
The fair value determined at the grant date of the equity-settled share-based payments is
recognised as an expense, with a corresponding increase in equity (share-based payments
reserve) on a straight line basis over the vesting period, based on the Group’s estimate of the
number of equity instruments that will eventually vest.
At each reporting date, the Group revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any, is recognised in
profit or loss over the remaining vesting period, with corresponding adjustments to equity-settled
share-based payments reserve.
Upon the exercise of options, the balance of the share-based payments reserve relating to
those options is transferred to share capital and the proceeds received, net of any directly
attributable transaction costs, are credited to share capital.
(m) Intangible Assets
Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is
acquired (acquisition date). Goodwill is measured as the excess of the fair value of consideration
paid over the fair value of the identifiable net assets of the entity or operations acquired.
Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for
impairment annually, being allocated to the cash flows of the relevant cash generating unit
and is carried at cost less accumulated impairment losses. An impairment loss for goodwill is
recognised immediately in profit or loss and is not reversed in a subsequent period.
Research & development expenditure
Research costs are expensed as incurred. An intangible asset arising from development
expenditure on an internal project is recognised only when the Group can demonstrate the
technical feasibility of completing the intangible asset so that it will be available for use or sale,
its intention to compete and its ability to use or sell the asset, how the asset will generate future
economic benefits, the availability of resources to complete the development and the ability to
measure reliably the expenditure attributable to the intangible asset during its development.
NOTES TO THE FINANCIAL STATEMENTS
30
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
31
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
1. Summary of Signficant Accounting Policies (continued)
1. Summary of Signficant Accounting Policies (continued)
Following the initial recognition of the development expenditure, the cost model is applied
requiring the assets to be carried at cost less any accumulated amortisation and accumulated
impairment losses. Any expenditure so capitalised is amortised over the period of expected
benefits from the related project.
The carrying value of an intangible asset arising from development costs is tested for impairment
annually when the asset is not yet available for use or more frequently when an indicator of
impairment arises during the reporting period.
Intellectual property
The intellectual property relates to the names, platform technology, branding and domains
acquired as a result of the acquisition of Webfirm, Webfirm Search, Adslot, Adimise, Full Circle
Online and QDC IP Technology businesses. Where the useful life is assessed as indefinite, assets
are not amortised and the carrying value is tested for impairment annually or more frequently
if events or changes in circumstances indicate impairment. It is carried at cost less impairment
losses. For those assets assessed as having a finite life, they are amortised on a straight-line basis
over the estimated useful life of the asset. The expected accounting useful life of intellectual
property relating to the Adslot, Adimise and QDC IP Technology business is 5 years.
Domain name
Acquired domain names are brought to account at cost, useful life is assessed as indefinite
and the assets are not amortised. The carrying value is tested for impairment annually or more
frequently if events or changes in circumstances indicate impairment. They are carried at cost
less impairment losses.
Customer contracts
Customer contracts acquired as part of a business combination are recognised separately from
goodwill. The customer contracts are carried at their fair value at the date of acquisition less
accumulated amortisation and impairment losses.
A summary of the policies applied to the capitalisation of Group’s software development and
customer contracts is as follows:
Software/Development Costs
Customer Contracts
Useful lives
Finite
Finite
Method used
Maximum 5 years - Straight line
Straight-line over the period
of customer contracts
Internally generated/
Acquired
Internally generated
Acquired
Impairment test/
Recoverable amount
testing
Amortisation method reviewed at
each financial year-end; Reviewed
annually for indicator of impairment
Amortisation method
reviewed at each financial
year-end; Reviewed annually for
indicator of impairment
(n) Leased assets
Leases of assets under which the Group assumes substantially all the risks and benefits of
ownership are classified as finance leases as distinct from operating leases under which the
lessor effectively retains substantially all such risks and benefits. Property, plant and equipment
acquired by finance leases is capitalised at the present value of the minimum lease payments
as a finance lease asset and as a corresponding lease liability from date of inception of the
lease. Lease assets are amortised over the period the entity is expected to benefit from the use
of the assets or the term of the lease, whichever is shorter. Finance lease liabilities are reduced
by the component of principal repaid. Lease payments are allocated between the principal
component of the liability and interest expense.
Operating lease payments are charged to profit or loss on a straight-line basis over the period of
lease term.
(o) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax
(GST), except:
i. Where the amount of GST incurred is not recoverable from taxation authority, it is
recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
ii. For receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as
part of receivables or payables.
(p) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts
disclosed as revenue are net of returns, allowances and duties and taxes paid.
Revenue is recognised for the major business activities as follows:
Rendering of services
Service revenue is recognised on an accruals basis as and when the service has been passed
onto the customer.
Website development revenue is recorded based on a twelve (12) week program of project
delivery. Any projects not completed within this period are deemed to be twenty percent (20%)
incomplete. Website hosting, search engine renewal and domain name registration revenue is
recorded over a one year duration. Prepaid revenue calculated in this regard is excluded from
revenue and is being treated as unearned revenue in the Consolidated Statement of Financial
Position.
Interest revenue
Interest revenue is recognised when it is probable that the economic benefits will flow to the
Group and the amount can be measured reliably, taking into account the effective yield on the
financial asset.
NOTES TO THE FINANCIAL STATEMENTS
32
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
33
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
1. Summary of Signficant Accounting Policies (continued)
1. Summary of Signficant Accounting Policies (continued)
Government grants
(t) Dividends
Government grants are recognised at fair value where there is reasonable assurance that the
grant will be received and all grant conditions will be met. Grants relating to expense items are
recognised as income over the periods necessary to match the grant to the costs they are
compensating. Grants relating to assets are credited to deferred income and are amortised on
a straight line basis over the expected lives of the assets.
Sale of non-current assets
The net gain from the sale of non-current asset sales is recognised in income at the date
control of the asset passes to the buyer, usually when the signed contract of sale becomes
unconditional.
(q) Acquisition of assets
The purchase method of accounting is used for all acquisitions of assets regardless of whether
equity instruments or other assets are acquired. Cost is measured as the fair value of the assets
given up, shares issued or liabilities undertaken at the date of acquisition. Acquisition-related
costs are expensed as incurred. Where equity instruments are issued in an acquisition, the value
of the instruments is their market price as at the date of acquisition, unless the notional price at
which they could be placed in the market is a better indicator of fair value. Transaction costs
arising on the issue of equity instruments are recognised directly in equity.
Any deferred settlement of cash consideration is discounted to its present value as at the date
of acquisition. The discount rate used is the incremental borrowing rate that the Group can
obtain from an independent financier under comparable terms and conditions.
(r) Leasehold improvements
The cost of improvements to leasehold properties is amortised over the unexpired period of the
lease or the estimated useful life of the improvement to the consolidated entity, whichever is the
shorter.
(s) Earnings per share
Basic earnings per share
Basic earnings per share for continuing operations and total operations attributable to members
of the Company are determined by dividing net profit after income tax from continuing
operations and the net profit attributable to members of the Company respectively, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number
of ordinary shares outstanding during the financial period. The number of shares used in the
calculation at any time during the period is based on the physical number of shares issued.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account the after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the weighted average number of shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Provision is made for the amount of any dividend determined or recommended by the directors
on or before the end of the financial year but not distributed at balance date.
(u) Impairment of assets
Goodwill and 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 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. The recoverable amount is the higher of an asset’s fair value less costs to
sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which are largely independent
of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial
assets other than goodwill that suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.
(v) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker. The chief operating decision maker has been identified as
the Chief Executive Officer.
(w) Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the entity’s accounting policies
The following are the critical judgements (apart from those involving estimations, which are dealt
with below), that management has made in the process of applying the Group’s accounting
policies and that have the most significant effect on the amounts recognised in the financial
statements:
Revenue recognition
In web development and web hosting business operations, management assesses stage of
completion of each project and recognises revenue in the period in which development work
is undertaken. In making its judgement, management considered the standard duration of
such contracts, stage of progress in contracts and commencement date of such contracts.
Accordingly, management has deferred recognising some web development and web hosting
revenue of an estimated value of services to be rendered in the future.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future and other key estimation
uncertainty at the balance sheet date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year.
NOTES TO THE FINANCIAL STATEMENTS
34
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
35
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
1. Summary of Signficant Accounting Policies (continued)
1. Summary of Signficant Accounting Policies (continued)
•
•
•
AASB 2010-6
Amendment to Australian Accounting Standards – Disclosures in Transfers of
Financial Assets adds and amends disclosure requirements about transfers of financial
assets, including in respect of the nature of the financial assets involved and the risks
associated with them. AASB 2010-6 will become mandatory for the Group’s 30 June 2012
financial statements. The Group will apply this revised AASB 2010-6 from 30 June 2012 but
it is not expected to have any impact on the Group’s financial statements.
Amendment to Australian Accounting Standards – Deferred Tax: Recovery of
AASB 2010-8
Underlying Assets provide a practical approach for measuring deferred tax liabilities and
deferred tax assets when investment property is measured using the fair value model in
AASB 140 Investment Property. AASB 2010-8 will become mandatory for the Group’s 30 June
2013 financial statements. The Group will apply this revised AASB 2010-8 from 30 June 2013
but it is not expected to have any impact on the Group’s financial statements.
Application of Tiers of Australian Accounting Standards and AASB 2010-2
AASB 1053
Amendments to Australian Accounting Standards arising from Reduced Disclosure
Requirements (effective from 1 July 2013). On 30 June 2010 the AASB officially introduced
a revised differential reporting framework in Australia. Under this framework, a two-tier
differential reporting regime applies to all entities that prepare general purpose financial
statements. Webfirm Group Limited is listed on the ASX and is not eligible to adopt the new
Australian Accounting Standards – Reduced Disclosure Requirements. The two standards
will therefore have no impact on the financial statements of the entity.
Impairment of goodwill and intangible assets
Determining whether goodwill and intangible assets are impaired required an estimation of the
value in use of the cash-generating units to which goodwill has been allocated. The value in use
calculation requires the entity to estimate the future cash flows expected to arise from the cash-
generating unit and a suitable discount rate in order to calculate the present value.
