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AnnuAl
RepoRt
2012
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Contents
Chairman’s Report
2
Directors’ Report
3
Remuneration Report 10
Auditors Independence Declaration 18
Consolidated Statement of Comprehensive Income 19
Consolidated Statement of Financial Position 20
Consolidated Statement of Changes in Equity 21
Consolidated Statement of Cash Flows 22
Notes to the Financial Statements 23
Directors’ Declaration 63
Independent Audit Report to the Members 64
Corporate Governance Statement 67
Shareholder Information 69
Corporate Directory 71
WEBFIRM GROUP LIMITED
ABN 70 001 287 510
Annual Report
for the year ended 30 June 2012
Chairman’s Report
This year has been an exciting year for Webfirm under the leadership of Andrew Barlow as interim CEO. Andrew is a
significant shareholder and founder of the Adslot business which underpins the core focus for the company. Andrew
has spent considerable time during the last 12 months continuing to evolve a strong vision for the company,
overseeing significant new product development as well as the expansion of key roles within the management team.
Our Adslot products continue to evolve as we hoped. To recap, the Adslot division was created via the acquisition
of three core pieces of technology during 2010 (Adslot, QDC and Adimise).
The first product created from these technologies in 2011 provided customized solutions specifically aimed at major
classified publishers in Australia and New Zealand. During the 2012 financial year we then developed and released
our first non-customised version of the Adslot platform - called Adslot Premium. It took the best parts of what we
learnt from the customized versions of the product and was also the first time the same product could be sold to
more than one customer. Adslot Premium is a tool that helps classified publishers sell sponsorship opportunities more
effectively to existing advertisers, for example, realestate.com.au as a publisher selling suburb sponsorship to real
estate agents.
As with all software development we continue to invest, evolve, learn and adapt to customer feedback and
customer use of our products. As part of this evolution significant work in this financial year went into developing
two new exciting products called Adslot Direct and Adslot Create.
Adslot Direct allows any publisher (not just classifieds publishers) to sell their advertising space directly to advertisers,
online and with a credit card. By allowing advertisers to buy this advertising space themselves it can significantly
reduce sales and administration costs for publishers. It effectively automates the sales process for publishers
because their advertising space can be bought directly by an advertiser without the publishers sales people
involved. It is also a product that can be set up for a new Publisher very quickly, i.e. a matter of minutes not months.
Adslot Direct is due for public beta release in the September quarter of 2012.
Adslot Create enables advertisers to quickly and easily build banner ads from a set of professional looking
templates using an online editing tool. This turns a process that usually takes weeks into one that takes only minutes,
and also breaks down a traditional barrier for advertisers by enabling the creation of banner advertisements
quickly and cost effectively. It will also allow publishers to set up specific advertising banner templates designed
with their target advertisers in mind.
Adslot Create will also allow for a community of designers to build advertising banner templates for sale through
the Adslot platform. Adslot Create is due for public release in the December quarter of 2012.
Both Adslot Direct and Adslot Create open the market for our business to a much broader number of publisher
customers globally beyond just classified publishers.
Within the Webfirm division, the decision to exit the highly competitive website creation business and focus primarily
on online marketing services has seen that division maintain profitability since August of 2011.
The focus for the year ahead is to launch and grow the Adslot Direct and Adslot Create Products and continue our
expansion of existing products locally and in the US and European markets. Revenue growth for the business during
this period will be a factor of the number of publishers using the Adslot platform and more specifically the amount
of advertising space being purchased by advertisers using Adslot.
Adrian Giles | Chairman Webfirm Group Limited | 23 August 2012
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ChAIRMAN’S REPoRt
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 2012 and the auditor’s report thereon.
Information on Directors
Mr Adrian Giles, Mr Andrew Barlow, Mr Chris Morris and Ms Tiffany Fuller were directors
for the whole financial year and up to the date of this report.
Mr David Burden resigned from his appointment as managing director and chief
executive officer on 30 August 2011.
Mr Andrew Barlow was appointed as acting chief executive officer commencing
30 August 2011.
Mr Anthony Du Preez resigned from his appointment as an executive director
on 30 March 2012.
Mr Adrian Giles [age 38]
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.
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DIRECtoRS’ REPoRt
3
Andrew Barlow [age 39]
Executive Director and acting CEO
Mr Chris Morris [age 64]
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 a large global enterprise will aid
Webfirm 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 [ASX:CPZ].
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.
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DIRECtoRS’ REPoRt
Ms tiffany Fuller [age 42]
Non-Executive Director
Mr Brendan Maher [age 44]
Company Secretary
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 [ASX:CPZ].
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 [ASX:SKE]
prior to joining Webfirm.
Mr Maher is a member of the Institute of Chartered
Accountants in Australia and also a member of the
Australian Institute of Company Directors.
Directorships of other listed companies
Other than those disclosed on pages 3 to 5 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.
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DIRECtoRS’ REPoRt
5
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 Chris Morris
Ms Tiffany Fuller
Ordinary Shares
#
Share Options
#
18,421,288
57,140,133
62,739,318
100,000
11,800,000
7,900,000
-
-
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:
n The Adslot division allows media publishers to sell their premium advertising inventory directly to
advertisers via a self-serve channel, increasing yield and significantly reducing sales and administration
costs; and
n The Webfirm division offers online marketing services including search engine optimisation, search engine
marketing [paid search advertising], social media marketing, website hosting and website amendments.
Operating results
The consolidated operating loss after income tax attributable to the members of Webfirm Group Limited
is $7,331,658 [2011: Loss $10,341,829].
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DIRECtoRS’ ShAREhoLDINGS
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 prior year, the Company made the decision to exit the highly competitive website creation business and
focus primarily on online marketing services including, search engine optimisation, paid search marketing, social
marketing, website hosting, non-bespoke website builds and website amendments. The restructure was finalised in
August 2011, and with the significantly reduced cost base, the division was able to be profitable for the remainder of
the year.
During the year the Directors decided to undertake a strategic review of the Webfirm Division to determine the
future strategy and focus for this division. The review included the potential sale of the division. Due to its renewed
cash contribution to the business, the outcome of the review was to retain the business and continue with its new
focus on Search Engine Marketing services.
Adslot Division
The Adslot Division provides advertising sales automation services that reduce selling costs and increase advertising
revenue for its publisher clients. It was created via the acquisition of three core pieces of technology during 2010
[Adslot, QDC and Adimise].
In the financial year 2011, the Company used the technologies to provide bespoke yield optimisation solutions to
major classifieds publishers in Australia and New Zealand.
This financial year, the Company launched Adslot Premium: a tool for online classifieds publishers to optimise the
sales and yield of their premium sponsorship inventory to their existing advertisers. The Company signed four
premium classifieds publishers across the real estate, travel and automotive industry verticals this year, after
standardising the platform to enable reduced implementation timeframes for clients.
During the year, significant work also went into developing two new products: Adslot Direct and Adslot Create.
Adslot Direct allows any publisher [not just classifieds publishers] to sell premium advertising inventory via a direct,
self-serve channel, significantly reducing sales and administration costs. Adslot Direct has undergone a successful
private beta program with clients in Australia and the United States. The product is due for public beta release in the
September quarter of 2012.
Adslot Create enables advertisers to quickly and easily build banner ads from a template, turning a process that
usually takes weeks into one that takes only minutes. It will also allow publishers to create private stores with custom
template libraries exclusively for their advertisers. Adslot Create’s beta program commenced in July 2012 with a
number of clients in Australia, the United Kingdom and the United States of America. The product is due for public
release in the December quarter of 2012.
In July 2012, our USA offices opened in San Francisco to facilitate our entry into that market with our product suite.
Corporate
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 1.5% on the previous year, to $5.3 million primarily due to the exit of unprofitable web
site development in the Webfirm division. The net loss after tax at $7.3 million was a reduced loss as compared to
FY11 primarily due to impairment write downs that were taken to account in FY11 in the Webfirm division.
This result included approximately $2.9 million in non-cash losses consisting of $2.7 million in depreciation and
amortisation expenses [mostly relating to acquired intangibles relating to the Adslot division] and $0.2 million of
non-cash share based expenses.
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REVIEW oF oPERAtIoNS
7
Matters Subsequent to the end of the financial year
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 group, the results of those operations or the
state of affairs of the group in future years.
