Contents Chairman’s Report Directors’ Report 3 4 Remuneration Report 10 Auditor’s Independence Declaration 19 Consolidated Statement of Profit or Loss and Other Comprehensive Income 20 Consolidated Statement of Financial Position 21 Consolidated Statement of Changes in Equity 22 Consolidated Statement of Cash Flows 23 Notes to the Financial Statements 24 Directors’ Declaration 63 Independent Audit Report to the Members 64 Corporate Governance Statement 67 Shareholder Information 70 Corporate Directory 72 Adslot Ltd ABN 70 001 287 510 Annual Report for the year ended 30 June 2013 2 Adslot | Annual Report 2013 Directors’ Report Chairman’s Report Chairman’s Report Our key strategic focus for the year was to sign a diverse catalogue of publishers to our Adslot Publisher platform. The Adslot Publisher platform was launched in October 2012, and was the culmination of our transition from creating highly customised versions of our technology for each publisher, to creating one version that would appeal to a broad range of publishers. Since launch we have secured over 650 publishers across the US, UK, Europe and Australia, in the process signing some of the most prominent publishers such as eBay, Star Tribune, Lycos, National Public Media and the worlds largest news site The Daily Mail. Publishers are adopting the Adslot platform because they see significant benefits in automating their online display advertising sales. The next phase of our strategy sees the launch of the Adslot marketplace. Our marketplace will allow advertisers and agencies to profile, plan and purchase premium display inventory across multiple Adslot publishers simultaneously. Adslot’s marketplace capability will be released at the end of the September quarter, followed by a global launch in October 2013. In order to generate the scale required to create liquidity in our marketplace, we are working to establish partnerships with companies and technologies that already work with large advertising agencies and large publishers. Advertising agencies in particular control a significant majority of the demand for display advertising space online and so capturing this demand through partnerships is crucial to the success of the Adslot business. We recently announced a partnership with Nextmark – a technology provider to US agencies – which will see their client base able to access and purchase premium display inventory directly from Adslot’s publisher catalogue. We look forward to announcing more partnerships to help grow our publisher catalogue and importantly bring advertiser demand to increase sales of display advertising for our publishers. Adrian Giles | Chairman Adslot Ltd | 28 August 2013 Directors’ Report Chairman’s Report Adslot | Annual Report 2013 3 Directors’ Report Your Directors present their report, together with the financial report of Adslot Ltd [formerly Webfirm Group Limited] ACN 001 287 510 [‘the Company’] and its controlled entities [“the Group”] for the financial year ended 30 June 2013 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 Andrew Barlow resigned from his appointment as acting chief executive officer on 8 October 2012. | Mr Ian Lowe was appointed as executive director and chief executive officer on 8 October 2012. Mr Adrian Giles Non-Executive Chairman Andrew Barlow Non-Executive Director [age 39] [age 40] Adrian Giles is an entrepreneur with businesses in the Internet, information technology and manufacturing industries. In 1997 Adrian co-founded Sinewave Interactive which researched and pioneered the concept of marketing a website using search engines and was the first company in Australia to offer Search Engine Optimisation [SEO] as a service. In 1998 Adrian co-founded Hitwise which grew over 10 years to become one of the most recognised global internet measurement brands operating successfully in the USA, UK, Australia, NZ, Hong Kong, and Singapore. Whilst positioning the company for a NASDAQ listing in early 2007 Hitwise was sold to Experian [LSE: EXPN] in one of Australia’s most successful venture backed Internet trade sales. Adrian is a member of the Remuneration Committee and the Audit & Risk Committee. 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. 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. 4 Adslot | Annual Report 2013 Directors’ Report Directors’ Report Mr Ian Lowe CEO and Executive Director Ms Tiffany Fuller Non-Executive Director [age 43] [age 43] Ian Lowe is one of Australia’s most experienced digital media executives, having built and run a number of successful global media technology companies from Australia. He has also forged an impeccable reputation in the advertising, media and technology community domestically and internationally, and has a deep understanding of both agency [demand-side] and publisher [supply-side] businesses. Mr Lowe previously held the role of Chief Executive Officer of Facilitate Digital Ltd and, prior to that, worked for and managed numerous other media and media technology businesses including Traffion, Red Sheriff, PMP Limited, and George Patterson Bates. Mr Chris Morris Non-Executive Director [age 65] 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 Adslot in its international expansion aspirations. Chris is a member of the Remuneration Committee and also the Audit & Risk Committee. Chris is also Chair of Smart Parking Limited [ASX:SPZ]. 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 super- annuation 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 Smart Parking Limited [ASX:SPZ]. Mr Brendan Maher Company Secretary [age 45] Brendan Maher joined the Company in 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 Adslot. Mr Maher is a member of the Institute of Chartered Accountants in Australia and also a member of the Australian Institute of Company Directors. Directors’ Report Directors’ Report Adslot | Annual Report 2013 5 Directorships of other listed companies Other than those disclosed on pages 4 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. 