The carrying amount of goodwill and intangible assets at the balance sheet date was
$10,486,968 (2010: $8,409,435) after an impairment loss of $ 2,749,184 (2010: $165,025) was
recognised during the current financial year. Refer to Note 11 for further details.
Share based payments
The calculation of the fair value of options issued requires significant estimates to be made in
regards to several variables such as volatility, dividend policy and the probability of options
reaching their vesting period. The estimations made are subject to variability that may alter the
overall fair value determined. The share based payment expenses for the year was $822,835
(2010: $932,809).
Contingent consideration – QDC Technologies
As detailed in Note 19, within the acquisition agreement for QDC Technologies Pty Ltd, the Group
agreed to pay further consideration contingent on the share price of the Group at a specified
future date. On initial recognition the Group estimated the value of contingent consideration
to be $106,800 on the basis that there was a 20% probability that the share price would be at
a level that would require further consideration under the terms of the agreement. At reporting
date, this estimate has been revised to $354,776 as the Group believes that there is now a 50%
probability that further consideration will be paid. This balance has been recognised in other
liabilities with movements being recorded in other expenses in the statement of comprehensive
income.
(x) New standards and interpretations issued but not effective
Certain new accounting standards and interpretations have been published that are not
mandatory for 30 June 2011 reporting periods, and have not yet been adopted by the Group.
The Group’s and the parent entity’s assessment of the impact of these new standards and
interpretations is set out below.
•
•
•
Related Party Disclosures, AASM 2009-12 Amendments
AASB 124 (revised December 2009)
to Australian Accounting Standards simplifies the definition of related parties, clarifying its
intended meaning and eliminating inconsistencies from the definition. AASB 124 (revised
December 2009) become mandatory for the Group’s 30 June 2012 financial statements but
is not expected to have any impact on the Group’s financial statements.
Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards
AASB 9
arising from the AASB 9 sets out requirements for the classification and measurement of
financial assets. AASB 2008-6 will become mandatory for the Group’s 30 June 2014 financial
statements. The Group will apply this revised AASB 2009-11 from 30 June 2014 but it is not
expected to have any impact on the Group’s financial statements.
Amendments to Australian Interpretation – Prepayments of a Minimum Funding
AASB 2009-14
Requirement makes amendments to Interpretation 14 AASB 119 – The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and their Interaction. AASB 2009-14 will
become mandatory for the Group’s 30 June 2012 financial statements. The Group will apply
this revised AASB 101 from 30 June 2012 but it is not expected to have any impact on the
Group’s financial statements.
NOTES TO THE FINANCIAL STATEMENTS
36
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
37
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2. Segment Information
2011
Business segments
External sales
Adslot
$
Webfirm
$
Total
$
932,190
3,513,581
4,445,771
Segment result from continuing operations
(5,387,331)
(2,119,806)
(7,507,137)
Depreciation (note 9)
Amortisation (note 11)
13,171
89,971
103,142
1,972,303
55,984
2,028,287
Additions to non-current assets (PP&E)
47,346
13,623
60,969
Impairment of intangibles
249,184
2,500,000
2,749,184
Statement of Financial Position
Segment assets
Segment liabilities
2010
Business segments
External sales
17,205,397
2,018,314
19,223,711
(13,724,604)
(1,262,881)
(14,987,485)
Adslot
$
Webfirm
$
Total
$
-
5,341,143
5,341,143
Segment result from continuing operations
(943,814)
(1,604,308)
(2,548,122)
Depreciation (note 9)
Amortisation (note 11)
Additions to non-current assets (PP&E)
Impairment of intangibles
Statement of Financial Position
Segment assets
Segment liabilities
181
426,900
-
-
91,766
93,692
46,284
165,025
91,947
520,592
46,284
165,025
5,663,447
3,065,511
8,728,958
(6,009,633)
(1,996,803)
(8,006,436)
Segment revenue reconciles to total revenue from continuing operations as follows:
Revenue
Total segment revenue
Interest revenue
Total revenue from continuing operations
2011
$
2010
$
4,445,771
5,341,143
903,194
119,996
5,348,965
5,461,139
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2. Segment Information (Continued)
A reconciliation from segment result to operating profit before income tax is provided as follows:
Segment Result
2011
$
2010
$
Total segment result
(7,507,137)
(2,548,122)
Interest revenue
Other income
Head office, share option and depreciation expenses allocated
in segment result
Depreciation of corporate assets
Interest expenses
Impairment of intangibles
Deferred vendor consideration
Share option expenses
Other head office expenses
903,194
75,781
119,996
110,664
1,243,777
1,027,685
(51,289)
(39,626)
(44)
(1,778)
(2,749,184)
(247,976)
-
-
(822,835)
(932,809)
(1,185,596)
(1,954,091)
Loss before income tax from continuing operations
(10,341,309)
(4,218,081)
Reportable segment assets are reconciled to total assets as follows:
Segment assets
Total segment assets
Head office assets
Intersegment eliminations
2011
$
2010
$
19,223,710
8,728,958
31,401,109
11,656,003
(19,784,103)
(6,098,638)
Total assets as per the statement of financial position
30,840,716
(14,286,323)
Reportable segment liabilities are reconciled to total liabilities as follows:
Segment liabilities
Total segment liabilities
Head office liabilities
Intersegment eliminations
2011
$
2010
$
(14,987,485)
(8,006,436)
(628,262)
(452,661)
12,863,403
6,000,000
Total liabilities as per the statement of financial position
(2,752,344)
(2,459,097)
NOTES TO THE FINANCIAL STATEMENTS
38
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
39
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2. Segment Information (Continued)
Notes to and forming part of the segment information
Business segments
The Group is organised into the following segments by product and service type:
Adslot
The Adslot business builds and operates large scale ‘private electronic marketplaces’ for media
publishers to sell premium advertising inventory to advertisers and advertising agencies. It uses
proprietary mathematical algorithms to maximise yield and relies on a unique patented set of
technologies.
Webfirm
Designing and developing websites, maintenance of the sites, and promoting the websites. Driving
on-line users to websites through provision of contextually mapped search advertising and by having its
customers found on search engines.
Accounting policies
The accounting policies of the reportable segments are the same as the Group’s accounting policies
described in note 1. The only exception is the Adslot segment which has brought to account assets
for the fair value of intellectual property acquired through business combinations (as determined
for consolidation purposes) and corresponding liabilities. These assets would ordinarily only be
recognised on consolidation. Segment revenues, expenses, assets and liabilities are those that are
directly attributable to a segment and the relevant portion that can be allocated to the segment on
a reasonable basis. Segment profit represents the profit earned by each segment without investment
revenue, finance costs and income tax expense. This is the measure reported to the chief operating
decision maker for the purposes of resource allocation and assessment of segment performance.
Segment assets include all assets used by a segment and consist primarily of operating cash,
receivables, capitalised R&D and other intangible assets, net of related provisions but do not include
non-current inter-entity assets and liabilities which are considered quasi-equity in substance. Segment
liabilities consist primarily of trade and other creditors, employee benefits and sundry provisions and
accruals. Segment assets and liabilities do not include income taxes.
Inter-segment transfers
There are no transfers of revenues, expenses and results between segments.
Geographical information
Revenues from external customers are attributed to individual countries based on the invoiced address
for the services.
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2. Segment Information (Continued)
Revenue from external
customers
Non-current assets
2011
$
2010
$
2011
$
2010
$
Continuing Operations
Australia and New Zealand
4,176,204
4,400,073
13,643,739
8,538,568
North America
Europe
Total revenue from continuing
operations
269,567
941,070
-
-
-
2,116
-
-
4,445,771
5,341,143
13,645,855
8,538,568
3. Revenue and Other Income
Revenue
Revenue for services rendered
Interest income
Total revenue
Other income
R&D tax offset grant
Export marketing development grant
Sundry income
2011
$
2010
$
4,445,771
5,341,143
903,194
119,996
5,348,965
5,461,139
26,400
49,381
-
75,781
-
106,032
4,632
110,664
Total revenue and other income
5,424,746
5,571,803
NOTES TO THE FINANCIAL STATEMENTS
40
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
41
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
4. Expenses
Loss before income tax includes the following
specific expenses:
Depreciation and amortisation
Amortisation – Leasehold improvements
Amortisation – Software development costs
Depreciation – Plant & Equipment
Total depreciation and amortisation
Finance costs
2011
$
2010
$
53,689
2,028,287
100,742
2,182,718
14,063
520,592
117,510
652,165
Interest paid/payable to unrelated entities
44
1,778
Other charges against assets
Impairment of intangibles
Impairment of trade receivables
2,749,184
340,717
165,025
325,410
Rental expense – operating leases
584,281
308,706
Defined contribution superannuation expense
Loss on sale of PP&E & internally developed software
Deferred vendor consideration
Foreign currency loss/(gain)
321,782
42,903
247,976
49,895
360,591
26,355
-
(75,283)
2011
$
2010
$
5. Income Tax Expense
(a) Numerical reconciliation of income tax expense to prima facie
tax benefit
Loss before income tax
(10,341,309)
(4,218,081)
Prima facie tax benefit on loss before income tax at 30% (2010: 30%)
(3,102,393)
(1,265,424)
Tax effect of:
Other non-allowable items
Share options expensed during year
930,429
246,851
212,120
279,843
Income tax benefit attributable to entity
(1,925,113)
(773,461)
Deferred tax assets relating to tax losses not recognised
1,925,633
773,981
Income tax expense attributable to entity
520
520
(b) Deferred Tax Assets Not Brought to Account
Deferred tax assets not brought to account, the benefits of which
will only be realised if the conditions for deductibility set out on Note
1(k) occur
Temporary differences
1,488,369
(983,028)
Tax Losses:
Operating losses
Capital losses
Potential tax benefit (30%)
15,163,471
10,380,494
131,879
131,879
16,783,719
9,529,345
5,035,116
2,858,803
The company and its wholly-owned Australian resident entities have formed a tax-consolidated group
and are therefore taxed as a single entity. The head entity within the tax-consolidated group is Webfirm
Group Limited.