Likely future developments and expected results
Disclosure of information regarding likely developments in the operations of group in future financial years and
the expected results of those operations is likely to result in unreasonable prejudice to the group. Accordingly, this
information has not been disclosed in this report, other than the expected launch of our new products Adslot Direct
[in the September 2012 quarter] and Adslot Create [in the December 2012 quarter].
Environmental regulations
The group’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
Options over ordinary shares
Options over ordinary shares
Options over ordinary shares
Options over ordinary shares
Options over ordinary shares
Total
22 Oct 2012
31 Jan 2013
31 Jan 2013
08 Jul 2014
30 Sep 2014
30 Sep 2014
$0.090
$0.053
$0.056
$0.151
$0.116
$0.190
1,000,000
51,700,000
6,180,000
2,000,000
3,000,000
300,000
64,180,000
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
1,480,000
$0.056
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. Disclosure of the premium amount is prohibited by the insurance contract.
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REVIEW oF oPERAtIoNS
Directors’ Meetings
The following table sets out the number of meetings of the Company’s Directors held during the year ended
30 June 2012 and the number of meetings attended by each Director.
Directors
Held
Attended
Held
Attended
Held
Attended
Board of Directors
Remuneration Committee
Audit and Risk Committee
Mr Adrian Giles
Mr Andrew Barlow
Mr David Burden
Mr Anthony Du Preez
Mr Chris Morris
Ms Tiffany Fuller
6
6
1
4
6
6
6
6
1
2
5
6
1
1
-
-
1
-
1
1
-
-
1
-
4
-
-
-
4
4
4
-
-
-
3
4
During the financial year 2012 all audit & risk matters have been attended to by the Audit & Risk Committee in
consultation with the Company’s auditors.
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 2012 has been received and can be found on
page 18 of the financial report. Details of amounts paid or payable to the auditor for non-audit services provided
during the year are outlined in note 22 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year by the auditor is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001.
BDO Audit [NSW-VIC] Pty Ltd amalgamated audit and non-audit services with Grant Thornton during the year under
review. The Company has decided to continue services provided by Grant Thornton subject to approval by
shareholders at the AGM.
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REVIEW oF oPERAtIoNS
9
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.
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 to the Board.
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 long term prospects and future 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.
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REMUNERAtIoN REPoRt
Section 3: Details of remuneration
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 Andrew Barlow
Non-Executive Director
Executive Director
Acting Chief Executive Officer
Appointed 16 February 2010
From 13 April 2010
Appointed 30 August 2011
Mr Adrian Giles
Non-Executive Director
Appointed 19 December 2007
Non-Executive Chairman
Executive Chairman
Mr David Burden
Chief Executive Officer
Managing Director
Mr Anthony Du Preez
Executive Director
From 8 October 2009
From 13 April 2010
Appointed 6 February 2008
Resigned 30 August 2011
From 8 April 2008
Resigned 30 August 2011
Appointed 22 February 2010
Resigned 30 March 2012
Mr Chris Morris
Non-Executive Director
Appointed 20 September 2010
Ms Tiffany Fuller
Non-Executive Director
Appointed 20 June 2011
Executive Officers
Mr Brendan Maher
Company Secretary / Chief Financial Officer
Appointed 15 November 2010
Mr Mathew Chamley
Regional General Manager – Webfirm Pty Ltd
Appointed 28 July 2009
Resigned 20 July 2011
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REMUNERAtIoN REPoRt
11
Section 3: Details of remuneration [continued]
Group 2012
Short-term benefits
Long term
benefits
Post-
employment
benefits
Share-
based
payment
Bonus
$
Other
$
Termination
benefits
$
Super-
annuation
$
Options
& rights1
$
Total
$
% of
remuneration
that consists
of options &
shares
%
Name
Executive directors
Mr A Giles
Mr A Barlow
Salary
& fees
$
83,840
321,959
-
-
Mr D Burden [i]
133,058
79,834
Mr A Du Preez [ii]
170,915
Non-executive directors
Mr C Morris
Ms T Fuller
50,000
75,000
-
-
-
Other key management personnel
Mr B Maher
255,121
24,000
Mr M Chamley [iii]
12,113
-
Totals
1,102,006
103,834
-
-
-
-
-
-
-
-
-
-
-
6,593
13,705
-
-
-
-
-
6,525
11,831
-
-
-
-
-
-
-
-
83,840
321,959
226,010
196,451
50,000
75,000
-
-
-
-
-
-
15,775
6,365
301,261
2.1%
30,062
2,163
2,030
46,368
4.4%
50,360
36,294
8,395
1,300,889
0.6%
1 Shares issued to Mr B Maher under the Employee Share Option Scheme are in substance rights issues and have been
treated as such in the remuneration table.
[i]
to 30 August 2011
[ii] to 30 March 2012
[iii] to 20 July 2011
Bonuses
Bonuses appearing in the table above were paid for the year ended 30 June 2012 as follows:
Name
Amount
Paid
$
Amount available
in future periods
$
Total Bonus
Opportunity
$
Assessment Criteria
Mr D Burden
79,834
Mr B Maher
24,000
-
-
79,834
43,750
New client signings, client platform volumes,
divisional performance
Reporting, Governance and other performance
related KPI’s
No portion of bonuses paid to key management personnel were forfeited.
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REMUNERAtIoN REPoRt
Section 3: Details of remuneration [continued]
Group 2011
Short-term benefits
Long term
benefits
Post-
employment
benefits
Share-
based
payment
Salary
& fees
$
Bonus
$
Other
$
Termination
benefits
$
Super-
annuation
$
Options
& rights
$
Total
$
% of
remuneration
that consists
of options
%
Name
Executive directors
Mr A Giles
Mr A Barlow
86,213
67,740
-
-
-
-
Mr D Burden
308,354
87,000
2,755
Mr A Du Preez
173,191
9,001
7,086
Non-executive directors
Mr A Vanzyl [i]
Mr C Morris [ii]
Ms T Fuller [iii]
48,750
37,500
2,083
Other key management personnel
Mr G Flower [iv]
38,169
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
89,473
175,686
50.9%
61,333
129,073
47.5%
15,199
93,799
507,107
18.5%
14,884
61,330
265,492
23.1%
-
-
-
54,840
103,590
52.9%
-
-
37,500
2,083
-
-
[1,323]
19,584
3,075
32,015
91,520
35.0%
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
20.7%
Totals
1,160,973
101,001
35,760
19,584
58,454
437,574
1,813,346
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
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13
Section 4: Executive contracts of employment
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.
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.
Notice Period
of between two and six months with the exception of Mr Giles and Mr Barlow who may
All members of the key management, including executive directors, have a notice period
terminate their contract of employment immediately upon their notice.
Resignation
Retirement
Termination by
the Company
Redundancy
Employment may be terminated by giving notice consistent with the notice period.
There are no financial entitlements due from the Company on retirement of an executive.
The Company may terminate the employment agreement by providing notice consistent
with the notice period or payment in lieu of the notice period.
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.
In July 2010, the Board has ceased issuing options to eligible employees under the scheme, as it believes that
options are no longer the most effective way to remunerate employees.
The Company obtained approval at the 2011 Annual General Meeting to establish an employee incentive
scheme comprising the Webfirm Group Limited Share Option Plan and the Webfirm Group Employee Share Trust.
Rights to shares are available to be issued to eligible employees based on the performance against agreed key
performance indicators. Any rights awarded are subject to a two year service period and if this service period is not
met, the rights to shares will be forfeited by the eligible employee.
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REMUNERAtIoN REPoRt
Section 5: Equity-based compensation [continued]
The following table shows grants of share-based compensation to directors and senior management under the
ESOP for the current financial year:
During the Financial year
Name
ESOP Series
Number
Granted
Number
Vested
% of
Grant
Vested
% of
Grant
Forfeited
% of Compensation for the
year Consisting of Shares
Mr B Maher [i]
Accepted on 01 Dec 11
413,511
-
-
-
2.1%
[i] These rights were issued under the ESOP to Mr Brendan Maher under his Employment Agreement. The rights to these
shares will vest on 30 November 2013. The Company has valued these rights to shares in accordance with accounting
standards at $21,916 of which $6,365 was expensed this year.