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 Ian Lowe Mr Chris Morris Ms Tiffany Fuller Share Rights # Share Options # Ordinary Shares # 19,633,409 62,803,769 - - - 20,000,000 70,410,696 100,000 - - - - - - - Remuneration of directors and senior management Information about the remuneration of directors and senior management is set out in the remuneration report of this directors’ report. Principal activities The company operates two main divisions: The Adslot division provides advertising sales automation services that reduce selling costs and increase advertising revenue for publishers. It has three main products: ADSLOT PUBLISHER [previously known as Adslot Direct] is a platform that automates the direct sale of online display advertising inventory – helping online publishers automate sales and grow profitability. Adslot Publisher allows advertisers to find and buy guaranteed, brand safe advertising inventory and develop creative content through a simple self-serve process. ADSLOT CREATE makes the creation of online display advertising content easy. Online publishers can drive more direct sales by empowering advertisers of all sizes to develop their own high quality creative with Adslot Create’s simple yet powerful editing tools. Adslot Create reduces the time to develop creative from weeks to minutes. ADSLOT ENTERPRISE provides online publishers with all the benefits of Adslot Publisher, but as an integrated solution and incorporating auction technology. The Webfirm division offers online marketing services including search engine optimisation, search engine marketing [paid search advertising], social media marketing, website hosting and website development. Operating Results The consolidated operating loss before interest, income tax, depreciation and amortisation [EBITDA] is $4,275,300, compared to a loss for the prior year of $5,564,742. The consolidated operating loss after income tax is $6,460,947, compared to a loss for the prior year of $7,331,658. 6 Adslot | Annual Report 2013 Directors’ Report Review of Operations Review of Operations 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]. Once the technologies were integrated and further innovated it was successfully sold and implemented into a small number of large online classifieds publishers in Australia and New Zealand. From FY 2012 the Company began to focus on increasingly productised iterations of its technology [versus what were previously highly customised installations], and correspondingly feature sets that would appeal to a broader set of online publishing businesses. Leveraging its various technology assets and knowledge acquired from working closely with publishers, in October 2012 the Company launched Adslot Publisher. Adslot Publisher is a purpose built platform that allows any online publisher to expose premium inventory into a purpose designed buying interface, from which an advertiser can purchase direct from the publisher via an entirely electronic process. Since October 2012 the Company has signed 657 publishers across US, UK, Europe and Australia to the Adslot Publisher platform. The next phase of Adslot’s strategy will see this diverse and growing catalogue of publishers assembled into a marketplace, in which large, sophisticated advertisers – such as media agencies – will be able to plan and buy premium display advertising inventory across multiple publishers simultaneously. Adslot’s marketplace capability will be released at the end of the [current] September quarter, followed by a global launch in October 2013. This product will be known as Adslot Media. Adslot is also in the process of partnering with organisations already servicing large buyers – such as media agencies – and large publishers. This is to optimise scale of supply and demand, and in turn optimise marketplace liquidity. Adslot Create was also released as a stand-alone product in FY 2013, enabling advertisers to quickly and easily build banner ads via a library of banner ad design templates. This capability transforms a process of days into minutes, in the process removing manual labour and associated cost. Adslot Create is also a key component in all customised installations, as it is also in Adslot Publisher for advertisers that do not have appropriate creative assets readily available. Webfirm division The Webfirm division offers products and services aimed at helping small and medium enterprise customers grow their business online. Despite FY 2013 sales slightly reducing to $2.6 million the Webfirm division contributed a profitable result of $0.3 million after covering its share of corporate costs. Whilst the Webfirm divisions strategic focus changed to primarily Search Engine Marketing services for its client base last year it has also successfully refocused on providing website development for new and existing clients. Corporate Adslot Ltd 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 on the previous year, to $4.7 million primarily due to the winding back of unprofitable legacy businesses in the Group. The net loss after tax at $6.4 million was a reduced loss as compared to FY12 primarily due to lower operating costs. This result included approximately $3.1 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 $0.4 million of non-cash share based expenses. Directors’ Report Review of Operations Adslot | Annual Report 2013 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 developments and business strategies In September 2013 the Company will undertake a first release of its marketplace via the release of Adslot Media, a purpose- designed buying interface for large buyers such as media agencies. Adslot Media will include advanced buying tools such as advanced inventory filtering tools, data driven audience profiling and programmatic optimisation of budget allocation. The Company expects it will take 2 quarters post global launch in October to drive adoption of the platform, the growth of which we expect to drive significant increase in Group revenue in the years to come. Whilst the Company expects growth in revenues from Adslot Create, Adslot Publisher and to a lesser extent Adslot Enterprise and the Webfirm Division, the majority of revenue growth will be derived from the Adslot Media platform. The Company expects to continue to incur net underlying operational cash outflows during FY 2014, but the extent and timing of these are largely subject to the adoption rate of Adslot Media. 