NOTES TO THE FINANCIAL STATEMENTS
42
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
43
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
2011
$
2010
$
6. Dividends
No dividends were declared in the current year or prior year by the
Company. There are no franking credits available to shareholders of
the Company.
7. Cash and cash equivalents
Cash at bank and on hand
18,352,609
3,807,779
8. Trade and other receivables
Current
Trade debtors
Less provision for impairment
Other receivables
Prepayments
Earn-out receivable from the sale of Adfeed Engine
Employee loans
1,717,234
2,452,338
(523,190)
(842,970)
1,194,044
1,609,368
59,977
121,375
16,039
61,027
67,498
-
-
2,083
1,391,435
1,739,976
Impairment of trade receivables
The Webfirm segment invoices the customer on the full sales values at sale date with collection
terms being related to various contract completion stages of website development and annual
hosting services. A particular debt exceeding 90 days does not necessarily mean delinquent debt
as the contract may still be at work in progress stage with corresponding debtor balance not due for
collection or debtor accounts being paid via monthly direct debit receipts.
Before accepting any new customers, the Group internally reviews the potential customer’s credit
quality. A substantial deposit on contract in website development and hosting segment of the Group
mitigates initial credit risk.
Included in the Group’s trade receivable balances are debtors with a carrying amount of $687,173
(2010: $1,206,818) which are past due at the reporting date for which the Group has not provided
as there has not been a significant change in credit quality and the amounts are still considered
recoverable. The Group does not hold any collateral over these balances. The average age of these
receivables is 40 days (2010: 56 days).
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
8. Trade and other receivables (continued)
(a) Ageing of past due but not impaired
0 – 30 days
31 – 60 days
61 – 90 days
Over 91 days
(b) Movement in the provision for impairment
Balance at beginning of the year
Impairment recognised during the year
Amounts written off as uncollectible
Amounts recovered during the year
Balance at the end of the year
2011
$
290,172
121,833
54,545
220,623
2010
$
231,639
157,029
75,809
742,341
687,173
1,206,818
842,970
469,292
(752,287)
(36,785)
523,190
507,356
423,709
(81,986)
(6,109)
842,970
In determining the recoverability of a trade receivable, the Group considers any recent history of payments
and the status of the projects to which the debt relates to. No payment terms have been renegotiated. The
concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the
directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
Fair value of receivables
Fair value of receivables at year end is measured to be the same as receivables net of provision for
impairment.
Non-current:
Employee loans
Receivables – Optum ES Pty Ltd (i)
Less provision for impairment
Movement in the provision for impairment:
non-current receivables
2011
$
2010
$
200,000
200,000
-
-
1,363,343
(1,363,343)
200,000
200,000
Balance at beginning of the year
1,363,343
2,163,343
Amounts written off as uncollectible
(1,363,343)
(800,000)
Balance at the end of the year
-
1,363,343
NOTES TO THE FINANCIAL STATEMENTS
44
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
45
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
8. Trade and other receivables (Continued)
(i) This represents an amount which was the outstanding balance on the intercompany loan from Webfirm
Group Limited to Optus E S Pty Ltd at the date of deconsolidation. The balance has also been fully
provided for in prior years. This receivable balance and corresponding provision was written off during
this year.
The recoverability of loans to controlled entities is determined with reference to the net assets of each
controlled entity.
Non-current receivables generally arise from transactions outside the usual operating activities of the
Group. No interest is chargeable and collateral is generally not obtained.
9. Non-Current Assets – Property, plant
and equipment
Leasehold improvements – at cost
Less: Accumulated amortisation
Plant and equipment – at cost
Less: Accumulated depreciation
Computer equipment – at cost
Less: Accumulated depreciation
Total carrying amount of property, plant and equipment
2011
$
2010
$
96,740
(64,036)
32,704
44,460
(10,346)
34,114
248,593
164,685
(159,386)
(113,675)
89,207
51,010
358,994
269,996
(283,866)
(225,987)
75,128
197,039
44,009
129,133
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
9. Non-Current Assets – Property, plant and equipment (Continued)
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and
end of the current financial year are set out below:
2011
Leasehold
Improvements
Plant and
Equipment
Computer
Equipment
Total
Carrying amount at 1 July 2010
Additions
$
34,114
52,279
$
$
$
51,010
44,009
129,133
83,909
86,149
222,337
Depreciation/amortisation expense
(53,689)
(45,712)
(55,030)
(154,431)
Carrying amount at 30 June 2011
32,704
89,207
75,128
197,039
2010
Leasehold
Improvements
Plant and
Equipment
Computer
Equipment
Total
Carrying amount at 1 July 2009
Additions
Disposals/write offs
$
63,154
9,822
(24,799)
$
$
$
84,943
83,865
231,962
4,385
(478)
40,892
55,099
(1,078)
(26,355)
Depreciation/amortisation expense
(14,063)
(37,840)
(79,670)
(131,573)
Carrying amount at 30 June 2010
34,114
51,010
44,009
129,133
2011
$
2010
$
10. Non-Current Assets – Other financial assets
Available for sale investment carried at fair value
Investment – at fair value
212,664
-
During the year the Company was issued a convertible note for $100,000 in Brandscreen Pty Ltd (an
unrelated entity). This convertible note and accumulated interest of $6,329 was converted to 145,094
preference shares on 11 March 2011. At that time the investment in Brandscreen Pty Ltd was re-valued
at fair value reflecting a capital raising which it undertook recognising a gain of $106,335. The Directors
are of the opinion that the fair value of the Brandscreen Pty Ltd preference shares has not materially
changed at 30 June 2011.
NOTES TO THE FINANCIAL STATEMENTS
46
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
47
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
11. Non-Current Assets – Intangible Assets
Intellectual
Property
Domain
Name
Goodwill
Internally
developed
software
Customer
Contracts
Total
$
$
$
$
$
$
Year ended 30 June 2011
Opening net book amount
5,537,106
30,805
2,500,000
341,524
Acquisitions
Amortisation
Impairment of assets
Disposal of assets
Carrying amount at 30
June 2011
At 30 June 2011
Cost
Accumulated
amortisation/impairment
Carrying amount at 30
June 2011
6,737,572
7,462
249,184
-
(1,972,303)
-
-
-
-
-
10,302,375
38,267
-
(55,984)
(2,749,184)
-
-
-
(139,214)
146,326
16,566,906
288,267
5,381,652
234,154
(6,264,531)
(250,000)
(5,381,652)
(87,828)
10,302,375
38,267
-
146,326
-
-
-
-
-
-
-
-
-
8,409,435
6,994,218
(2,028,287)
(2,749,184)
(139,214)
10,486,968
22,470,979
(11,984,011)
10,486,968
Intellectual
Property
Domain
Name
Goodwill
Internally
developed
software
Customer
Contracts
Total
$
$
$
$
$
$
Year ended 30 June 2010
Opening net book amount
50,000
100,000
2,500,000
223,062
65,025
2,938,087
Acquisitions
Amortisation
5,932,006
30,805
(444,900)
-
Impairment of assets
-
(100,000)
-
-
-
194,154
(75,692)
-
-
6,156,965
(520,592)
-
(65,025)
(165,025)
Carrying amount at 30
June 2010
At 30 June 2010
Cost
Accumulated amortisation/
impairment
Carrying amount at 30
June 2010
5,537,106
30,805
2,500,000
341,524
-
8,409,435
9,829,334
280,805
5,132,469
417,216
65,025
15,724,849
(4,292,228)
(250,000)
(2,632,469)
(75,692)
(65,025)
(7,315,414)
5,537,106
30,805
2,500,000
341,524
-
8,409,435
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
11. Non-Current Assets – Intangible Assets (Continued)
Goodwill
The Goodwill balances relate to the acquisitions of Webfirm and Full Circle Online. At June 2011 the Directors passed an
impairment expense of $2,749,184, thereby removing all Goodwill.
Intellectual property
Business names and domain names
Business name and domain name opening balance of $30,805 relates to the various business names and domain names
held by Webfirm CGU. During the year under review domain names amounting to $7,462 was acquired by Adslot CGU.
The directors have assessed that this intellectual property has an indefinite useful life on the basis that the directors do not
believe that there is a foreseeable limit on the period over which this asset is expected to generate cash inflows for the
entity.
The carrying value of this intellectual property attached to the Webfirm CGU and Adslot CGU (and segments) was reviewed
and with sufficient future benefits being expected from the asset, no impairment was required.
Copyright and patent licences
Adslot Pty Ltd (“Adslot”) holds valuable copyright and patent licences (“Licences”) in respect of Combinatorial Auction
Platform Technology (“CAP” or “Core IP”).
The directors have assessed the accounting useful life of the Adslot Licences for accounting purposes to be five years. This
assessment has given regard to the expected financial benefits of the technology to be potentially well beyond a five year
period, together with the risk that competitors could replicate this technology over time, and therefore the potential for the
company’s ongoing commitment to research and development of the Core IP.
Adimise Pty Ltd (“Adimise”) holding online ad-serving technology was acquired during the year for $246,470, and at
acquisition date, held net liabilities exceeding assets of $24,585 (see Note 19 Business Combinations). The directors have
determined that the carrying value of this intellectual property should not exceed the residual value of $271,055 ($246,470 +
$24,585). Accordingly the fair value of the Ad-serving IP attached to the Adslot CGU has been determined to be $271,055.
The directors have assessed the accounting useful life of the Adimise Licences for accounting purposes to be five years.
QDC IP Technology (“QDC”) holding video advertising technology was acquired during the year for $6,477,345, and at
acquisition date, held net tangible assets and liabilities of fair value $10,828 (see Note 19 Business Combinations). Deferred
vendor consideration included in the vendor agreement has resulted in further contingent consideration related to this
acquisition amounting to $106,800.