The following rights to shares were granted to key management personnel during the year:
ESOP shares – 2012
Issue Date
Number of
Shares
Vesting Date
Exercise Price
$
01-Dec-2011
413,511
30 Nov 2013
-
Value of
shares at
grant date
$
Fair Value
Per Share
$
Date vested
and
exercisable
21,916
21,916
0.0530
-
Shares held by the Trust under the scheme will have voting and dividend rights, and the right to participate in
further issues pro-rata to all ordinary shareholders. There is no Board policy in place to limit the executive
employees’ exposure to risk in relation to securities issued as remuneration.
The following options were granted to key management personnel during the prior 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
30-Aug-2010
3,000,000
29-Aug-2014
0.096
344,700
0.1149
08-Apr-2011
344,700
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.
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15
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:
Rights/Options Granted During the Year
Rights/Options Vested During the Year
2012
2011
2012
2011
Number
$
Number
$
Number
$
Number
$
Name
Directors
Mr Adrian Giles
Mr David Burden [i]
Mr Andrew Barlow
Mr Chris Morris
Ms Tiffany Fuller
Mr Anthony Du
Preez [ii]
Mr Adrian Vanzyl [iii]
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other Key Management Personnel
Mr B Maher
413,511
$21,916
Mr M Chamley [iv]
Mr G Flower [v]
[i]
to 30 August 2011
[ii] to 30 March 2012
[iii] to 20 June 2011
-
-
[iv]
[v]
-
-
to 20 July 2011
to 13 September 2010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,900,000
$85,141
6,500,000
$93,799
3,950,000
$57,001
-
-
-
-
4,250,000
$61,330
3,500,000
$50,507
-
-
558,824
$2,030
2,000,000
$26,308
3,000,000
$344,700
-
-
309,589
$32,015
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 ESOP rights to shares granted during the year ended 30 June 2012 included:
ESOP #1
01/12/11
30/11/13
-
$0.053
45.0%
0%
3.22%
Model Input
Grant Date
Escrow End Date
Exercise Price
Price at Grant Date
Expected Volatility
Expected Dividend Yield
Risk Free Interest Rate
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Section 5: Equity-based compensation [continued]
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 Grant Date
Expected Volatility
Expected Dividend Yield
Risk Free Interest Rate
Class #1
30/08/10
08/04/11
29/08/14
$0.096
$0.070
102.9%
0%
4.80%
Details of options exercised and lapsed during the year appear in the following table:
2012
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
9,900,001
Mr D Burden
13,000,000
Mr A Du Preez
8,500,000
Mr C Morris
Ms T Fuller
-
-
Other key management personnel
Mr B Maher
-
Mr M Chamley
4,000,000
Totals
49,200,002
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
[1,480,000]1
[1,441,176]2
[2,000,001]
11,800,000
11,800,000
[2,000,001]
7,900,000
7,900,000
-
-
-
-
-
-
13,000,000
13,000,000
8,500,000
8,500,000
-
-
-
-
-
-
1,078,824
1,078,824
[1,480,000]
[1,441,176]
[4,000,002]
42,278,824
42,278,824
1 The fair value of options exercised during the period was $34,188
2 The fair value of options forfeited during the year was $33,291
This marks the end of the audited remuneration report.
This report is made in accordance with a resolution of directors.
Adrian Giles | Chairman | 23 August 2012
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17
Auditor’s Independence Declaration
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18
AUDItoR’S INDEPENDENCE DECLARAtIoN
Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2012
Total revenue from continuing operations
Other income
Website publishers & related costs
Depreciation and amortisation expenses
Finance costs
Salaries and employment related costs
Consultancy and contractor costs
Directors’ fees
Staff recruitment
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
Notes
2012 $
2011 $
3
3
4
4
4
4
4
4,682,469
5,348,965
659,129
75,781
[1,158,310]
[1,318,599]
[2,658,506]
[2,182,718]
-
[44]
[5,504,663]
[4,682,391]
[587,591]
[446,501]
[246,471]
[213,333]
[202,238]
[138,541]
[114,231]
[175,268]
[211,045]
[822,835]
[44,904]
[125,567]
[377,231]
[584,281]
[50,000]
[2,749,184]
[70,091]
[340,717]
[87,723]
[222,805]
[130,375]
[255,765]
[222,029]
[404,052]
[177,090]
[127,912]
[830,758]
[975,542]
[7,331,658]
[10,341,309]
5
-
[520]
[7,331,658]
[10,341,829]
36,452
-
36,452
[44]
106,335
106,291
Total comprehensive income attributable to the members of Webfirm Group Limited
[7,295,206]
[10,235,538]
2012 Cents
2011 Cents
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
[1.08]
[1.08]
[1.66]
[1.66]
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
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19
Consolidated Statement of
Financial Position
For the year ended 30 June 2012
Notes
2012
$
2011
$
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Total current assets
NON-CURRENT ASSETS
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
NON-CURRENT LIABILITIES
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
7
8
8
9
10
11
12
13
14
14
15
16
13,746,124
18,352,609
1,361,994
1,391,435
15,108,118
19,744,044
-
200,000
167,738
212,664
197,039
212,664
7,869,963
10,486,968
8,250,365
11,096,671
23,358,483
30,840,715
1,015,805
1,470,270
1,011,050
1,110,587
174,727
164,603
2,201,582
2,745,460
26,294
26,294
6,884
6,884
2,227,876
2,752,344
21,130,607
28,088,371
76,674,272
76,547,875
1,945,845
5,830,556
[57,489,510]
[54,290,060]
21,130,607
28,088,371
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying
notes.
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CoNSoLIDAtED StAtEMENt oF FINANCIAL PoSItIoN
Consolidated Statement of
Changes in Equity
For the year ended 30 June 2012
2012
Issued
Capital
$
Reserves
$
Accumulated
Losses
$
Total
Equity
$
Notes
Balance at 1 July 2011
76,547,875
5,830,556
[54,290,060]
28,088,371
Movement in foreign exchange translation
16
reserve
Increase in available for sale investment reserve
16
Other comprehensive income
Loss attributable to members of the company
Total comprehensive income
-
-
-
-
-
36,452
-
36,452
-
-
-
36,452
-
36,452
-
[7,331,658]
[7,331,658]
36,452
[7,331,658]
[7,295,206]
Transactions with equity holders in their capacity as equity holders
Contributions of equity, net of transaction costs
Treasury shares
Reclassification of lapsed options to retained
earnings
15
15
16
Increase in employees share based payments
16
reserve
259,413
[133,016]
-
-
-
-
-
-
259,413
[133,016]
[4,132,208]
4,132,208
-
211,045
-
211,045
Balance 30 June 2012
76,674,272
1,945,845
[57,489,510]
21,130,607
126,397
[3,921,163]
4,132,208
337,442
2011
Issued
Capital
$
Reserves
$
Accumulated
Losses
$
Total
Equity
$
Notes
Balance at 1 July 2010
50,874,027
4,901,430
[43,948,231]
11,827,226
Movement in foreign exchange translation
reserve
Increase in available for sale investment reserve
16
16
Other comprehensive income
Loss attributable to members of the company
Total comprehensive income
-
-
-
-
-
[44]
106,335
106,291
-
-
-
[44]
106,335
106,291
-
[10,341,829]
[10,341,829]
106,291
[10,341,829]
[10,235,538]
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
25,673,848
-
-
822,835
25,673,848
822,835
-
-
-
25,673,848
822,835
26,496,683
Balance 30 June 2011
76,547,875
5,830,556
[54,290,060]
28,088,371
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
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21
Consolidated Statement of
Cash Flows
For the year ended 30 June 2012
Notes
2012
$
2011
$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from trade and other debtors [inclusive of GST]
4,169,273
4,628,338
Interest received
Government grants and other receipts
1,154,422
903,194
-
75,781
Payments to trade creditors, other creditors and employees [inclusive of GST]
[10,020,116]
[9,599,365]
Interest paid
-
[44]
Net cash outflows from operating activities
25
[4,696,421]
[3,992,096]
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Proceeds from sale of fixed assets
[56,813]
[293,429]
20,274
42,903
Net cash acquired via acquisition of subsidiary
19
-
108,344
Payments for intangible assets
Payments for available-for-sale financial assets
Net cash outflows from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Payments for equity raising costs
Net cash inflows from financing activities
Net increase/[decrease] in cash held
Cash at the beginning of the financial year
Effects of exchange rate changes on cash
[13,741]
[776,888]
-
[106,329]
[50,280]
[1,025,399]
82,880
20,122,497
-
[510,233]
82,880
19,612,264
[4,663,821]
14,594,769
18,352,609
3,807,779
57,336
[49,939]
CASH AT THE END OF THE FINANCIAL YEAR
7
13,746,124
18,352,609
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
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CoNSoLIDAtED StAtEMENt oF CASh FLoWS
Notes to the Financial Statements
For the year ended 30 June 2012
1. Summary of Significant 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 2012 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 2011:
n AASB 124
Related Parties/AASB 2009-12 Amendments to Australian Accounting Standards
n AASB 2009-14 Amendments to Australian Interpretations – Prepayments of Minimum Funding Requirements
[Interpretation 14]
n AASB 2010-4
Further Amendments to Australian Accounting Standards arising from the Annual Improvement
Project
n AASB 2010-5 Amendments to Australian Accounting Standards
n AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures in Transfers of Financial Assets
n AASB 1054
Additional Australian Disclosures
n AASB 2011-1
Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence
Project
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.