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: Type Expiry Date Exercise Price Options over ordinary shares 08 Jul 2014 Options over ordinary shares 30 Sep 2014 Options over ordinary shares 30 Sep 2014 $0.151 $0.116 $0.190 Total Number Under Option 2,000,000 3,000,000 300,000 5,300,000 There were no shares or interests issued during or since the end of the financial year as a result of exercise of an option. Shares subject to rights Details of unissued shares or interests subject to rights as at the date of signing this report are: Type Right to receive ordinary shares Right to receive ordinary shares Right to receive ordinary shares Right to receive ordinary shares Right to receive ordinary shares Total Share price required [a] $0.100 $0.200 $0.300 $0.400 $0.500 Number of rights 3,000,000 3,000,000 4,000,000 5,000,000 5,000,000 20,000,000 [a] Share price required to trade above a 30 day VWAP before entitlement to Right 8 Adslot | Annual Report 2013 Review of Operations Review of Operations 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 Adslot Ltd and the Adslot 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. Directors’ Meetings The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2013 and the number of meetings attended by each Director. Directors Mr Adrian Giles Mr Ian Lowe Mr Andrew Barlow Mr Chris Morris Ms Tiffany Fuller Board of Directors Remuneration Committee Audit and Risk Committee Held Attended Held Attended Held Attended 8 7 8 8 8 8 7 8 8 8 1 - 1 1 - 1 - 1 1 - 3 - - 3 3 3 - - 2 3 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 2013 has been received and can be found on page 19 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. Review of Operations Review of Operations Adslot | Annual Report 2013 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. 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. The Chairman’s fees are $75,000 per annum. Non-executive directors fees are $50,000 per annum. In addition the Chair of the Audit & Risk Committee receives a further $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. 10 Adslot | Annual Report 2013 Remuneration Report 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 Adslot Ltd [formerly Webfirm Group Limited] and its controlled entities include the following directors and executive officers: Directors Position Date appointed/resigned Mr Adrian Giles Non-Executive Director Appointed 19 December 2007 Non-Executive Chairman Executive Chairman Non-Executive Chairman From 8 October 2009 From 13 April 2010 From 8 October 2012 Mr Andrew Barlow Non-Executive Director Appointed 16 February 2010 Executive Director From 13 April 2010 Acting Chief Executive Officer Appointed 30 August 2011 Acting Chief Executive Officer Resigned 8 October 2012 Non-Executive Director From 31 December 2012 Mr Ian Lowe Chief Executive Officer Executive Director Appointed 8 October 2012 Appointed 8 October 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 Remuneration Report Remuneration Report Adslot | Annual Report 2013 11 Section 3: Details of remuneration [continued] Group 2013 Short-term benefits Termination benefits Post- employment benefits Share-based payment Salary & fees $ Bonus $ Other $ Name Executive directors Mr I Lowe [ i ] 221,320 Non-executive directors Mr A Giles Mr A Barlow Mr C Morris Ms T Fuller 76,040 140,386 50,000 75,000 - - - - - Other key management personnel Mr B Maher 255,892 30,000 Totals 818,638 30,000 - - - - - - - Super- annuation $ Shares & Rights 1 $ % of remuneration that consists of options & shares % Total $ 12,352 186,766 420,438 44.4% - - - - - - - - 76,040 140,386 50,000 75,000 - - - - 19,112 44,780 349,784 31,464 231,546 1,111,648 12.8% 20.8% $ - - - - - - - 1 Awards of Shares and Rights to Mr I Lowe and Awards of Shares to Mr B Maher are governed by the rules of the Company’s ESOP, given the forfeiture conditions contained in that Plan these awards are in substance rights issues. [i] from 8 October 2012 Bonuses Bonuses appearing in the table above were paid for the year ended 30 June 2013 as follows: Name Amount Paid $ Amount available in future periods $ Total Bonus Opportunity $ Assessment Criteria Mr B Maher 30,000 - 45,063 Divisional performance, governance, reporting and performance related KPI’s No portion of the bonuses paid to key management personnel were forfeited. 12 Adslot | Annual Report 2013 Remuneration Report Remuneration Report Section 3: Details of remuneration [continued] Group 2012 Short-term benefits Termination benefits Post- employment benefits Share-based payment Super- annuation $ Options & Rights 1 $ Total $ % of remuneration that consists of options & shares % Salary & fees $ Bonus $ Other $ Name Executive directors Mr A Giles Mr A Barlow 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 - - - - - - - - - $ - - - - - 30,062 6,593 6,525 13,705 11,831 - - - - - - - - - - 83,840 321,959 226,010 196,451 50,000 75,000 15,775 2,163 6,365 2,030 301,261 46,368 50,360 36,294 8,395 1,300,889 - - - - - - 2.1% 4.4% 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 the bonuses paid to key management personnel were forfeited. Remuneration Report Remuneration Report Adslot | Annual Report 2013 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 contractual terms for all Key Management Personal. Length of contract Open ended Fixed Remuneration Remuneration comprises salary and statutory employer superannuation contributions. Incentive Plans Notice Period Resignation Retirement Eligible to participate. Incentive criteria and award opportunities vary for each executive. All members of the key management, including executive directors, have a notice period of three months. 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. Termination by the Company The Company may terminate the employment agreement by providing notice consistent with the notice period or payment in lieu of the notice period. Redundancy Payments for redundancy are discretionary and are determined having regard to the particular circumstances. There are no contractual commitments to pay redundancy over and above any statutory entitlement. Termination for serious misconduct The Company may terminate the employment agreement at any time without notice, and the executive will be entitled to payment of remuneration only up to the date of termination. Section 5: Equity-based compensation Employee share ownership plan [ESOP] Between 2009 and July 2010 the Company operated an options based scheme for executives and senior employees of the Group. Each share option converted into one ordinary share of Adslot Ltd 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, subject to the individual remaining an employee of the Company. 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. In July 2010, the Board ceased issuing options to eligible employees under the scheme, as it believed that options were no longer the most effective way to remunerate employees. In November 2012 the Company gained approval to establish an employee incentive scheme comprising the Adslot Limited Share Option Plan and the Adslot 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. 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. 