Notwithstanding the Independent Expert’s Report (for the QDC transaction) included an assessment that the fair value of
the Core IP could be as high as $7,700,000, having regard to the subjective nature of the valuation for this type of asset,
the directors have determined the fair value of intellectual property should not exceed the residual value of $6,466,517.
Accordingly the fair value of the Licences to the Core IP attached to the Adslot CGU has been determined to be $6,466,517.
The directors have assessed the accounting useful life of the Licences for accounting purposes to be five years. This
assessment has given regard to the expected financial benefits of the technology to be potentially well beyond a five year
period, together with the risk that competitors could replicate this technology over time, and therefore the potential for the
Group’s ongoing commitment to research and development of the Core IP.
Accumulated amortisation of this asset as at 30 June 2011 was $731,691 (2010: $nil). The amortisation period of the intangible
asset is five years on a straight line basis.
Software
The $341,524 opening balance in internally development software is related to costs associated with three internally
developed software platforms capitalised according to accounting standards. During the year under review the Group sold
one internally developed software with an opening balance amounting to $148,369.
The directors are of the opinion that these software developments have a limited five year useful life and hence have been
amortised accordingly by $46,830 (2010: $93,692).
NOTES TO THE FINANCIAL STATEMENTS
48
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
49
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
12. Current liabilities – Payables
Trade creditors
Other creditors
13. Current liabilities – Other
Current:
Unearned revenue (i)
Deferred vendor consideration- QDC (ii)
2011
$
2010
$
241,130
453,219
Current:
14. Current Provisions
1,229,140
693,077
1,470,270
1,146,296
Employee benefits
Non current:
Employee benefits
755,811
1,175,912
354,776
-
1,110,587
1,175,912
15. Contributed equity
2011
$
2010
$
164,603
124,197
6,884
12,692
2011
2010
2011
2010
Number
Number
$
$
(i) The significant portion of current year unearned revenue pertains to website development and hosting invoices that are
rendered based on full contract terms at the contracts inception, however performed over stages which straddle the
balance sheet date.
(ii) Deferred vendor consideration is the probability at 30 June 2011 of additional shares due on 7 May 2012 as further vendor
consideration on QDC acquisition. Additional shares are required where the 5-day VWAP of the Company’s share price
is less than 10.9 cents at 7 May 2012. The position taken at this reporting date reflects a 50% probability that the
Company’s share price will be in a range of 7.5 cents to 10.9 cents.
Ordinary Shares – Fully Paid
681,698,900
491,821,809
76,547,875
50,874,027
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the numbers
of shares.
At the shareholders meeting each ordinary share is entitled to one vote when a poll is called, otherwise each shareholders
has one vote on a show of hands.
(i)(i)
(ii)
NOTES TO THE FINANCIAL STATEMENTS
50
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
51
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
15. Contributed equity (continued)
Movements in Paid-Up Capital
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
15. Contributed equity (continued)
Options issued, exercised and lapsed during the financial year and options outstanding at the end of the year are
summarised below:
Date
Details
Number of shares
Issue price
Capital raising
costs
Value
Issue Type
Notes
Number
$
$
$
Expiry
Date
Exercise
Price
$
Balance at
beginning
of the year
(Number)
Issued during
the year
(Number)
Expired
during
the year
(Number)
Exercised
during the
year
(Number)
Balance at
end of the
year
(Number)
Ordinary options
10/04/11
0.500
2,000,000
Ordinary options
10/04/11
0.500
100,000
Ordinary options
30/06/12
0.100
6,000,003
Ordinary options
30/06/12
0.100
3,840,000
Ordinary options
22/10/12
0.090
2,000,000
Ordinary options
31/01/13
0.053
51,700,000
Ordinary options
31/01/13
0.056
15,500,000
-
-
-
-
-
-
-
(2,000,000)
(100,000)
-
-
-
-
-
-
6,000,003
(2,590,000)
(900,000)
350,000
-
-
(1,000,000)
1,000,000
-
51,700,000
(3,600,000)
(1,720,000)
10,180,000
Ordinary options
Ordinary options
Ordinary options
Ordinary options
(i)
(ii)
(i)
(i)
08/07/14
0.151
29/08/14
0.096
30/09/14
0.116
30/09/14
0.190
-
-
-
-
2,000,000
-
3,000,000
(2,690,411)
3,000,000
300,000
-
-
-
-
-
-
2,000,000
309,589
3,000,000
300,000
81,140,003
8,300,000
(10,980,411)
(3,620,000)
74,839,592
(i) Options issued to employees for services rendered.
(ii) Options issued to employees for services rendered. Refer to Note 23 – Key Management Personnel Disclosures
60,789
37,358,173
57,426
1,162,897
95,187
2,284,490
210,268
3,959,467
-
-
-
76,000
6,000,000
33,000
30-Jun-09
Balance
28-Jul-09
Share Placement
09-Sep-09
Share Placement
16-Feb-10
Share Placement
16-Feb-10
16-Feb-10
Issue of shares to
sub-underwriters
138,558,520
20,338,720
39,661,280
119,135,289
2,171,429
0.060
0.060
0.035
0.035
Issue of shares to Adslot Pty Ltd
vendor
171,428,571
0.035
14-Apr-10
Employee ESOP shares
528,000
0.0625
30-Jun-10
Balance
491,821,809
423,670
50,874,027
08-Jul-10
08-Jul-10
Issue of shares to Adimise Pty Ltd
vendor
2,143,214
0.115
Issue of shares to Full Circle
Online Pty Ltd vendor
2,142,500
0.115
31-Aug-10
Exercise of employee options
14-Sep-10
Share Placement-professional
investors
800,000
21,153,845
0.100
0.130
17-Sep10
Share Placement-professional
investors
37,096,155
0.130
13-Oct-10
Exercise of options- sub-
underwriter
1,000,000
0.090
29-Oct-10
Share Placement
07-Dec-10
Issue of shares to QDC IP
Technologies Pty Ltd vendor
28-Feb-11
Exercise of employee options
23-Mar-11
Exercise of employee options
11-Apr-11
Exercise of employee options
30-Jun-11
Balance
94,412,286
29,309,091
100,000
1,300,000
420,000
681,698,900
0.130
0.190
0.100
0.056
0.056
-
-
-
246,470
246,387
80,000
181,390
2,568,610
-
-
4,822,500
90,000
328,843
11,944,834
-
-
-
-
5,568,727
10,000
72,800
23,520
933,903
76,547,875
NOTES TO THE FINANCIAL STATEMENTS
52
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
53
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
16. Reserves
Reserves
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
17. Earnings Per Share
2011
$
2010
$
2011
Cents
2010
Cents
(a) Basic earnings per share
Loss attributable to the ordinary equity holders of the Company
(1.66)
(1.42)
Share–based payments reserve
5,760,673
4,937,838
Available for sale investment reserve
Foreign currency translation reserve
Share–based payments reserve
Opening balance
Option expense
Closing balance
Available for sale investment reserve
Opening balance
Movement in fair value
Closing balance
Foreign currency translation reserve
Opening balance
Movement on currency translation
Closing balance
106,335
-
(b) Diluted earnings per share
(36,452)
(36,408)
5,830,556
4,901,430
Loss attributable to the ordinary equity holders of the Company
(1.66)
(1.42)
2011
$
2010
$
4,937,838
4,005,029
Loss from continuing operations attributable to the members of the Company
(c) Reconciliation of earnings used on calculating earnings per share (i)
822,835
932,809
used on calculating basic and diluted earnings per share
(10,341,829)
(4,218,601)
5,760,673
4,937,838
-
106,335
106,335
36,408
44
36,452
-
-
-
29,526
6,882
36,408
2011
Number
2010
Number
(d) Weighted average number of shares used as the denominator
Weighted average number of shares on issue used in the calculation of basic EPS
623,779,891
297,831,081
(e) Weighted average number of shares used as the denominator
Weighted average number of shares on issue used in the calculation of diluted EPS
623,779,891
297,831,081
Weighted average number of options that could potentially dilute basic earnings per
share in the future, but are not included in the calculation of diluted EPS because
they are anti-dilutive for the period presented.
82,793,127
39,985,839
(i) During 2011 and 2010 there were no discontinued operations or values attributable to minority interests.
18. Discontinued Operations
There were no discontinued operations during the year ended 30 June 2011.
The Share-based payments reserve is used to record the value of options accounted for in accordance with AASB2: Share
Based Payments.
The available-for sale investment reserve is used to record net gain/loss arising on revaluation of available-for sale financial
assets in accordance with AASB 7: Financial Instruments Disclosure.
The foreign currency translation reserve is used to record the value of aggregate movements in the translation of foreign
currency in accordance with AASB 121: The Effects of Changes in Foreign Exchange Rates.
NOTES TO THE FINANCIAL STATEMENTS
54
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
55
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
19. Business Combinations
2011
Adimise Pty Ltd and Full Circle Online Pty Ltd:
On 8 July 2010 Webfirm Group Limited acquired 100% of the equity of Adimise Pty Ltd and Full Circle Online Pty Ltd.
The deal provides Webfirm with Adimise’s online ad-serving technology, key component of Webfirm’s new Adslot Direct
Platform. The acquisition costs related to this acquisition were $8,932 which has been included in legal fees in the Statement
of Comprehensive Income.
The acquired businesses contributed $541,266 in revenue and a net loss of $149,940 to the Group for the period from 8 July
2010 to 30 June 2011. These amounts have been calculated using the Company’s accounting policies, and would have
been the same had the acquisition occurred on 1 July 2010.
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
19. Business Combinations (Continued)
QDC IP Technologies IP Pty Ltd
On 7 December 2010 Adslot Pty Ltd acquired 100% of the equity of QDC IP Technologies Pty Ltd (QDC). QDC’s Display Ad
Builder and Personalised Video Ad Platform technologies will be combined with Adslot and Adimise technologies to create
the new Adslot Direct Platform. The integration of QDC technology with Adslot Direct Platform will allow online publishers to
offer an automated end to end advertisement sales system. The acquisition costs related to this acquisition were $75,063
which has been included in legal fees and employment related costs in the Statement of Comprehensive Income.