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23
1. Summary of Significant 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
$4.7m 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 FY 2012 Adslot earned revenues from its first five clients on the Adslot Premium platform. During
FY 2013 the Group expects more clients to be signed up on the Adslot Premium product in addition to new revenues
from the launch of Adslot Direct and Adslot Create. Despite this it is likely net operating cash flows from operations
will be negative in FY 2013. However the directors believe the Group can continue to pay its debts as and when the
fall due for the following reasons:
n The Group has a cash position as at 30 June 2012 of $13.7m;
n Whilst the revenue from the Webfirm division is anticipated to be flat the division is expected to make continued
positive net cash flows from its operations on existing revenue levels in FY 2013; and
n 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.
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 the statement of comprehensive income 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
reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the
balance date.
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1. Summary of Significant Accounting Policies [continued]
[c] Principles of consolidation [continued]
Exchange differences are recognised in the statement of comprehensive income 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 reporting 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 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 the statement
of comprehensive income.
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 the statement of
comprehensive income. 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 the statement of comprehensive income, transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets carried at fair value through the statement of
comprehensive income are expensed in the statement of comprehensive income.
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.
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1. Summary of Significant Accounting Policies [continued]
[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.
[k] Income tax
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 tax 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.
To the extent that it is not probable that taxable profit will be available in the foreseeable future against which the
unused tax losses or unused tax credits can be utilised, the deferred tax assets of its own and its controlled entities
are not recognised by Webfirm Group Limited.
[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.
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1. Summary of Significant Accounting Policies [continued]
[l] Employee benefits [continued]
Long service leave
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.
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 the statement of comprehensive income 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 complete 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. 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 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.
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27
1. Summary of Significant Accounting Policies [continued]
[m] Intangible Assets [continued]
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.
Software
Software represents internally developed software platforms capitalised according to accounting standards.
Software is assessed as having a finite life and is amortised on a straight-line basis over the estimated useful life
of the asset. The expected accounting useful life of software is 5 years.
The carrying value of the software is tested for impairment when an indicator of impairment arises during the
reporting period.
[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 the statement of comprehensive income 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. All projects
are assigned percentages of project completion [based on actual work in progress] and all website development
revenue applicable to percentage of incomplete work is recorded as unearned revenue. Website hosting, SSL
certificate and domain name registration revenue is recorded over one year duration. While 30% of search engine
renewal revenue is recorded as earned in first month of renewal contract, the balance 70% revenue is recognised
over 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.
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NotES to thE FINANCIAL StAtEMENtS
1. Summary of Significant Accounting Policies [continued]
[p] Revenue recognition [continued]
Government grants
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 group, 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.
[t] Dividends
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.
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29
1. Summary of Significant Accounting Policies [continued]
[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 reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year.
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 reporting date was $7,869,963 [2011: $10,486,968] after
an impairment loss of $ 50,000 [2011: $2,749,184] 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 $211,045 [2011: $822,835].
Unrecognised deferred tax assets
As disclosed in Note 5, the Group has not recognised deferred tax assets relating to temporary differences, capital
losses or operating losses. Deferred tax assets are only recognised when it is probable that they will be able to be
utilised in future reporting periods. Due to the continuing operating losses, the directors have determined it not
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NotES to thE FINANCIAL StAtEMENtS
1. Summary of Significant Accounting Policies [continued]
[w] Critical accounting judgements and key sources of estimation uncertainty
[continued]
appropriate to recognise deferred tax assets until a point in time where it is probable that future taxable income
is going to be available to utilise the assets. The tax benefit of deferred tax assets not recognised is $7,626,274
[2011: $5,035,116].
Research and development tax concessions
A receivable of $659,129 [2011: nil] has been recognised in relation to a research and development tax concession
for the 2012 financial year. The actual claim is yet to be submitted with the Australian Tax Office and therefore there
remains some uncertainty in regards to the quantum of the concession to be received. The financial statements
reflect the Directors estimate of the receivable after taking into account the likelihood of each component of the
claim being received.
Contingent consideration – QDC Technologies
As detailed in Note 19, within the acquisition agreement for QDC Technologies Pty Ltd [QDC], the Company agreed
to pay further consideration of up to 13,333,333 additional shares if after eighteen [18] months the total consideration
paid to the vendors was less than $4.0 million. On 6 June 2012 all 13,333,333 additional shares became payable
and nine out of eleven vendors of QDC were issued with 8,557,576 additional shares in accordance with the QDC
acquisition agreement. The issue of additional shares to two QDC vendors who are related parties of the Company
are subject to shareholder approval which will be sought at the 2012 AGM. At reporting date, the balance deferred
vendor consideration has been estimated at $286,545 [2011: $354,776]. This balance has been recognised in other
liabilities with movements in liability during the year 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
2012 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.
n AASB 9 Financial Instruments, AASB 2009-11 and AASB 2010-7 Amendments to Australian Accounting Standards
arising from the AASB 9 sets out requirements for the classification and measurement of financial assets and
liabilities. AASB 9 will become mandatory for the Group’s 30 June 2014 financial statements. The Group will apply
this revised AASB 2009-11 and AASB 2010-7 from 30 June 2014 but it is not expected to have any impact on the
Group’s financial statements.
n AASB 10 Consolidated Financial Statements requires a parent to present consolidated financial statements as
those of a single economic entity, replacing the requirements previously contained in AASB 127 Consolidation
– Special Purpose Entities. AASB 10 will become mandatory for the Group’s 30 June 2013 financial statements.
The Group will apply AASB 10 from 30 June 2013 but it is not expected to have any impact on the Group’s
financial statements.
n AASB 11 Joint Arrangements replaces AASB 131 Interests in Joint Ventures and requires assessing the rights and
obligations to account for those rights and obligations in accordance with that type of joint agreement. AASB 11
will become mandatory for the Group’s 30 June 2013 financial statements. The Group will apply AASB 11 from
30 June 2013 but it is not expected to have any impact on the Group’s financial statements.
n AASB 12 Disclosure of Interests in Other Entities requires extensive disclosure of interests in other entities and the
effects of those interests on its financial position, financial performance and cash flows. AASB 12 will become
mandatory for the Group’s 30 June 2013 financial statements. The Group will apply AASB 12 from 30 June 2013
but it is not expected to have any impact on the Group’s financial statements.