14 Adslot | Annual Report 2013 Remuneration Report 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 ended June 2013: During the Financial year Number Granted Number Vested % of Grant Vested % of Grant Forfeited 3,000,000 1,674,872 - - - - - - % of Compensation for the year Consisting of Shares 23.7% 12.8% Name ESOP Series Mr I Lowe Mr B Maher Accepted on 10 Oct 12 Accepted on 14 Sep 12 ESOP Series Shares Vesting Date Number of 14-Sep-2012 1,674,872 13-Sep-2014 10-Oct-2012 1,500,000 9-Oct-2013 10-Oct-2012 1,500,000 9-Oct-2014 Value of shares at grant date $ 77,044 88,500 88,500 Expensed in FY 2013 $ Fair Value Per Share $ Date vested and exercisable 32,102 66,375 33,187 0.0460 0.0590 0.0590 - - - 254,044 131,664 The following table shows grants of share-based compensation to directors and senior management under the ESOP during prior year ending June 2012: During the Financial year Number Granted Number Vested % of Grant Vested % of Grant Forfeited % of Compensation for the year Consisting of Shares 413,511 - - - 2.1% Name ESOP Series Mr B Maher Accepted on 01 Dec 11 ESOP Series Shares Vesting Date Number of 01-Dec-2011 413,511 30 Nov 2013 Value of shares at grant date $ 21,916 21,916 Expensed in FY 2013 $ Fair Value Per Share $ Date vested and exercisable 0.0530 - 6,365 6,365 Remuneration Report Remuneration Report Adslot | Annual Report 2013 15 Section 5: Equity-based compensation [continued] Rights over Shares Upon commencement of employment [8 October 2012] during the current year Mr Lowe has been granted the right to receive the following shares after the share price of the Company trades above a 30 day VWAP as per the table below. Each right would convert into one ordinary share of Adslot Ltd when the VWAP criteria is met. No amounts are paid or payable by the recipient on receipt of the right. The rights carry no voting rights. Some rights are subject to escrow per the below table and all rights are subject to Mr Lowe remaining an employee of the Company. Issue Date 8-Oct-2012 8-Oct-2012 8-Oct-2012 8-Oct-2012 8-Oct-2012 Number of Rights over shares Required VWAP Price $ Value of rights at grant date $ Fair Value per right $ Escrow Required from award 3,000,000 3,000,000 4,000,000 5,000,000 5,000,000 0.10 0.20 0.30 0.40 0.50 93,000 64,500 66,000 73,000 63,500 360,000 0.0310 0.0215 0.0165 0.0146 0.0127 2 years 2 years - - - Details of ESOP and other rights to 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 2013 2012 2013 2012 Name Number $ Number $ Number $ Number $ Directors Mr Adrian Giles - - Mr Ian Lowe [i] 23,000,000 $537,000 Mr Andrew Barlow Mr Chris Morris Ms Tiffany Fuller - - - - - - - - - - - - - - - - Other Key Management Personnel Mr B Maher 1,674,872 $77,044 413,511 $25,356 [i] from 8 October 2012 - - - - - - - - - - - - - - - - - - - - - - - - 16 Adslot | Annual Report 2013 Remuneration Report Remuneration Report Section 5: Equity-based compensation [continued] 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 2013 included: Model Input Grant Date Escrow End Date Exercise Price Price at Grant Date Expected Volatility Expected Dividend Yield Risk Free Interest Rate ESOP #13-1 ESOP #13-2 ESOP #13-3 14/09/12 13/09/14 - $0.046 108.3% 0% 2.86% 10/10/12 09/10/13 - $0.059 106.5% 0% 2.44% 10/10/12 09/10/14 - $0.059 106.5% 0% 2.44% The model inputs for other rights granted during the year ended 30 June 2013 included: Model Input Grant Date Exercise Date [i] Expiry Date [ii] Exercise Price Price at Grant Date Expected Volatility Expected Dividend Yield Risk Free Interest Rate Class #C1 Class #C2 Class #C3 Class #C4 Class #C5 08/10/12 08/10/12 08/10/12 08/10/12 08/10/12 - - $0.100 $0.059 97.7% 0% 2.68% - - $0.200 $0.059 97.7% 0% 2.68% - - $0.300 $0.059 97.7% 0% 2.68% - - $0.400 $0.059 97.7% 0% 2.68% - - $0.500 $0.059 97.7% 0% 2.68% [i] There is no exercise date as the right vests upon the company shares reaching the exercise price, assumed to be after three [3] years for the purpose of valuation. [ii] There is no expiry dates related to these rights, but assumed to be five [5] years for the purpose of valuation. The model inputs for ESOP rights to shares granted during the year ended 30 June 2012 included: Model Input Grant Date Escrow End Date Exercise Price Price at Grant Date Expected Volatility Expected Dividend Yield Risk Free Interest Rate ESOP #12-1 01/12/11 30/11/13 - $0.053 45.0% 0% 3.22% Remuneration Report Remuneration Report Adslot | Annual Report 2013 17 Section 5: Equity-based compensation [continued] Details of options granted, exercised and lapsed during the year appear in the following table: Granted during the year as compen- sation [Number] Balance at the start of the year [Number] Exercised during the year [Number] Forfeited during the year [Number] Lapsed during the year [Number]1 Balance at the end of the year [Number] Vested and exercisable at the year end [Number] 2013 Name Directors Mr A Giles 11,800,000 Mr A Barlow 7,900,000 Mr I Lowe Mr C Morris Ms T Fuller - - - Other key management personnel Mr B Maher - Totals 19,700,000 - - - - - - - - - - - - - - - - - - - - - [11,800,000] [7,900,000] - - - - [19,700,000] - - - - - - - - - - - - - - 1 The fair value of options lapsed during the year was $460,980 This marks the end of the audited remuneration report. This report is made in accordance with a resolution of directors. Adrian Giles | Chairman | 28 August 2013 18 Adslot | Annual Report 2013 Remuneration Report Auditor’s Independence Declaration Auditor’s Independence Declaration Remuneration Report Auditor’s Independence Declaration Adslot | Annual Report 2013 19 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2013 Notes 2013 $ 2012 $ Total revenue from continuing operations Other income Website publishers & related costs Depreciation and amortisation expenses 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 Loss Income tax expense Loss after income tax expense Net loss attributable to members Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign exchange translation Total other comprehensive income 3 3 4 4 4 4 5 4,055,721 4,682,469 673,756 659,129 [748,257] [1,158,310] [2,711,403] [2,658,506] [5,137,214] [5,504,663] [249,846] [249,995] [82,629] [80,164] [429,785] [256,716] [320,100] - [12,670] [89,136] [113,178] [237,407] [129,720] [341,430] [587,591] [246,471] [202,238] [114,231] [211,045] [44,904] [377,231] [50,000] [70,091] [87,723] [130,375] [222,029] [177,090] [830,758] [6,460,173] [7,331,658] [774] - [6,460,947] [7,331,658] [6,460,947] [7,331,658] 29,777 29,777 36,452 36,452 Total comprehensive