The acquired businesses contributed no revenue and a net loss of $987,208 to the Group for the period from 7 December
2010 to 30 June 2011. These amounts have been calculated using the Group’s accounting policies.
The amount of revenue and losses for the combined entity calculated, had the acquisition occurred on 1 July 2010 would
have been $220,534 in revenue and a net loss of $766,621.
The purchase consideration consists of the following:
The purchase consideration consists of the following:
Equity – 4,285,714 fully paid ordinary shares @ 11.5 cents per share
Total consideration paid
$
492,857
492,857
Subject to the achievement of certain post completion sales targets, additional deferred consideration of up to $150,000
can become payable by the Group. No deferred consideration has been provided for as the directors’ estimate that it is
unlikely these targets will be met within the required time frame.
Details of assets and liabilities acquired are as follows:
Acquirees’ Carrying
Fair Value
$
$
$
Cash
Equity – 29,309,091 fully paid ordinary shares of Webfirm
Deferred vendor consideration
Total consideration paid
$
801,818
5,568,727
106,800
6,477,345
If at the end of an eighteen (18) month period from the date of acquisition, the total value of consideration paid to the
Vendors is calculated to be less than $4.0 million (using a VWAP of the Company’s share price over the five (5) trading days
prior to that date), then up to a maximum of 13.3 million additional Webfirm Group Limited shares is to be issued as further
consideration. The directors assessed the potential fair value of contingent consideration at acquisition date to be $106,800.
The contingent consideration has been revalued at year end to its fair value of $354,776. The movement in fair value of
contingent consideration is taken to the Statement of Comprehensive Income.
492,857
Details of assets and liabilities acquired are as follows:
Purchase consideration
Fair value of net identifiable assets acquired:
Cash and cash equivalents
Trade and other receivables
Property, plant & equipment
Payables
Employee benefits
Intangible assets (including formation expenses)
Intellectual property – platform technology
Goodwill
106,855
106,855
197,177
197,177
8,425
8,425
(333,197)
(333,197)
(6,643)
(6,643)
16,943
-
-
-
271,055
249,185
Net identifiable assets acquired
(10,440)
492,857
492,857
Statement of Cash Flows
For the purposes of the statement of cash flows, the acquisition resulted in net cash acquired of $106,855.
Purchase consideration
Fair value of net identifiable assets acquired:
Cash and cash equivalents
Trade and other receivables
Property, plant & equipment
Intangible assets (including formation expenses)
Acquirees’
Carrying Amount
Fair Value
$
$
$
6,477,345
1,513
3,073
6,266
236,272
1,489
3,073
6,266
-
Intellectual property – platform technology
-
6,466,517
Net identifiable assets acquired
247,124
6,477,345
6,477,345
Notwithstanding that the Independent Expert’s Report (for the QDC transaction) included an assessment that the fair value
of the platform technology could be as high as $7.75 million, having regard to the subjective nature of the valuation for this
type of asset, the directors have determined the fair value of intellectual property should not exceed the residual value of
$6,466,517. Accordingly the fair value of the platform technology has been determined to be $6,466,517.
Statement of Cash Flows
For the purposes of the statement of cash flows, the acquisition resulted in net cash acquired of $1,489.
NOTES TO THE FINANCIAL STATEMENTS
56
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
57
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
19. Business Combinations (Continued)
2010
Adslot Pty Ltd
On 16 February 2010 Webfirm Group Limited acquired 100% of the equity of Adslot Pty Ltd. Adslot designs and operates
large scale ‘private electronic marketplaces’ for media publishers to sell premium advertising inventory to advertisers
and advertising agencies. It uses combinatorial auction technology to maximise yield in publisher’s premium advertising
inventory. The acquisition costs relating to this acquisition were $151,219 which has been included in the legal fees, salaries
and employment related costs and other expense lines in the Statement of Comprehensive Income.
The acquired business contributed no revenue and a net loss of $1,370,512 to the Group for the period from 16 February 2010
to 30 June 2010. These amounts have been calculated using the Group’s accounting policies.
The amount of revenue and losses for the combined entity calculated had the acquisition occurred on 1 July 2009 would
have been no revenue and a net loss of $1,957,484.
The purchase consideration was made up entirely of equity and was settled as follows:
Equity – 171,428,571 fully paid ordinary shares @ 3.5 cents per share
Total consideration
6,000,000
6,000,000
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
20. Contingencies
No contingent assets or liabilities are noted.
21. Commitments
Operating lease commitments
Total operating lease expenditure contracted for at balance date but not capitalised
in the financial statements, payable:
Within 1 year
Between 1 and 5 years
2011
$
2010
$
558,282
341,095
676,541
446,579
1,234,823
787,674
The lease commitments detailed above relate to rental premises occupied by the Webfirm Group and lease rental of
computer servers.
Details of net assets acquired and technology platform intellectual property are as follows:
Capital commitments
Purchase consideration
Fair value of net identifiable assets acquired:
Cash and cash equivalents
Sundry debtors
Property, plant and equipment
Development costs
Intellectual property – technology platform
Employee benefits
Payables
Acquirees’
Carrying
Amount
Fair Value
$
$
$
6,000,000
146,150
146,150
182,305
182,305
786
240,000
786
-
-
5,932,006
(9,240)
(9,240)
(252,007)
(252,007)
Net identifiable assets acquired
307,994
6,000,000
6,000,000
The directors determined the fair value attributable to technology platform intellectual property was $5,932,006 (Note 11).
The directors have assessed the recoverable amount of intellectual property in accordance with AASB 136 Impairment of
Assets as outlined in Note 11.
Statement of Cash Flows
For the purposes of the statement of cash flows, the acquisition resulted in net cash acquired of $146,150.
The Group and the Company have not entered any capital expenditure contracts at reporting date that are not
recognised as liabilities on the Statement of Financial Position.
2011
$
2010
$
22. Remuneration of auditors
During the year the following fees were paid/payable to the auditor of
the company:
Audit Services
Audit and review of financial reports
90,000
85,000
NOTES TO THE FINANCIAL STATEMENTS
58
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
59
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
23. Key Management Personnel Disclosures
Directors
The following persons were directors of the Company during the financial year:
Mr Adrian Giles (Executive Chairman)
Mr Andrew Barlow (Executive Director)
Mr David Burden (Managing Director)
Mr Adrian Vanzyl (Non-Executive Director)
(resigned 20 June 2011)
Mr Anthony Du Preez (Executive Director)
Mr Chris Morris (Non-Executive Director)
(appointed 20 September 2010)
Ms Tiffany Fuller (Non-Executive Director)
(appointed 20 June 2011)
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group,
directly or indirectly, during the financial year:
Name
Mr Gavan Flower
Mr Damian Element
Position
Chief Financial Officer (resigned 13 September 2010)
Chief Financial Officer (appointed 13 September 2010 and resigned 15
November 2010)
Mr Brendan Maher
Chief Financial Officer (appointed 15 November 2010)
Mr Mathew Chamley
Regional General Manager Webfirm P/L (appointed 28 July 2009)
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Termination benefits
Share based payments
Total compensation
2011
$
1,297,734
58,454
-
19,584
437,574
1,813,346
2010
$
1,245,032
74,191
(11,252)
81,277
952,058
2,341,306
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
23. Key Management Personnel Disclosures (Continued)
Other transactions with key management personnel
Loans to key management personnel
Aggregate loans to key management personnel and their related parties:
Loans to key
management
personnel
2011
2010
Balance at
beginning
Loans
granted
Interest
charged
Amounts
repaid
Balance at end
Number in
group
$
200,000
205,543
$
-
-
$
-
$
-
145
(5,688)
$
200,000
200,000
Number
1
1
Key management personnel with loans above $100,000 in the reporting period:
2011
Balance at
beginning
Loans
granted
Interest
charged
Amounts
repaid
Balance at end
Highest in
period
$
D. Burden
200,000
2010
D. Burden
200,000
$
-
-
$
-
-
$
-
-
$
$
200,000
200,000
200,000
200,000
The $200,000 loan represents financial assistance provided to the CEO for the purpose of acquiring 10,000,000 shares
(pre-consolidation equivalent to 2,000,000 post consolidation) in the Company. The loan was provided on an interest free
basis. The interest not charged, calculated at the statutory interest rate of 6.65% for the year ended 30 June 2011, was
$13,300. The loan was approved by shareholders at an Extraordinary General Meeting held 16 September 2008.
Business Acquisitions:
Both Mr Adrian Giles and Mr Andrew Barlow were significant shareholders of QDC Technologies Pty Ltd prior to the
acquisition made by the Group as detailed in Note 19. Under the terms of the transactions Mr Adrian Giles (shares) and Mr
Andrew Barlow (cash) received compensation for the shares that they held in QDC Technologies. These relationships were
disclosed in the Notice of Meeting for the AGM held on 30 November 2010 and in the Independent Expert’s Report prepared
as part of the transaction.
Transactions with Directors and their personally related entities:
During the year payments of $64,806 were made to Venturian Pty Ltd an entity related to Mr Andrew Barlow for consulting
services on normal terms and conditions.
During the year receipts of $52,661 were received from Colonial Leisure Group an entity related to Mr Chris Morris for website
hosting and search marketing services on normal terms and conditions.