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31
1. Summary of Significant Accounting Policies [continued]
[x] New standards and interpretations issued but not effective [continued]
n AASB 128 Investments in Associates and Joint Ventures [2011] supersedes AASB 128 Investments in Associates
and prescribes the accounting for investments in associates and sets out the requirements for the application
of the equity method when accounting for investments in associates and joint ventures. AASB 128 will become
mandatory for the Group’s 30 June 2013 financial statements. The Group will apply AASB 128 from 30 June 2013
but it is not expected to have any impact on the Group’s financial statements.
n AASB 13 Fair Value Measurement and related AASB 2011-8 Amendments to Australian Accounting Standards
arising from AASB 13 replaces the guidance on fair value measurement in existing AASB accounting literature
with a single standard. AASB 13 will become mandatory for the Group’s 30 June 2013 financial statements. The
Group will apply AASB 13 from 30 June 2013 but it is not expected to have any impact on the Group’s financial
statements.
n AASB 119 Employee Benefits [2011], AASB 2011-10 Amendments to Australian Accounting Standards arising from
AASB 119 [2011] and AASB 2011-11 Amendments to AASB 119 [September 2011] arising from Reduced Disclosure
Requirements is an amended version of AASB 119 Employee Benefits with revised requirements for pensions and
other post-employment benefits, termination benefits and other changes. AASB 12 will become mandatory for
the Group’s 30 June 2013 financial statements. The Group will apply AASB 119 from 30 June 2013 but it is not
expected to have any impact on the Group’s financial statements.
n AASB 2010-8 Amendment to Australian Accounting Standards – Deferred Tax: Recovery of 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.
n AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel
Disclosure Requirements amends AASB 124 Related party Disclosures to remove the individual key management
personnel disclosures required by Australian specific paragraphs. AASB 2011-4 will become mandatory for the
Group’s 30 June 2014 financial statements. The Group will apply AASB 12 from 30 June 2014 but it is not expected
to have any impact on the Group’s financial statements.
n AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive
Income requires entities to group items presented in other comprehensive income [OCI] on the basis of
subsequent reclassification to comprehensive income and requires tax associated with items presented
before tax to be shown separately. AASB 2011-9 will become mandatory for the Group’s 30 June 2013 financial
statements. The Group will apply this revised AASB 2011-9 from 30 June 2013 but it is not expected to have any
impact on the Group’s financial statements.
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2. Segment Information
2012
Business segments
External sales
Adslot
$
Webfirm
$
Total
$
988,202
2,818,745
3,806,947
Segment result from continuing operations
[8,325,243]
90,914
[8,234,329]
Depreciation included in segment result [note 9]
24,654
6,707
31,361
Amortisation included in segment result [note 11]
2,533,915
46,831
2,580,746
Additions to non-current assets [PP&E]
Impairment of intangibles
Statement of Financial Position
Segment assets
Segment liabilities
2011
Business segments
External sales
17,043
3,136
-
50,000
20,179
50,000
15,169,232
607,814
15,777,046
[13,480,099]
[783,344]
[14,263,443]
Adslot
$
Webfirm
$
Total
$
932,190
3,519,080
4,451,270
Segment result from continuing operations
[5,387,331]
[2,119,806]
[7,507,137]
Depreciation included in segment result [note 9]
13,171
89,971
103,142
Amortisation included in segment result [note 11]
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
17,205,397
2,018,314
19,223,711
[13,724,604]
[1,262,881]
[14,987,485]
Segment revenue reconciles to total revenue from continuing operations as follows:
Revenue
Total segment revenue
Head office revenue
Interest revenue
Intersegment eliminations
2012
$
2011
$
3,806,947
4,451,270
11,257
891,590
[27,325]
-
903,194
[5,499]
Total revenue from continuing operations
4,682,469
5,348,965
2
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2. Segment Information [continued]
A reconciliation from segment result to operating profit before income tax is provided as follows:
Segment Result
Total segment result
Interest revenue
Other revenue
Impairment of intangibles
Deferred vendor consideration
Share option expenses
2012
$
2011
$
[8,234,329]
[7,507,137]
891,590
903,194
670,386
75,781
[50,000]
[2,749,184]
[308,302]
[247,976]
[211,045]
[822,835]
Other head office expenses not allocated in segment result
[89,958]
6,848
Loss before income tax from continuing operations
[7,331,658]
[10,341,309]
Reportable segment assets are reconciled to total assets as follows:
Segment Assets
Total segment assets
Head office assets
Intersegment eliminations
2012
$
2011
$
15,777,046
19,223,710
26,816,537
31,401,109
[19,235,100]
[19,784,104]
Total assets as per the statement of financial position
23,358,483
30,840,715
Reportable segment liabilities are reconciled to total liabilities as follows:
Segment Liabilities
Total segment liabilities
Head office liabilities
Intersegment eliminations
2012
$
2011
$
[14,263,443]
[14,987,485]
[827,836]
[628,262]
12,863,403
12,863,403
Total liabilities as per the statement of financial position
[2,227,876]
[2,752,344]
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 division allows media publishers to sell their premium advertising inventory directly to advertisers via a
self-serve channel, increasing yield and significantly reducing sales and administration costs.
Webfirm
The Webfirm division offers online marketing services including search engine optimisation, search engine
marketing [paid search advertising], social media marketing, website hosting and website amendments.
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2. Segment Information [continued]
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
Segment revenue reported above represents revenue generated from external customers. Inter segment revenue
transfers of $27,325 [2011: $5,499], and corresponding expenses have been eliminated on consolidation.
Geographical information
Revenues from external customers are attributed to individual countries based on the invoiced address for the
services.
Revenue from
external customers
Non-current
assets
2012
$
2011
$
2012
$
2011
$
Continuing Operations
Australia and New Zealand
3,780,305
4,176,204
8,248,359
13,643,739
North America
Europe
-
269,567
-
10,574
-
2,006
-
2,116
Total revenue and non-current assets
from continuing operations
3,790,879
4,445,771
8,250,365
13,645,855
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35
3. Revenue and Other Income
Revenue
Revenue for services rendered
Interest income
Total revenue
Other income
R&D grant
Export marketing development grant
Total revenue and other income
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
2012
$
2011
$
3,790,879
4,445,771
891,590
903,194
4,682,469
5,348,965
659,129
26,400
-
659,129
49,381
75,781
5,341,598
5,424,746
2012
$
2011
$
7,169
53,689
2,580,746
2,028,287
70,591
100,742
2,658,506
2,182,718
Interest paid/payable to unrelated entities
-
44
Other charges against assets
Impairment of intangibles
Impairment of trade receivables
Rental expense – operating leases
Defined contribution superannuation expense
[Profit]/Loss on sale of PP&E & internally developed software
Deferred vendor consideration
Foreign currency loss
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50,000
2,749,184
70,091
340,717
377,231
584,281
362,917
[20,274]
308,302
43,541
321,782
42,903
247,976
49,895
5. Income Tax Expense
[a] Numerical reconciliation of income tax expense to prima facie tax benefit
Loss before income tax
[7,331,658]
[10,341,309]
Prima facie tax benefit on loss before income tax at 30% [2011: 30%]
[2,199,497]
[3,102,393]
2012
$
2011
$
Tax effect of:
Other non-allowable items
Share options expensed during year
Research & development tax concession
ESOP share purchase
95,011
63,314
[510,081]
[39,905]
930,429
246,851
-
-
Income tax benefit attributable to entity
[2,591,158]
[1,925,113]
Deferred tax assets relating to tax losses not recognised
2,591,158
1,925,633
Income tax expense attributable to entity
-
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
Tax losses:
Operating losses
Capital losses
Potential tax benefit [30%]
691,724
1,488,369
24,597,310
15,163,471
131,879
131,879
25,420,913
16,783,719
7,626,274
5,035,116
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.
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
13,746,124
18,352,609
2012
$
2011
$
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8. Trade and other receivables
Current:
Trade debtors
Less: Allowance for impairment
Other receivables
Prepayments
Earn-out receivable from the sale of Adfeed Engine
2012
$
2011
$
983,411
1,325,657
[470,684]
[523,190]
512,727
802,467
800,037
451,554
49,230
-
121,375
16,039
1,361,994
1,391,435
Impairment of trade receivables
Included in the allowance for impairment is an amount of $445,703 [2011: $445,703] representing a 100% provision
over an overseas debt involving a legacy business for which the Company continues recovery proceedings.
The average age of the Company’s receivables is 44 days [2011: 53 days].
[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
2012
$
2011
$
54,571
49,665
27,567
290,172
121,833
54,545
390
220,623
132,193
687,173
523,190
842,970
95,522
469,292
[108,390]
[752,287]
[39,638]
[36,785]
470,684
523,190
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 provision required in excess of the provision for impairment.
Fair value of receivables
Fair value of receivables at year end is measured to be the same as receivables net of the allowance for
impairment.