loss attributable to the members [6,431,170] [7,295,206] 2013 Cents 2012 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 [0.94] [0.94] [1.08] [1.08] The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 20 Adslot | Annual Report 2013 Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Financial Position As at 30 June 2013 Notes 2013 $ 2012 $ CURRENT ASSETS Cash and cash equivalents Trade and other receivables Total current assets NON-CURRENT ASSETS 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 9 10 11 12 13 14 14 15 16 9,132,037 1,796,793 13,746,124 1,361,994 10,928,830 15,108,118 130,079 212,664 5,771,645 6,114,388 167,738 212,664 7,869,963 8,250,365 17,043,218 23,358,483 813,104 651,185 212,059 1,015,805 1,011,050 174,727 1,676,348 2,201,582 46,618 46,618 26,294 26,294 1,722,966 2,227,876 15,320,252 21,130,607 76,871,148 76,674,272 1,039,039 1,945,845 [62,589,935] [57,489,510] 15,320,252 21,130,607 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Adslot | Annual Report 2013 21 Consolidated Statement of Changes in Equity For the year ended 30 June 2013 2013 Balance at 1 July 2012 Notes Issued Capital $ Reserves $ Accum- ulated Losses $ Total Equity $ 76,674,272 1,945,845 [57,489,510] 21,130,607 Movement in foreign exchange translation reserve 16 Other comprehensive income Loss attributable to members of the company Total comprehensive income Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Treasury shares Reclassification of lapsed options to retained earnings Reclassification of vested ESOP Increase in employees’ share based payments reserve - - - - 29,777 29,777 - - 29,777 29,777 - [6,460,947] [6,460,947] 29,777 [6,460,947] [6,431,170] 15 15 16 16 16 648,721 [457,691] - - - - 648,721 [457,691] - [1,360,522] 1,360,522 5,846 [5,846] - 429,785 - - - - 429,785 196,876 [936,583] 1,360,522 620,815 Balance 30 June 2013 76,871,148 1,039,039 [62,589,935] 15,320,252 2012 Balance at 1 July 2011 Notes Issued Capital $ Reserves $ Accum- ulated Losses $ Total Equity $ 76,547,875 5,830,556 [54,290,060] 28,088,371 Movement in foreign exchange translation reserve 16 Other comprehensive income Loss attributable to members of the company Total comprehensive income Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Treasury shares Reclassification of lapsed options to retained earnings Increase in employees’ share based payments reserve 15 15 16 16 - - - - 36,452 36,452 - - 36,452 36,452 - [7,331,658] [7,331,658] 36,452 [7,331,658] [7,295,206] 259,413 [133,016] - - - - 259,413 [133,016] - - [4,132,208] 4,132,208 - 211,045 - 211,045 126,397 [3,921,163] 4,132,208 337,442 Balance 30 June 2012 76,674,272 1,945,845 [57,489,510] 21,130,607 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 22 Adslot | Annual Report 2013 Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows For the year ended 30 June 2013 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from trade and other debtors Interest received Government grants and other receipts Notes 2013 $ 2012 $ 3,294,614 547,574 822,844 4,169,273 1,154,422 - Payments to trade creditors, other creditors and employees [8,238,911] [10,020,116] Income tax paid [774] - Net cash outflows from operating activities 25 [3,574,653] [4,696,421] CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Proceeds from sale of fixed assets Payments for intangible assets Net cash outflows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 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 [33,123] 855 [986,304] [1,018,572] - - [56,813] 20,274 [13,741] [50,280] 82,880 82,880 [4,593,225] [4,663,821] 13,746,124 18,352,609 [20,862] 57,336 CASH AT THE END OF THE FINANCIAL YEAR 7 9,132,037 13,746,124 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Adslot | Annual Report 2013 23 Notes to the Financial Statements For the year ended 30 June 2013 1. Summary of Significant Accounting Policies The financial report covers Adslot Ltd, formerly Webfirm Group Limited [“Company”] and controlled entities [“Group”]. Separate financial statements for Adslot Ltd as an individual entity are no longer presented as a consequence of a change to the Corporations Act 2001. However limited financial information for Adslot Ltd, as an individual entity is included in Note 27. Adslot Ltd is a listed public company, incorporated and domiciled in Australia. The financial report is for the financial year ended 30 June 2013 and is presented in Australian dollars. The principal accounting policies adopted in the preparation of these consolidated financial statements are summarised 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 Adslot Ltd [formerly Webfirm Group Limited] comply with International Financial Reporting Standards [IFRS] as issued by the International Accounting Standards Board [IASB]. Adslot Ltd is a for-profit entity for the purpose of preparing the financial statements. Adoption of new and amended standards The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 July 2012: AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets provides clarification on the determination of deferred assets and deferred liabilities when investment property is measured using the fair value model in AASB 140 Investment Property. AASB 2010-8 also includes the requirement that the measurement of deferred tax assets and deferred tax liabilities on non-depreciable assets measured using the revaluation model in AASB 116 Property, Plant and Equipment should always be based on recovery through sale. These amendments have had no impact on the Group. AASB 2011-9 Amendments to Australian Interpretations – Presentation of Items of Other Comprehensive Income requires entities to group items presented in Other Comprehensive Income on the basis of whether they are potentially re-classifiable to profit or loss subsequently and changes the title of ‘statement of comprehensive income’ to ‘statement of profit or loss and other comprehensive income’. The adoption of AASB 2011-9 has resulted in changes to Group’s presentation of its financial statements. 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. 