NOTES TO THE FINANCIAL STATEMENTS
60
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
61
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
23. Key Management Personnel Disclosures (Continued)
23. Key Management Personnel Disclosures (Continued)
Option holdings
The number of options over ordinary shares in the company held during the financial year by each director of Webfirm
Group Limited and other key management personnel of the group, including their personally related parties are set out
below:
Balance at the
start of the year
(Number)
Granted during
the year as
compensation
(Number)
Exercised
during
the year
(Number)
Forfeited/
Lapsed during
the year
(Number)
Balance at
the end of the
year (Number)
Vested and
exercisable at
the year end
(Number)
2011
Name
Directors
-
13,800,001
13,800,001
(2,000,000)
9,900,001
9,900,001
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,000,000
13,000,000
Other key management personnel
9,000,001
9,000,001
Mr D Element
1,200,000
3,500,000
8,500,000
8,500,000
Mr J Edis
1,200,000
Balance
at the start
of the year
(Number)
Granted during
the year as
compensation
(Number)
Exercised
during
the year
(Number)
Other
changes
during
the year
Balance
at the end
of the year
(Number)
Vested and
exercisable at
the year end
(Number)
2010
Name
Directors
Mr A Giles
2,000,001
11,800,000
Mr A Barlow
4,000,001
7,900,000
Mr D Burden
-
13,000,000
Mr A Vanzyl
2,000,001
7,000,000
Mr A Du Preez
-
8,500,000
-
-
Mr A Beecher
1,200,000
Mr S Jones
1,200,000
600,000
Mr M Chamley
Mr G Flower
-
-
4,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,800,001
7,900,001
11,900,001
7,950,001
13,000,000
6,500,000
9,000,001
5,500,001
8,500,000
4,250,000
4,700,000
4,300,000
1,200,000
1,200,000
1,800,000
4,000,000
-
800,000
800,000
800,000
-
-
69,100,003
38,800,003
Mr A Giles
13,800,001
Mr A Barlow
11,900,001
Mr D Burden
13,000,000
Mr A Vanzyl
9,000,001
Mr A Du Preez
8,500,000
Mr C Morris
Ms T Fuller
Other key
management
personnel
-
-
Mr D Element
4,700,000
Mr M Chamley
4,000,000
-
-
-
-
-
-
-
-
-
Mr G Flower
Mr B Maher
-
-
3,000,000
-
(800,000)
(400,000)
3,500,000
3,500,000
Totals
12,800,003
56,300,000
-
-
-
-
4,000,000
2,000,000
(2,690,411)
309,589
309,589
-
-
-
Totals
64,900,003
3,000,000
(800,000)
(5,090,411)
62,009,592
60,009,592
NOTES TO THE FINANCIAL STATEMENTS
62
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
63
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
23. Key Management Personnel Disclosures (Continued)
23. Key Management Personnel Disclosures (Continued)
Equity holdings and transactions
The numbers of shares in the company held during the financial year by each director of Webfirm Group Limited and other
key management personnel of the Group, including their personally related parties, are set out below.
Held at
1 July 2010
Received
during the year
on exercise of
options
Received
during the
year as
compensation
Net other
changes during
the year
Held at
30 June 2011
2011
Name
Ordinary shares
Directors
Mr A Giles
Mr A Barlow
Mr D Burden
Mr A Vanzyl*
Mr A Du Preez
Mr C Morris
Ms T Fuller
15,062,872
57,140,133
5,900,731
2,164,277
12,968,051
-
-
-
-
-
-
-
-
-
Other key management personnel
Mr D Element*
Mr M Chamley
Mr G Flower*
Mr B Maher
Totals
795,091
800,000
229,089
-
-
-
-
-
94,260,244
800,000
*shareholding effective as at date of resignation
-
-
-
-
-
-
-
-
-
-
-
-
3,358,416
18,421,288
-
57,140,133
(269,232)
5,631,499
(2,164,277)
-
-
12,968,051
57,130,848
57,130,848
100,000
100,000
(1,595,091)
-
-
-
-
229,089
-
-
56,560,664
151,620,908
Held at
1 July 2009
Received
during the year
on exercise of
options
Received
during the
year as
compensation
Net other
changes during
the year
Held at
30 June 2010
3,882,962
5,418,064
4,484,065
1,155,833
-
414,286
294,286
14,286
795,091
-
-
16,458,873
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,000
-
11,179,910
15,062,872
51,722,069
57,140,133
1,416,666
5,900,731
1,008,444
2,164,277
12,968,051
12,968,051
(414,286)
(294,286)
-
-
-
-
30,286
795,091
16,000
213,089
229,089
-
-
-
32,000
77,799,657
94,290,530
2010
Name
Ordinary shares
Directors
Mr A Giles
Mr A Barlow
Mr D Burden
Mr A Vanzyl
Mr A Du Preez
Other key management personnel
Mr J Edis
Mr A Beecher
Mr S Jones
Mr D Element
Mr M Chamley
Mr G Flower
Totals
24. Share Based Payments
Employee share option plan
The Company has operated an ownership-based scheme for executives and senior employees of the Group. This was
approved by shareholders at the 2009 Annual General Meeting. Awards were made under this plan up to October 2010
such that senior employees and an executive were granted options to purchase parcels of ordinary shares at an exercise
prices ranging from 9.6 cents to 19.0 cents per ordinary share.
Each share option converts into one ordinary share of Webfirm Group Limited on exercise. No amounts are paid or payable
by the recipient on receipt of the option. The options carry no voting rights. Options may be exercised at any time from the
date of vesting to the date of their expiry.
The vesting dates of these Options are detailed in the table below. All Option tranches are based the individual remaining
an employee of the Group. The plan rules allow departed employees to retain their options for a period of time based on
the length of their service with the Company and the nature of their separation from the Company. The board considered
these conditions appropriate to ensure the objective of maintaining key staff within the Company.
The Company has valued these options in accordance with accounting standards. The total value of these options vested
was assessed at $32,015. There is no amount remaining to be expensed in future years.
The board has no formal policy in place for limiting the risk of executive and senior employees of the Group in relation to the
options issued.
2,620,000 options provided as remuneration were exercised during the year.
Set out below are summaries of options granted to employees of the Webfirm Group during the year in return for services
rendered.
NOTES TO THE FINANCIAL STATEMENTS
64
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
65
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
24. Share Based Payments (Continued)
Other Options Issued
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
24. Share Based Payments (Continued)
2010
1,000,000 options issued as consideration for services provided by a third party supplier in prior years, were exercised
during the year.
2011
Grant
Date
Expiry
Date
Exercise
Price
$
Balance
at start of
the year
(Number)
Granted
during
the year
(Number)
Exercised
during
the year
(Number)
Lapsed
during
the year
(Number)
Forfeited
during the
year
(Number)
Balance
at end of
the year
(Number)
Vested and
exercisable
at the end
of the year
(Number)
30/06/06
10/04/11
0.500
2,000,000
01/04/08
10/04/11
0.500
100,000
27/08/08
30/06/12
0.100
3,840,000
23/09/08
30/06/12
0.100
6,000,003
21/10/09
22/10/12
0.090
2,000,000
16/02/10
31/01/13
0.053
51,700,000
16/02/10
31/01/13
0.056
15,500,000
-
-
-
-
-
-
-
-
-
(2,000,000)
(100,000)
(900,000)
(2,590,000)
-
(1,000,000)
-
-
-
-
(1,720,000)
(3,600,000)
28/07/10
08/07/14
0.151
30/08/10
29/08/14
0.096
14/10/10
30/09/14
0.116
14/10/10
30/09/14
0.190
-
-
-
-
2,000,000
3,000,000
3,000,000
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
350,000
350,000
6,000,003
6,000,003
1,000,000
1,000,000
51,700,000
51,700,000
10,180,000
4,730,000
2,000,000
-
(2,690,411)
309,589
309,589
-
-
3,000,000
300,000
-
-
Total
81,140,003
8,300,000
(3,620,000)
(8,290,000)
(2,690,411)
74,839,592
64,089,592
Weighted average exercise price
$0.072
$0.120
$0.076
$0.182
$0.096
$0.064
$0.059
Weighted average remaining contractual life at 30 June 2011 (days)
605
Grant
Date
Expiry
Date
Exercise
Price
$
Balance
at start of
the year
(Number)
Granted
during
the year
(Number)
Exercised
during
the year
(Number)
Lapsed
during
the year
(Number)
Forfeited
during the
year
(Number)
Balance
at end of
the year
(Number)
Vested and
exercisable
at the end
of the year
(Number)
30/06/06
10/04/11
0.500
2,000,000
01/04/08
10/04/11
0.500
100,000
27/08/08
30/06/12
0.100
5,660,000
23/09/08
30/06/12
0.100
6,000,003
-
-
-
-
21/10/09
22/10/12
0.090
16/02/10
31/01/13
0.053
16/02/10
31/01/13
0.056
-
-
-
2,000,000
51,700,000
15,500,000
Total
13,760,003
69,200,000
Weighted average exercise price
$0.161
$0.055
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
2,000,000
100,000
100,000
(1,820,000)
3,840,000
3,673,333
-
-
-
-
6,000,003
6,000,003
2,000,000
2,000,000
51,700,000
27,600,000
15,500,000
-
(1,820,000)
81,140,003
41,373,336
$0.10
$0.072
$0.088
Weighted average remaining contractual life at 30 June 2010 (days)
897
No options expired during the periods covered by the above tables.
Options are valued using the Binomial option pricing model. The model inputs for options granted during the year ended
30 June 2011 included:
Model Input
Grant Date
Exercise Date
Expiry Date
Exercise Price
Price at Effective Grant Date
Expected Volatility
Expected Dividend Yield
Risk Free Interest Rate
Class #1
30/08/10
08/04/11
29/08/14
$0.096
$0.07
102.9%
0%
4.80%
NOTES TO THE FINANCIAL STATEMENTS
66
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
67
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
24. Share Based Payments (Continued)
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
26. Financial Risk Management
The volatility calculation is based upon historical share price information of the Company from the commencement of the
Adslot acquisition within the Group (16 February 2010) up to the grant date.
The model inputs for options granted during the year ended 30 June 2010 included:
The Group’s operations expose it to various financial risks including market, credit, liquidity and cash flow risks. Risk
management programmes and policies are employed to mitigate the potential adverse effects of these exposures
on the results of the Group.
Financial risk management is carried out by the Chief Financial Officer with oversight provided by the Board.