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8. Trade and other receivables [continued]
Non-current:
Employee loans
Movement in the provision for impairment: non-current receivables
Balance at beginning of the year
Amounts written off as uncollectible
Balance at the end of the year
2012
$
2011
$
-
-
-
-
-
200,000
200,000
1,363,343
[1,363,343]
-
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
2012
$
36,385
[7,594]
28,791
2011
$
96,740
[64,036]
32,704
159,090
248,593
[78,608]
[159,386]
80,482
89,207
187,116
358,994
[128,651]
[283,866]
58,465
75,128
Total carrying amount of property, plant and equipment
167,738
197,039
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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:
2012
Carrying amount at 1 July 2011
Additions
Disposals/write offs
Depreciation/amortisation expense
Carrying amount at 30 June 2012
Leasehold
Improvements
$
Plant and
Equipment
$
Computer
Equipment
$
32,704
3,256
89,207
19,587
75,128
59,000
Total
$
197,039
81,843
-
[3,367]
[30,017]
[33,384]
[7,169]
28,791
[24,945]
[45,646]
[77,760]
80,482
58,465
167,738
2011
Leasehold
Improvements
$
Plant and
Equipment
$
Computer
Equipment
$
Carrying amount at 1 July 2010
Additions
34,114
52,279
51,010
83,909
44,009
86,149
Total
$
129,133
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
10. Non-Current Assets – Other financial assets
2012
$
2011
$
Available for sale investment carried at fair value
Investment – at fair value
212,664
212,664
During the prior 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. Uncertainty exists in relation to the fair value of the Brandscreen
investment, but the directors are satisfied that it is not below the current carrying value.
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11. Non-Current Assets – Intangible Assets
Intellectual
Property
$
Domain
Name
$
Goodwill
$
Internally
developed
Software
$
Total
$
Year ended 30 June 2012
Opening net book amount
10,302,375
38,267
Acquisitions
Amortisation
Impairment of assets
-
[2,533,915]
[50,000]
-
-
-
Carrying amount at 30 June 2012
7,718,460
38,267
-
-
-
-
-
146,326
10,486,968
13,741
13,741
[46,831]
[2,580,746]
-
[50,000]
113,236
7,869,963
At 30 June 2012
Cost
Accumulated amortisation/
impairment
16,566,906
288,267
5,381,652
247,894
22,484,719
[8,848,446]
[250,000]
[5,381,652]
[134,658]
[14,614,756]
Carrying amount at 30 June 2012
7,718,460
38,267
-
113,236
7,869,963
Intellectual
Property
$
Domain
Name
$
Goodwill
$
Internally
developed
Software
$
Total
$
Year ended 30 June 2011
Opening net book amount
5,537,106
30,805
2,500,000
341,524
8,409,435
Acquisitions
Amortisation
Impairment of assets
Disposal of assets
6,737,572
7,462
249,184
-
6,994,218
[1,972,303]
-
-
-
-
-
-
[55,984]
[2,028,287]
[2,749,184]
-
[2,749,184]
-
-
[139,214]
[139,214]
146,326
10,486,968
Carrying amount at 30 June 2011
10,302,375
38,267
At 30 June 2011
Cost
Accumulated amortisation/
impairment
16,566,906
288,267
5,381,652
234,154
22,470,979
[6,264,531]
[250,000]
[5,381,652]
[87,828]
[11,984,011]
Carrying amount at 30 June 2011
10,302,375
38,267
-
146,326
10,486,968
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11. Non-Current Assets – Intangible Assets [continued]
Goodwill
The Goodwill balances related 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
Domain names
Domain names opening carrying value of $38,267 relates to the various domain names held by Webfirm CGU and
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”] owned by Enterprise Point Pty Ltd and its controlled entities
[“Enterprise”]. $5,932,006 of opening balance relates to this “CAP” technology.
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.
Accumulated amortisation of this asset as at 30 June 2012 was $2,817,702 [2011: $1,631,301]. The amortisation period
of the intangible asset is five years on a straight line basis.
Adimise Pty Ltd [“Adimise”] holding online ad-serving technology had $271,055 of Ad-serving IP in the opening
balance and attached to the Adslot CGU.
The directors have assessed the accounting useful life of the Adimise Licences for accounting purposes to be five
years.
Accumulated amortisation of this asset as at 30 June 2012 was $108,422 [2011: $54,211]. The amortisation period of the
intangible asset is five years on a straight line basis.
QDC IP Technology [“QDC”] holding video advertising technology had licences to the Core IP valued at $6,466,517
in opening balance and attached to Adslot CGU.
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 2012 was $2,024,994 [2011: $731,691]. The amortisation period of
the intangible asset is five years on a straight line basis.
Software
The $146,326 opening balance in internally development software is related to costs associated with two internally
developed software platforms attached to Webfirm CGU, capitalised according to accounting standards.
The Directors are of the opinion that these software developments have a limited five year useful life and hence
have been amortised accordingly by $46,831 [2011: $46,830].
During June 2012, research & development related wage costs attached to the Adslot CGU were capitalised
according to accounting standards, amounting to $13,741 [2011: nil].
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12. Current liabilities – Payables
Trade creditors
Other creditors
13. Current liabilities – Other
Current:
Unearned revenue [i]
Deferred vendor consideration – QDC [ii]
2012
$
2011
$
72,618
241,130
943,187
1,229,140
1,015,805
1,470,270
2012
$
2011
$
724,505
755,811
286,545
354,776
1,011,050
1,110,587
[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 reporting date.
[ii] Deferred vendor consideration is the estimated value at 30 June 2012 of the balance additional shares that became
due on 6 June 2012 as further vendor consideration from the acquisition of QDC. As two of the QDC vendors were
related parties, shareholder approval is required prior to issue of these shares.
14. Current Provisions
Current:
Employee benefits
Non current:
Employee benefits
15. Contributed equity
2012
$
2011
$
174,727
164,603
26,294
6,884
2012
Number
2011
Number
2012
$
2011
$
Ordinary Shares – Fully Paid
687,567,332
681,698,900
76,674,272
76,547,875
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.
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15. Contributed equity [continued]
Movements in Paid-Up Capital
Date
Details
Number of
shares
Number
Issue
price
$
Capital
raising costs
$
Value
$
30-Jun-10 Balance
491,821,809
423,670
50,874,027
08-Jul-10
Issue of shares to Adimise Pty Ltd vendor
2,143,214
08-Jul-10
Issue of shares to Full Circle Online Pty Ltd vendor
2,142,500
0.115
0.115
31-Aug-10
Exercise of employee options
800,000
0.100
-
-
-
246,470
246,387
80,000
14-Sep-10
Share Placement - professional investors
21,153,845
0.130
181,390
2,568,610
17-Sep10
Share Placement - professional investors
37,096,155
0.130
13-Oct-10
Exercise of options - sub-underwriter
1,000,000
0.090
-
-
4,822,500
90,000
29-Oct-10
Share Placement
94,412,286
0.130
328,843
11,944,834
07-Dec-10
Issue of shares to QDC IP Technologies Pty Ltd
vendor
29,309,091
0.190
28-Feb-11
Exercise of employee options
100,000
0.100
23-Mar-11
Exercise of employee options
1,300,000
0.056
11-Apr-11
Exercise of employee options
420,000
0.056
-
-
-
-
5,568,727
10,000
72,800
23,520
30-Jun-11
Balance
681,698,900
933,903
76,547,875
06-Feb12
Exercise of employee options
1,480,000
0.056
20-Mar-12 Cancellation of shares held in escrow
[2,000,000]
0.100
06-Jun-12
Issue of shares - QDC deferred vendor consideration
8,557,576
0.044
-
-
-
82,880
[200,000]
376,533
30-Jun-12
689,736,476
933,903
76,807,288
Less: Treasury shares1
[2,169,144]
0.061
-
[133,016]
30-Jun-12 Balance
687,567,332
933,903
76,674,272
1 Treasury shares
Treasury shares are shares in Webfirm Group Limited that are held by the Webfirm Group Employee Share Trust
which was formed on 1 December 2011 to administer the Webfirm Group Share Ownership Plan [ESOP]. This Trust has
been consolidated in accordance with note 1 [c]. Shares held by the Trust on behalf of eligible employees are
shown as treasury shares in the financial statements.
Shares issued under the ESOP are held in escrow for a period of two years subject to ongoing employment with the
Group. Employees may elect not to participate in the scheme.
Shares issued under this scheme will, subject to the provision of the Trust deed, rank equally in all respects and will
have same rights and entitlements as ordinary shares under the Constitution of the Group.