Class #2
Class #3
Class #4
(a) Market risks
Model Input
Grant Date
Exercise Date
Expiry Date
Exercise Price
Price at Grant Date
Expected Volatility
Expected Dividend Yield
Risk Free Interest Rate
Class #1
16/02/10
16/02/10
31/01/13
$0.053
$0.04
100.4%
0%
4.76%
16/02/10
01/02/11
31/01/13
$0.053
$0.04
100.4%
0%
4.76%
16/02/10
16/02/11
31/01/13
$0.056
$0.04
100.4%
0%
4.76%
16/02/10
16/02/12
31/01/13
$0.056
$0.04
100.4%
0%
4.76%
25. Cash Flow reconciliation
Reconciliation of Net Cash Flows from Operating Activities to Loss for the year
Loss for the year after income tax
Depreciation and amortisation
Impairment of intangibles
Share based payment
Impairment of receivables
Loss on asset write off
Unrealised foreign currency loss/(gain)
Changes in assets and liabilities (net of effects of acquisition and disposal of entities)
Decrease in receivables
(Decrease) in payables and other provisions
Net cash outflow from operating activities
2011
$
2010
$
(10,341,829)
(4,218,601)
2,182,718
2,749,184
822,835
340,717
42,903
49,895
652,165
165,025
932,809
325,410
26,355
(75,283)
208,074
373,510
(46,593)
(2,520,119)
(3,922,096)
(4,338,729)
Market risks include foreign exchange risk, interest rate risk and other price risk. The Group’s activities expose it to the
financial risks of changes in foreign currency, interest rate risk relating to interest earned on cash and cash equivalents and
price risk on available-for-sale financial assets.
In the current reporting period the foreign currency related exposure is not considered to be material to the entity’s overall
business operation. Foreign currency exposure is monitored by the Board on a quarterly basis. The Board has considered
that any specific risk mitigation action is not required at this time.
Disclosures relating Interest rate risk is covered in Note 26(d) and price risk is covered in Note 26(e). The Group does not have
formal policies that address the risks associated with changes in interest rates or changes in fair values on available-for-sale
financial assets.
(b) Credit risk
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
The credit risk on financial assets, other than investments, of the Group which have been recognised in the Consolidated
Statement of Financial Position is the carrying amount net of any provision for doubtful debts.
The Group has no significant concentrations of credit risk. As disclosed in Note 8 a), ‘Impairment of receivables’, The
Group has policies in place to ensure that sales of services are made to customers with appropriate credit history. Before
accepting any new customers, the Group internally reviews the potential customer’s credit quality. A substantial deposit on
contract in website development and hosting segment of the Group mitigates initial credit risk.
The Group held the following financial assets with potential credit risk exposure:
Financial assets
Cash and cash equivalents
Trade and other receivables
(c) Liquidity risk
Financial liabilities
Trade and other payables
2011
$
18,352,609
1,391,435
19,744,044
2011
$
2010
$
3,807,779
1,939,976
5,747,755
2010
$
1,470,270
1,146,296
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close-out market positions. Due to the
dynamic nature of the underlying business, the Board aims at maintaining flexibility in funding by keeping committed credit
lines and sufficient cash available.
NOTES TO THE FINANCIAL STATEMENTS
68
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
69
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
26. Financial Risk Management (Continued)
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
27. Parent Entity Information
All financial liabilities are expected to be settled within 12 months of the reporting date, per the contractual terms of the
obligations.
The following details of information are related to the parent entity, Webfirm Group Limited, at 30 June 2011. This information
has been prepared using consistent accounting policies as presented in Note 1.
(d) Cash flow and fair value interest rate risk
As the Group has no significant interest-bearing assets or liabilities (except cash), the Group’s income and operating cash
flows are not materially exposed to changes in market interest rates.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on exposure to interest rates on interest bearing bank balances
throughout the reporting period. A 100 basis point increase or decrease is used when reporting interest rate risk internally
to key management personnel and represents management’s assessment of the possible change in interest rates (also
comparable to movement in interest rates during the reporting year).
At reporting date, if interest rates had been 100 basis points higher or lower and all other variables were held constant, the
Group’s net profit would increase by $156,713 and decrease by $150,372 (2010: increase by $9,450 and decrease by $2,058).
This is mainly attributable to the Group’s exposure to interest rate on its bank balances bearing variable interest rates.
(e) Price risk
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices) (level 2), and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
All financial assets held by the Group have been classified as level 3 as the available-for-sale financial assets are unlisted
equities. The fair value of the available-for-sale financial assets were:
Available-for-sale financial assets
Investments in unlisted equities
2011
$
212,664
2010
$
-
The fair value of unlisted equities has been determined with reference to comparable equity transactions made by
the unlisted company. A gain of $106,335 has been included in other comprehensive income.
(f) Net fair value of financial assets and liabilities
The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of
the Group approximates their carrying value.
The net fair value of other monetary financial assets and financial liabilities is based upon market prices where a market
exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities with similar risk
profiles. The fair value of these assets approximates their carrying value.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
Share-based payments reserve
Available for sale investment reserve
Retained losses
Total equity
Loss for the year
Total comprehensive loss for the year
2011
$
18,110,475
13,079,873
31,190,348
233,503
-
233,503
76,547,875
5,760,673
106,335
(51,458,038)
30,956,845
(10,848,668)
(10,848,668)
2010
$
3,672,805
11,771,358
15,444,163
241,668
-
241,668
50,874,027
4,937,838
-
(40,609,370)
15,202,495
(1,245,136)
(1,245,136)
The capital commitments Note 21 includes commitments incurred by the parent entity related to leases of the old head
office premises at 23 Union Street, South Melbourne and new head office premises at 85 Coventry Street, South Melbourne
for an amount of $909,890 (2010: $189,267).
NOTES TO THE FINANCIAL STATEMENTS
70
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
DIRECTORS’ DECLARATION
71
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Notes to the Financial Statements (continued)
For the year ended 30 June 2011
28. Related Party Transactions
Other than the transactions disclosed in Note 23 relating to Key Management Personnel, there have been no related
party transactions that have occurred during the current or prior financial year.
29. Events Subsequent to Reporting Date
In August 2011 the purchaser of the AdFeed Engine, which was sold by us in September 2010, exercised their right to
terminate the Sale Agreement. As a result no further earn out payments under that sale agreement will be earned by
the Group. The amount carried at June 2011 for future earn out entitlement has been collected, as such this has no
impact of the reported profit of the Group.
Other than this there has not been any matter or circumstance occurring subsequent to the end of the financial year
that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those
operations or the state of affairs of the consolidated entity
in future years.
30. Consolidated Entities
Name
Parent entity
Country of Incorporation
Ordinary Share
Consolidated Equity Interest
2011
%
2010
%
Webfirm Group Limited
Australia
Directors’ Declaration
The directors declare that the financial statements, comprising the statement of comprehensive income, statement of
financial position, statement of changes in equity, statement of cash flows, accompanying notes, as set out on pages
24 to 70 are in accordance with the Corporations Act 2001 and:
(a) comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements in Australia;
(b) give a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance,
as represented by the results of its operations and its cash flows, for the financial year ended on that date; and
(c) the company has included in the notes to the financial statements an explicit and unreserved statement of
compliance with International Financial Reporting Standards.
In the directors’ opinion:
(a) there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
(b) the audited remuneration disclosures set out on pages 11 to 18 of the Directors’ Report comply with section 300A
of the Corporations Act 2001.
The directors have been given the declaration by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Controlled entities
Ads Alliance Pty Ltd
Adslot Pty Ltd
Ansearch.com.au Pty Ltd
Ansearch Group Services Pty Ltd
Webfirm Media Pty Ltd
Enedia Pty Ltd
Searchworld Pty Ltd
Webfirm Pty Ltd
Webfirm Search Pty Ltd
Adimise Pty Ltd
Full Circle Online Pty Ltd
QDC IP Technologies Pty Ltd
Adslot UK Limited
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
Adrian Giles
Chairman
Webfirm Group Limited
29 August 2011
INDEPENDENT AUDIT REPORT
72
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
INDEPENDENT AUDIT REPORT
73
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Independent Audit Report
Independent Audit Report
CORPORATE GOVERNANCE
74
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
CORPORATE GOVERNANCE
75
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Corporate Governance
The directors of Webfirm Group Limited have a commitment to maintain long term shareholder
value, and recognise the benefits of good corporate governance in achieving this aim.
Having regard to the size and resources available to the company, the company endeavours
at all times to comply with the Australian Stock Exchange Corporate Governance Principles and
Recommendations (‘ASX Principles’). Unless otherwise stated, the company complies with the ASX
recommendations.
Principle 1: Lay solid foundations for management and oversight
The Company has separate functions for board and senior management. The board and senior
management functions are disclosed publicly in the Company Board Charter which is published on the
Company’s website. The board meet regularly to perform their prescribed functions, including formal
meetings held each two months as well as additional ad hoc meetings where required.
Each of the board members is in regular contact with the CEO and CFO/Company Secretary. The
company has a process for evaluating the performance of senior executives, including the evaluation
of performance against key performance indicators by both the CEO and Board. The company has
yet to publish this process publicly. A performance review of the chief executive officer and senior
executives of the company has taken place prior to the date of this report, in accordance with the
established process.
Principle 2: Structure the board to add value
The Board seeks to ensure that its membership represents an appropriate balance between directors
with experience and knowledge of the company, and directors with an external or fresh perspective,
and that the size of the board is conducive to effective discussion and efficient decision making.
The Board is currently comprised of six board members, five of which are not considered independent
directors. The only independent director is Ms Tiffany Fuller.
As such, the board composition is not in accordance with ASX corporate governance principles
2.1 (majority of board members be independent) and 2.2 (independent chair). However, the board
considers that the individuals on the board can and do make quality and independent judgements in
the best interest of the company on all relevant issues.
The role of chair and chief executive officer are held by different individuals. A description of the skills
and experience of each of the directors and their period in office is contained in the Director’s Report
section of the Annual Report.
Because the Company has a board consisting of only six directors, the directors collectively perform
the functions of a nomination committee, as the directors do not consider that any increase in
efficiency or effectiveness would be achieved through the formation of a nomination committee.
The directors have access to a broad range of professional advisors who provide advice and
assistance as requested by the directors, and at the expense of the Company. The company is yet to
implement a formal process for evaluating the performance of the board, its committees or individual
directors.
Corporate Governance Statement (Continued)
Principle 3: Promote ethical and responsible decision-making
The Company has a code of conduct for directors that provides policy and guidance on matters of
conduct as directors. The aim of the code is to guide directors in the execution of their responsibilities,
to ensure all legal obligations and stakeholder requirements are considered, and to provide all
stakeholders with confidence in the integrity of the Company and the directors. The company
actively complies with this policy. The code of conduct is published on the Company’s website.
The Company has a policy concerning trading in company securities by directors and employees.
The aim of this policy to provide guidance to directors and senior employees when acquiring or
disposing of shares in the Company, and to ensure any acquisition or disposal of shares in the
Company by a director or senior employee is conducted in accordance with legal and regulatory
requirements and good corporate governance practice. The company actively complies with this
policy. This policy is published on the Company’s website.
To enable a director to carry out his or her duties, the board allows individual directors to seek
independent professional advice after discussion with the chairman in the first instance. The aim of
this practice is to ensure that all directors are in a position to have or to obtain all necessary information
required for them to make an informed decision about any matter concerning the Company. Any
necessary advice is obtained at the company’s expense and advice obtained is made available to
all directors.
The Company is committed to diversity in the work place and the benefit from accessing all available
talent. The Company has not yet adopted or published an Equality and Diversity Policy. At 30 June 2011,
Women filled 17% of the Company’s Board, 0% of the Company’s Senior Management and 16% of all
staff positions within the Company.
Principle 4: Safeguard integrity in financial reporting
During the 2010/11 financial year the audit and risk committee functions were performed by the board
collectively, however in July 2011 the Company formed an Audit & Risk Committee. Ms Tiffany Fuller
chairs the Audit & Risk Committee. Mr Chris Morris and Mr Adrian Giles are the committee’s other two
members.
As recommended by the ASX Principles the committee has at least 3 members, is chaired by an
independent chair, who is not chair of the board. It however does not have only non-executive
directors as members nor consist of a majority of independent directors.
The Audit & Risk Committee Charter can be found at the Company’s website.
The board continues to have the power to make call upon the attendance of the CEO, CFO, the
external auditor or any other person to the meeting from time to time. The directors also have access
to professional advisors who provide advice and assistance as requested by the directors.
Compliance with accounting and financial reporting standards and procedures are subject to
board review and review by the external auditors. Any non-executive director has direct access to
the external auditor and is permitted to make such enquiries of the auditor as they feel necessary.
The external auditor is invited to attend the annual general meeting and make himself or herself
available to answer any questions pertaining to the conduct of the audit, the content of the audit
report or the financial affairs of the Company.
CORPORATE GOVERNANCE
76
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
SHAREHOLDER INFORMATION
77
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Corporate Governance Statement (Continued)
Principle 5: Make timely and balanced disclosure
The company has a policy of complying with ASX disclosure requirements. The directors and senior
management have received education and training on the subject of ASX disclosure requirements.
The company actively complies with this policy. The policy is published on the Company website.
Principle 6: Respect the rights of shareholders
The company has a policy for promoting effective communication with shareholders. The company
actively complies with this policy, by way of regular ASX announcements; letters posted to
shareholders, and shareholder presentations. The Company also provides the last three years’ press
releases and announcements on our website. The policy is published on the Company website.
Principle 7: Recognise and manage risk
The directors of the Company take the management of business risk seriously, and is actively building
policies and procedures aimed at identifying, evaluating and mitigating risk.
The Company is in the early stages of the development of its risk management procedures.
The newly formed Audit & Risk Committee will formalise this process during the next financial year.
Material business risks are identified by directors or senior management are bought to the attention
of the board via the newly established audit and risk committee, and prior to the establishment of the
audit and risk committee, to the board directly. The Company has a formal business risk management
policy and plan. The policy is published on the Company website.
The area of risk considered under the risk policy include: strategic and market risk; financial; asset and
resources; personnel and productivity; intellectual property and information; product and operations;
technological and systems; and legal and compliance risk. Financial risk management, including
market risks, credit risk, liquidity risk, cash flow and fair value interest rate risk are each addressed in the
annual report of the Company.
In accordance with section 295A of the Corporation Act, the board has received assurance from both
the CEO and CFO that a system of risk management and internal control appropriate to the size and
nature of the organisation is in place and is operating effectively in all material respects.
Principle 8: Remunerate fairly and responsibly
The Company established a Remuneration Committee during the year. It met for the first time in June
2011. Prior to its establishment the directors of the full board collectively performed the functions of a
remuneration committee. The Remuneration Committee Charter is published on the Company website.
The members of the Remuneration Committee are Mr Andrew Barlow (Chair), Mr Chris Morris and Mr
Adrian Giles. The committee meets the ASX principles by having at least three members, however it is
not chaired by an independent director, nor are a majority of its members independent. Despite this
the Board believe the composition of this Remuneration Committee operates effectively. The directors
have access to professional advisors who provide advice and assistance as requested by the directors.
The non-executive directors and the executive directors and senior management of the company
have clearly distinguishable remuneration structures which are set out in documented service
agreements. Full remuneration details for directors and key executives are provided in the director’s
report and the notes to the annual financial statements in this annual report.
Shareholder Information
Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as follows.
The information is current as at 23 August 2011.
Distribution of equity securities
Ordinary Shares
Options
Number of
Holders
Number of
Shares
Number of
Holders
Number of Options
The number of shareholders by size of shareholding
in each class of shares are:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 +
TOTAL
109
268
345
1,144
765
2,631
13,846
849,917
2,791,628
47,752,750
626,654,395
678,062,536
-
-
-
-
17
-
-
-
-
74,689,592
The number of shareholders holding less than
a marketable parcel of shares (7,143 shares):
498
1,601,508
Twenty largest shareholders
Listed Ordinary Shares
Number of Shares
% of Shares
The names of the twenty largest holders of quoted shares are:
1 VENTURIAN PTY LTD
2 FINICO PTY LIMITED
3 OVERACHIEVE PTY LTD
4 ANDAMA HOLDINGS PTY LTD
5 MR ANTHONY DU PREEZ + MRS GEORGINA DU PREEZ
6 UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
7 IMAGE DIGITAL PUBLICATIONS (VICTORIA) PTY LTD
8 YARRA VENTURES PTY LTD
9 KHALON PTY LIMITED
10 PHILIP MURPHY INVESTMENTS PTY LTD
11 K PAGNIN PTY LTD
12 GPS NOMINATOR PTY LTD
13 D PAGNIN PTY LTD
14 KEO PROJECTS PTY LTD
15 YARRA VENTURES PTY LTD
16 ALCATT PTY LTD
17 RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
18 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
19 CAPITAL ACCRETION PTY LTD
20 COTU INVESTMENTS PTY LTD
Total Top 20 holders of Ordinary Shares
Remaining holders balance
Classes of Shares
56,492,031
55,148,796
27,530,041
13,434,659
12,968,051
11,578,066
10,909,091
8,706,577
7,990,330
7,110,222
7,000,000
6,897,455
6,000,000
5,829,670
5,569,629
5,487,858
5,398,308
5,313,742
5,115,384
5,100,000
8.33
8.13
4.06
1.98
1.91
1.71
1.61
1.28
1.18
1.05
1.03
1.02
0.88
0.86
0.82
0.81
0.80
0.78
0.75
0.75
269,579,910
408,482,626
39.76
60.24
Webfirm Group Limited has only one class of share on issue, being fully paid ordinary shares.
Substantial Shareholders
Chris Morris
Andrew Barlow
Voting Rights
All ordinary shares carry one vote per share without restrictions.
Shares
57,130,848
57,140,133
% Shares
8.4%
8.4%
Notes:
CORPORATE DIRECTORY
78
WEBFIRM GROUP LIMITED ANNUAL REPORT 2011
Corporate Directory
Directors
Auditors
Mr Adrian Giles – Executive Chairman
Mr David Burden – CEO/Managing Director
Mr Andrew Barlow – Executive Director
Mr Anthony Du Preez – Executive Director
Mr Chris Morris – Non-Executive Director
Ms Tiffany Fuller – Non-Executive Director
Chief Executive Officer
Mr David Burden
Company Secretary
Mr Brendan Maher
Head Office
Webfirm Group Limited
Level 2, 85 Coventry Street
South Melbourne Vic 3205 Australia
Phone: + 61 3 8695 9199
Fax: + 61 3 9696 0700
Toll free 1300 852 722
BDO Audit (NSW-VIC) Pty Ltd
The Rialto
Level 30, 525 Collins Street
Melbourne VIC 3000
Solicitors
Minter Ellison
Level 23,525 Collins Street
Melbourne VIC 3000
Bankers
National Australia Bank Limited
424 St Kilda Road
St Kilda VIC 3004
Share Register
Computershare Registry Services Pty Ltd
Yarra Falls
452 Johnston Street
Abbotsford, VIC 3001
Registered Office
Home Stock Exchange
Webfirm Group Limited
Level 2, 85 Coventry Street
South Melbourne Vic 3205 Australia
Phone: + 61 3 8695 9199
Fax: + 61 3 9696 0700
Toll free 1300 852 722
Australian Stock Exchange Limited
Level 45, South Tower
Rialto, 525 Collins St
Melbourne, VIC 3000
ASX Code: WFM
Notes:
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2011
ANNUAL
REPORT
WEBFIRM GROUP LIMITED
webfirmgroup.com
85 Coventry Street
South Melbourne
Victoria, Australia 3205
T +61 3 8695 9199
F +61 3 9696 0700
webfirmgroup.com
ASX:WFM