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
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U
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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:
Issue Type
Notes
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
30/06/12
0.100
6,000,003
Ordinary options
30/06/12
0.100
350,000
Ordinary options
22/10/12
0.090
1,000,000
Ordinary options
31/01/13
0.053
51,700,000
Ordinary options
31/01/13
0.056
10,180,000
Ordinary options
08/07/14
0.151
2,000,000
Ordinary options
29/08/14
0.096
309,589
Ordinary options
30/09/14
0.116
3,000,000
Ordinary options
30/09/14
0.190
300,000
74,839,592
-
-
-
-
-
-
-
-
-
-
[6,000,003]
[350,000]
-
-
-
-
-
-
-
-
1,000,000
51,700,000
[1,441,176]
[1,480,000]
7,258,824
-
[309,589]
-
-
-
-
-
-
2,000,000
-
3,000,000
300,000
[8,100,768]
[1,480,000]
65,258,824
Employee ESOP shares issued and outstanding at the end of year the year are summarised below:
Issue Type
Valuation
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]
Escrow
End Date
Employee ESOP
30/11/13
Employee ESOP
01/12/13
Employee ESOP
12/12/13
Employee ESOP
18/01/14
0.053
0.060
0.064
0.060
-
-
-
-
-
413,511
88,967
833,333
833,333
2,169,144
-
-
-
-
-
-
-
-
-
-
413,511
88,967
833,333
833,333
2,169,144
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
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I
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45
16. Reserves
Reserves
Share–based payments reserve
Available for sale investment reserve
Foreign currency translation reserve
Share–based payments reserve
Opening balance
Reclassification of lapsed options
Share based payment 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
Transfer to retained earnings 1
Closing balance
2012
$
2011
$
1,839,510
5,760,673
106,335
106,335
-
[36,452]
1,945,845
5,830,556
5,760,673
4,937,838
[4,132,208]
-
211,045
822,835
1,839,510
5,760,673
106,335
-
106,335
-
106,335
106,335
[36,452]
[36,408]
-
36,452
[44]
-
-
[36,452]
1 The foreign currency translation reserve was transferred to retained earnings due to the exit of the
Ansearch Inc business.
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.
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
o
R
G
M
R
I
I
F
B
E
W
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NotES to thE FINANCIAL StAtEMENtS
17. Earnings Per Share
2012
Cents
2011
Cents
[a] Basic earnings per share
Loss attributable to the ordinary equity holders of the Company
[1.08]
[1.66]
[b] Diluted earnings per share
Loss attributable to the ordinary equity holders of the Company
[1.08]
[1.66]
[c] Reconciliation of earnings used on calculating earnings per share [i]
Loss from continuing operations attributable to the members of the Company used
[7,331,658]
[10,341,829]
on calculating basic and diluted earnings per share
2012
$
2011
$
2012
Number
2011
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
681,316,767
623,779,891
[e] Weighted average number of shares used as the denominator
Weighted average number of shares on issue used in the calculation of diluted EPS
681,316,767
623,779,891
[i] During 2012 and 2011 there were no discontinued operations or values attributable to minority interests.
Weighted average number of options that could potentially dilute basic earnings
74,062,833
82,793,127
per share in the future, but are not included in the calculation of diluted EPS
because they are anti-dilutive for the period presented.
2012
Number
2011
Number
18. Discontinued Operations
There were no discontinued operations during the year ended 30 June 2012.
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
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G
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I
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47
19. Business Combinations
2012
There were no business combinations during the year ended 30 June 2012.
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.
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:
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
Acquirees’
Carrying
Amount
$
Fair Value
$
$
492,857
106,855
106,855
197,177
8,425
197,177
8,425
[333,197]
[333,197]
[6,643]
16,943
-
-
[6,643]
-
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.
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
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NotES to thE FINANCIAL StAtEMENtS
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:
Cash
Equity – 29,309,091 fully paid ordinary shares of Webfirm Group Limited @ 19.0 cents per share
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 as at 30 June 2011. The movement in fair value of contingent consideration is taken to the Statement of
Comprehensive Income.
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
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.
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
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L
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49
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
2012
$
2011
$
296,425
558,282
261,188
676,541
557,613
1,234,823
The lease commitments detailed above relate to rental premises and lease rental of printer/copier.
Capital commitments
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.
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
90,000
2012
$
2011
$
Other services
Indirect tax services
39,500
129,500
-
90,000
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
o
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G
M
R
I
I
F
B
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NotES to thE FINANCIAL StAtEMENtS
23. Key Management Personnel Disclosures
Directors
The following persons were directors of the Company during the financial year:
n Mr Adrian Giles [Executive Chairman]
n Mr Andrew Barlow [Executive Director]
n Mr David Burden [Managing Director] [resigned 30 August 2011]
n Mr Anthony Du Preez [Executive Director] [resigned 30 March 2012]
n Mr Chris Morris [Non-Executive Director]
n Ms Tiffany Fuller [Non-Executive Director]
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
Position
n Mr Brendan Maher Chief Financial Officer and Company Secretary
n Mr Mathew Chamley Regional General Manager Webfirm P/L [resigned 20 July 2011]
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Termination benefits
Share based payments
Total compensation
2012
$
2011
$
1,205,840
1,297,734
36,294
58,454
-
50,360
8,395
-
19,584
437,574
1,300,889
1,813,346
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
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R
G
M
R
I
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51
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
Balance at
beginning
$
Loans
granted
$
Interest
charged
$
Amounts
repaid/
set off
$
Balance
at end
$
Number
in group
2012
2011
200,000
200,000
-
-
-
-
[200,000]
-
-
200,000
-
1
Key management personnel with loans above $100,000 in the reporting period:
Balance at
beginning
$
Loans
granted
$
Interest
charged
$
Amounts
repaid/
set off
$
Balance
at end
$
Highest
in period
$
2012
D. Burden
200,000
2011
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], on escrow [subject to settlement of loan]
in the Company. The loan was provided on an interest free basis. The loan was approved by shareholders at
an Extraordinary General Meeting held 16 September 2008. Mr Burden resigned on 30 August 2011 and the loan
became due and payable at the end of February 2012. These shares were cancelled in March 2012. The interest
not charged, calculated at the statutory interest rate of 7.80% for the year ended 30 June 2012, was $11,210.
Business Acquisitions:
No related party transactions during the year ended 30 June 2012.
Transactions with Directors and their personally related entities:
During the year payments of $90,575 were made to Venturian Pty Ltd an entity related to Mr Andrew Barlow for
consulting services on normal terms and conditions. Payments of $271,000 were also made to Venturian Pty Ltd for
Andrew Barlow’s services as CEO of the Group, which is included in key management personnel compensation.
During the year receipts of $86,623 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.
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
o
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G
M
R
I
I
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B
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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:
2012
Name
Directors
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]
Mr A Giles
13,800,001
Mr A Barlow
9,900,001
Mr D Burden
13,000,000
Mr A Du Preez
8,500,000
Mr C Morris
Ms T Fuller
-
-
Other key management personnel
Mr M Chamley
4,000,000
Mr B Maher
-
Totals
49,200,002
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
[2,000,001]
11,800,000
11,800,000
[2,000,001]
7,900,000
7,900,000
-
-
-
-
13,000,000
13,000,000
8,500,000
8,500,000
-
-
-
-
[1,480,000]
[1,441,176]
1,078,824
1,078,824
-
-
-
-
[1,480,000]
[5,441,178]
42,278,824
42,278,824
2011
Name
Directors
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]
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
-
-
-
-
-
-
-
-
-
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
-
-
-
-
[800,000]
[400,000]
3,500,000
3,500,000
-
-
-
-
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
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
o
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53
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.
2012
Name
Ordinary shares
Directors
Mr A Giles
Mr A Barlow
Mr D Burden*
Mr A Du Preez*
Mr C Morris
Ms T Fuller
Other key management personnel
Mr B Maher
Mr M Chamley*
Totals
Held at
1 July 2011
18,421,288
57,140,133
5,631,499
12,968,051
57,130,848
100,000
-
229,089
151,620,908
*shareholding effective as at date of resignation
Received
during the
year on
exercise of
options
Received
during the
year as
compensation
Net other
changes
during the
year
Held at
30 June 2012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,421,288
57,140,133
[5,631,499]
[12,968,051]
-
-
5,608,470
62,739,318
-
-
[229,089]
100,000
-
-
[13,220,169]
138,400,739
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
-
-
-
-
-
-
-
-
-
2
1
0
2
t
R
o
P
E
R
L
A
U
N
N
A
D
E
t
I
M
L
P
U
o
R
G
M
R
I
I
F
B
E
W
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
54
NotES to thE FINANCIAL StAtEMENtS
-
-
-
-
-
-
-
-
-
-
-
-
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
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 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 Company has valued these options in accordance with accounting standards. The total value of these options
vested was assessed at $2,030. 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.
1,480,000 options provided as remuneration were exercised during the year.
There were no options granted to employees of the Webfirm Group during the year in return for services rendered.
In July 2010, the Board has ceased issuing options to eligible employees under the scheme, as it believes that
options are no longer the most effective way to remunerate employees.
The Company obtained approval at the 2011 Annual General Meeting to establish an employee incentive
scheme comprising the Webfirm Group Limited Share Option Plan and the Webfirm Group Employee
Share Trust.
Rights to shares are available to be issued to eligible employees based on the performance against agreed key
performance indicators. Any rights awarded are subject to a two year service period and if this service period is not
met, the rights to shares will be forfeited by the eligible employee.
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24. Share Based Payments [continued]
The following table shows grants of share-based compensation to directors and senior management under the
ESOP for the current financial year:
Grant
Date
Escrow
End
Date
Valuation
Price
$
Balance
at start of
the year
(Number)
Granted
during
the year
(Number)
Vested
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)
01/12/11
30/11/13
0.053
02/12/11
01/12/13
0.060
13/12/11
12/12/13
0.064
19/01/12
18/01/14
0.060
Total
-
-
-
-
-
413,511
88,967
833,333
833,333
2,169,144
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
413,511
88,967
833,333
833,333
2,169,144
-
-
-
-
-
Weighted average share price
$0.000
$0.060
$0.000
$0.000
$0.000
$0.060
$0.000
Weighted average remaining contractual life at 30 June 2012 [days]
542
The model inputs for ESOP rights to shares granted during the year ended 30 June 2012 included:
Model Input
ESOP #1
ESOP #2
ESOP #3
ESOP #4
Grant Date
Exercise Date
01/12/11
02/12/11
13/12/11
19/01/12
01/12/13
02/12/13
13/12/13
19/01/14
Escrow End Date
30/11/13
01/12/13
12/12/13
18/01/14
Exercise Price
Price at Grant Date
Expected Volatility
Expected Dividend Yield
Risk Free Interest Rate
-
$0.053
45.0%
0%
3.22%
-
$0.060
45.0%
0%
3.22%
-
$0.064
49.0%
0%
3.08%
-
$0.060
54.0%
0%
3.21%
ESOP rights to shares are valued using the Binomial option pricing model.
Other Options Issued
There were no other options issued during the year.
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24. Share Based Payments [continued]
2012
Grant
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)
Expiry
Date
Vested and
exercisable
at the end
of the year
(Number)
-
[300,000]
[50,000]
27/08/08
30/06/12
0.100
350,000
23/09/08
30/06/12
0.100
6,000,003
21/10/09
22/10/12
0.090
1,000,000
16/02/10
31/01/13
0.053
51,700,000
16/02/10
31/01/13
0.056
10,180,000
28/07/10
08/07/14
0.151
2,000,000
30/08/10
29/08/14
0.096
309,589
14/10/10
30/09/14
0.116
3,000,000
14/10/10
30/09/14
0.190
300,000
-
-
-
-
-
-
-
-
-
- [6,000,003]
-
-
[1,480,000]
-
-
-
-
-
-
-
-
[309,589]
-
-
-
-
-
-
1,000,000
1,000,000
51,700,000
51,700,000
-
-
-
[1,441,176]
7,258,824
7,258,824
-
-
-
-
2,000,000
666,667
-
-
3,000,000
1,000,000
300,000
100,000
Total
74,839,592
- [1,480,000] [6,609,592]
[1,491,176] 65,258,824
61,725,491
Weighted average exercise price
$0.064
$0.000
$0.056
$0.100
$0.057
$0.060
$0.056
Weighted average remaining contractual life at 30 June 2012 [days]
260
2011
Grant
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)
Expiry
Date
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
Options are valued using the Binomial option pricing model.
There were no options granted during the year ended 30 June 2012.
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24. Share Based Payments [continued]
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
$0.070
102.9%
0%
4.80%
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.
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
[Profit]/Loss on asset write off
Unrealised foreign currency [loss]/gain
Changes in assets and liabilities [net of effects of acquisition and disposal of entities]
[Increase]/Decrease in receivables
[Decrease]/Increase in payables and other provisions
Net cash outflow from operating activities
2012
$
2011
$
[7,331,658]
[10,341,829]
2,658,506
2,182,718
50,000
2,749,184
211,045
822,835
70,091
340,717
[20,274]
43,541
42,903
49,895
[40,650]
208,074
(337,022)
(46,593)
[4,696,421]
[3,922,096]
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NotES to thE FINANCIAL StAtEMENtS
26. Financial Risk Management
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.
[a] Market risks
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:
2012
$
2011
$
Financial assets
Cash and cash equivalents
13,746,124
18,352,609
Trade and other receivables
1,361,994
1,391,435
[c] Liquidity risk
Financial liabilities
15,108,118
19,744,044
2012
$
2011
$
Trade and other payables
1,015,805
1,470,270
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.
All financial liabilities are expected to be settled within 12 months of the reporting date, per the contractual terms
of the obligations.
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26. Financial Risk Management [continued]
[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 $163,667 and decrease by $155,139 [2011: increase by $156,713
and decrease by $150,372]. 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:
2012
$
2011
$
Available-for-sale financial assets
Investments in unlisted equities
212,664
212,664
The fair value of unlisted equities has been determined with reference to comparable equity transactions made
by the unlisted company. No change in the fair value of the investments has occurred since the end of the end of
the prior financial year.
[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.
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NotES to thE FINANCIAL StAtEMENtS
27. Parent Entity Information
The following details of information are related to the parent entity, Webfirm Group Limited, at 30 June 2012.
This information has been prepared using consistent accounting policies as presented in Note 1.
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
2012
$
2011
$
12,887,682
18,110,475
13,209,612
13,079,873
26,097,294
31,190,348
168,682
233,503
-
-
168,682
233,503
76,807,288
76,547,875
1,839,510
5,760,673
106,335
106,335
[52,824,521]
[51,458,038]
25,928,612
30,956,845
[11,547,299]
[10,848,668]
[11,547,299]
[10,848,668]
The 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 $544,537 [2011: $909,890]
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
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 group, the results of those operations or
the state of affairs of the group in future years.
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61
30. Consolidated Entities
Name
Parent entity
Webfirm Group Limited
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
Adslot Inc.
Country of
Incorporation
Ordinary Share
Consolidated Equity Interest
2012
%
2011
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
United States
-
100
100
100
100
-
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
Equity interests in all controlled entities are by way of ordinary shares.
* Companies were deregistered during the year.
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NotES to thE FINANCIAL StAtEMENtS
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 19 to 62 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 group’s financial position as at 30 June 2012 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 10 to 17 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.
Adrian Giles | Chairman Webfirm Group Limited | 23 August 2012
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DIRECtoRS’ DECLARAtIoN
63
Independent Audit Report
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INDEPENDENt AUDIt REPoRt
Independent Audit Report
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INDEPENDENt AUDIt REPoRt
65
Independent Audit Report
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INDEPENDENt AUDIt REPoRt
Corporate Governance Statement
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. 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 four board members,
three 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 four 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.
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.
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67
Corporate Governance Statement
[continued]
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 2012 Women
filled 25% of the Company’s Board, 0% of the Company’s
Senior Management and 21% of all staff positions within
the Company.
Principle 4: Safeguard integrity
in financial reporting
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.
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, which is managed
via the Audit & Risk Committee.
Material business risks that are identified are bought
to the attention of the Board or via the Audit and Risk
Committee. 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 operates a Remuneration Committee and
its 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.
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CoRPoRAtE GoVERNANCE StAtEMENt
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 20 August 2012.
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
The number of shareholders holding less than
a marketable parcel of shares [16,667 shares]:
117
244
323
13,632
760,014
2,628,448
1,062
44,579,951
792
641,754,431
2,538
689,736,476
889
6,196,146
Twenty largest
shareholders
The names of the twenty largest holders of quoted shares are:
1
2
3
4
5
6
7
8
9
10
11
12
VENTURIAN PTY LTD
K PAGNIN PTY LTD Continue reading text version or see original annual report in PDF
format above