24 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 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 to successfully launch the Adslot products in multiple geographies. The Group has incurred a net cash outflows from operations of $3.6m 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 2013 Adslot started earning revenues from its Adslot Publisher product. During FY 2014 the Group expects increase in revenues from the Adslot Publisher Product and new revenues from the launch of the Adslot Market Place [Adslot Media] and from the Adslot Create Product. Despite this, it is likely, net operating cash flows from operations will continue to be negative in FY 2014. However the directors believe the Group can continue to pay its debts as and when the fall due for the following reasons: The Group has a cash position as at 30 June 2013 of $9.1m; The Webfirm division is expected to make continued positive net cash flows from its operations during FY 2014; and Management could reduce the level of resources dedicated to expanding the business if so required. Accordingly the directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. [c] Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Company, and the entities it controlled at the end of, or during, the financial year. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 27. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 25 1. Summary of Significant Accounting Policies [continued] [c] Principles of consolidation [continued] Business combinations Acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values [at the date of exchange] of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. The group recognises identifiable assets and liabilities assumed in the business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition date fair values. Goodwill is stated after separate recognition of identifiable intangible assets calculated as the excess of the sum of the fair value of the consideration transferred over the acquisition date fair value of identifiable net assets. If the identifiable net assets exceeds the consideration transferred, the excess amount is recognised in profit or loss immediately. 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. 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. Exchange differences are recognised in statement of profit or loss and other 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 charged/credited to other comprehensive income and recognised in the Group’s foreign currency translation reserve in equity. On disposal of a foreign operation the cumulative translation difference recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal. [d] Cash and cash equivalents For the purposes of the Statement of Cash Flows, cash includes cash on hand and deposits at call which are readily convertible to cash and are not subject to significant risk of changes in value, net of bank overdrafts. Publisher Account Cash represents share of advertising revenue held before release to Adslot Publishers. [e] Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Leasehold improvements are depreciated over the estimated useful life using the straight-line method with any balance written off at termination of lease. Depreciation is calculated on a straight line basis for all plant and equipment. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis. The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of asset and is recognised in profit or loss. The following depreciation rates are used for each class of depreciable asset: Computer Equipment 20 – 40% per annum Plant & Equipment 20 – 25% per annum Leasehold Improvements 20% per annum 26 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 1. Summary of Significant Accounting Policies [continued] [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 that are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in profit or loss. Subsequent recoveries of amounts previously written off are credited against the allowance account. [g] Investments and other financial assets Financial assets are recognised when the group entity becomes a party to the contractual provisions of the instrument. At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed through profit or loss. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured subsequent to recognition at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any other category of financial assets. Available-for-sale financial assets are measured at fair value. Gains or losses arising from changes in available-for-sale financial assets are presented in other comprehensive income in the period in which they arise. [h] Trade and other creditors – financial liabilities 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. Financial liabilities are measured subsequently at amortised cost using the effective interest method. [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 profit or loss and other 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 Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 27 1. Summary of Significant Accounting Policies [continued] [k] Income tax [continued] 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 are always provided for in full. 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 Adslot Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Adslot Ltd, and the controlled entities in the tax consolidated group account for their own current tax and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. 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 Adslot Ltd [formerly 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. 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 others 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. 28 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 1. Summary of Significant Accounting Policies [continued] [m] Intangible Assets Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired [acquisition date]. Goodwill is measured as the excess of the fair value of consideration paid over the fair value of the identifiable net assets of the entity or operations acquired. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually, being allocated to the cash flows of the relevant cash generating unit and is carried at cost less accumulated impairment losses. An impairment loss for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. Research & development expenditure Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to 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. 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 statement of profit or loss and other comprehensive income on a straight-line basis over the period of lease term. Associated costs such as maintenance and insurance are expensed as incurred. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 29 1. Summary of Significant Accounting Policies [continued] [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 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. Adslot Publisher revenue is accounted for in accordance with AASB 118 Revenue such that only the portion of the media campaign that is retained by Adslot for their services is recorded as revenue. Where underlying campaigns selected by advertisers are served over a period a time, the portion that extends beyond the reporting period is not taken up as revenue. Where the funds for these campaigns are prepaid by advertisers those amounts are treated as unearned revenue in the Consolidated Statement of Financial Position. Funds collected from advertisers and due to publisher clients are separated from Company funds and are disclosed in the accounts as “Cash held on behalf of Publishers” and “Publisher Creditors”. 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. 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] 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. 30 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 1. Summary of Significant Accounting Policies [continued] [r] 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. [s] 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. [t] 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. [u] Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Chief Executive Officer. Each of the operating segments is managed separately as each of these service lines requires different technologies, service different clients and sells different products. All inter-segment transactions are carried out at arm’s length prices. There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss. [v] 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. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 31 1. Summary of Significant Accounting Policies [continued] [v] Critical accounting judgements and key sources of estimation uncertainty [continued] 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 and intangible assets have 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 future cash flows included in the assessment are predicted largely on the successful launch of Adslot Media in September 2013. In the event that this product does not generate revenues as planned an impairment of the related intangible assets may result. The carrying amount of goodwill and intangible assets at the reporting date was $5,771,645 [2012: $7,869,963] and there were no impairment losses [2012: $50,000] recognised during the current financial year. Refer to Note 11 for further details. Capitalisation of internally developed software Distinguishing the research and development phases of software projects and determining whether the recognition requirements for the capitalisation of development costs are met, requires judgement. After capitalisation, manage- ment monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. 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 $429,785 [2012: $211,045]. 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 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 $5,352,038 [2012: $4,182,251]. Research and development tax concessions A receivable of $953,878 [2012: $659,129] has been recognised in relation to a research and development tax concession for the 2013 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. 32 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 1. Summary of Significant Accounting Policies [continued] [v] Critical accounting judgements and key sources of estimation uncertainty [continued] Contingent consideration – QDC Technologies As detailed in Notes 13 the Company agreed to pay to the vendors of QDC Technologies Pty Ltd [QDC] further consideration of up to 13,333,333 additional shares if after eighteen [18] months post acquisition 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. During 2013 financial year, additional shares to the remaining two QDC vendors who are related parties of the Company, were approved paid by shareholders at the 2012 Annual General Meeting. At reporting date, the deferred vendor consideration has a nil balance [2012: $286,545]. The difference between deferred vendor consideration liability at 2012 financial year end and the actual payment amount during the year has been recognised in other expenses in the consolidated statement of profit or loss and other comprehensive income. [w] New standards and interpretations issued but not effective Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2013 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. The following new or amendments to existing standards have been published and are mandatory for accounting periods beginning on or after 1 January 2013 or later periods, but have not been adopted. They are expected to result in minimum or no impact to the Group’s financial statements. AASB 9 Financial Instruments; AASB 10 Consolidated Financial Statements; AASB 11 Joint Arrangements replaces AASB 131 Interests in Joint Ventures; AASB 12 Disclosure of Interests in Other Entities AASB 13 Fair Value Measurement and related AASB 2012-8 Amendments to Australian Accounting Standards arising from AASB 13; AASB 119 Employee Benefits [2011], AASB 2012-10 Amendments to Australian Accounting Standards arising from AASB 119 [2011] and AASB 2012-11 Amendments to AASB 119 [September 2011] arising from Reduced Disclosure Requirements. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 33 2. Segment Information 2013 Business segments External sales Adslot Webfirm Total 927,526 2,623,674 3,551,200 Segment result from continuing operations [7,593,420] 256,998 [7,336,422] Depreciation included in segment result [note 9] 54,837 15,781 70,618 Amortisation included in segment result [note 11] 2,593,954 46,831 2,640,785 Additions to non-current assets [PP&E] Impairment of intangibles Statement of Financial Position Segment assets Segment liabilities 2012 Business segments External sales 24,996 - 6,378 - 31,374 - 13,522,381 520,619 14,043,000 [12,983,823] [732,600] [13,716,423] 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 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] Segment revenue reconciles to total revenue from continuing operations as follows: Revenue Total segment revenue Head office revenue Interest revenue Intersegment eliminations Total revenue from continuing operations 2013 $ 2012 $ 3,551,200 3,806,947 - 526,530 [22,009] 11,257 891,590 [27,325] 4,055,721 4,682,469 34 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 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 Loss on foreign exchange Income tax paid Profit on sale of fixed assets 2013 $ 2012 $ [7,336,422] [8,234,329] 526,530 673,756 - 891,590 670,386 [50,000] 95,515 [308,302] [429,785] [211,045] [20,862] [774] 691 - - - Other head office income/[expenses] not allocated in segment result 30,404 [89,958] Loss before income tax from continuing operations [6,460,947] [7,331,658] Reportable segment assets are reconciled to total assets as follows: Segment assets Total segment assets Head office assets Intersegment eliminations Total assets as per the statement of financial position Reportable segment liabilities are reconciled to total liabilities as follows: Segment assets Total segment liabilities Head office liabilities Intersegment eliminations Total liabilities as per the statement of financial position 2013 $ 2012 $ 14,043,000 15,777,046 22,826,015 26,816,537 [19,825,797] [19,235,100] 17,043,218 23,358,483 2013 $ 2012 $ [13,716,423] [14,263,443] [869,926] [827,836] 12,863,383 12,863,403 [1,722,966] [2,227,876] Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 35 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 provides advertising sales automation services that reduce selling costs and increase advertising revenue for publishers through its three main products: Adslot Publisher, Adslot Create and Adslot Enterprise. 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. Accounting policies The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 1. 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 $22,009 [2012: $27,325], and corresponding expenses have been eliminated on consolidation. Major customers The Group provides services to and derives revenue from a number of customers in both the Adslot and Webfirm divisions. During the year, the Group has derived over 10% of consolidated revenue from continuing operations from one customer within the Adslot division. 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 2013 $ 2012 $ 2013 $ 2012 $ Continuing Operations Australia and New Zealand 3,512,426 3,780,305 6,107,973 8,248,359 North America Europe Total revenue and non-current assets from continuing operations 11,086 5,679 3,529,191 - 10,574 3,790,879 3,085 3,330 - 2,006 6,114,388 8,250,365 36 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 3. Revenue and Other Income Revenue Revenue for services rendered Interest income Total revenue Other income R&D 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 Other charges against assets Impairment of intangibles Impairment of trade receivables 2013 $ 2012 $ 3,529,191 526,530 4,055,721 673,756 673,756 4,729,477 3,790,879 891,590 4,682,469 659,129 659,129 5,341,598 2013 $ 2012 $ 7,277 2,640,785 63,341 2,711,403 - 12,670 7,169 2,580,746 70,591 2,658,506 50,000 70,091 Rental expense – operating leases 320,100 377,231 Defined contribution superannuation expense [Profit]/Loss on sale of PP&E & internally developed software Deferred vendor consideration Foreign currency loss 410,294 [691] [95,515] 20,862 362,917 [20,274] 308,302 43,541 Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 37 5. Income Tax Expense [a] Numerical reconciliation of income tax expense to prima facie tax benefit Loss before income tax Prima facie tax benefit on loss before income tax at 30% [2012: 30%] Tax effect of: Other non-allowable items Share options expensed during year Research & development tax concession Income tax benefit attributable to entity Deferred tax assets relating to tax losses not recognised Income tax expense attributable to entity [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%] 2013 $ 2012 $ [6,460,173] [7,331,658] [1,938,052] [2,199,497] 4,185 128,936 635,918 [1,169,013] 1,169,787 774 17,027 63,314 544,441 [1,574,715] 1,574,715 - [4,605,182] [6,025,183] 22,313,431 131,879 17,840,128 5,352,038 19,834,142 131,879 13,940,838 4,182,251 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 Adslot Ltd. 6. Dividends The Company declared no dividends in the current year or prior year. There are no franking credits available to shareholders of the Company. 7. Cash and Cash Equivalents Cash at bank and on hand Publisher account 2013 $ 9,123,060 8,977 9,132,037 2012 $ 13,746,124 - 13,746,124 38 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 8. Trade and Other Receivables 2013 $ 2012 $ Current: Trade debtors Less: Allowance for impairment Other receivables Prepayments The average age of the Company’s trade receivables is 35 days [2012: 44 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 605,003 [20,480] 584,523 1,082,879 129,391 1,796,793 67,817 1,206 72 - 69,095 470,684 13,937 [458,473] [5,668] 20,480 983,411 [470,684] 512,727 800,037 49,230 1,361,994 54,571 49,665 27,567 390 132,193 523,190 77,100 [108,390] [21,216] 470,684 In determining the recoverability of a trade receivable, the Company considers any recent history of payments and the status of the projects to which the debt relates. 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 allowance for impairment. Included in the amounts written off as uncollectible in 2013 is an amount of $445,703 which relates to a legacy business for which an allowance for impairment was made in 2009. 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. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 39 9. Non-Current Assets – Property, Plant and Equipment Leasehold improvements – at cost Less: Accumulated amortisation Plant and equipment – at cost Less: Accumulated depreciation Computer equipment – at cost Less: Accumulated depreciation Total carrying amount of property, plant and equipment 2013 $ 36,385 [14,871] 21,514 159,090 [100,144] 58,946 215,159 [165,540] 49,619 130,079 2012 $ 36,385 [7,594] 28,791 159,090 [78,608] 80,482 187,116 [128,651] 58,465 167,738 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: 2013 Carrying amount at 1 July 2012 Additions Disposals/write offs Depreciation/amortisation expense Carrying amount at 30 June 2013 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 $ 28,791 80,482 58,465 - - - - [7,277] [21,536] 53,613 [20,654] [41,805] Total $ 167,738 53,613 [20,654] [70,618] 21,514 58,946 49,619 130,079 Leasehold Improvements $ Plant and Equipment $ Computer Equipment $ 32,704 89,207 75,128 3,256 - [7,169] 19,587 [3,367] [24,945] 59,000 [30,017] [45,646] Total $ 197,039 81,843 [33,384] [77,760] 28,791 80,482 58,465 167,738 40 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 10. Non-Current Assets – Other Financial Assets 2013 $ 2012 $ Available for sale investment carried at fair value Investment – at fair value 212,664 212,664 Uncertainty exists with regards to the fair value of our investment in Brandscreen Pte Ltd [an unlisted foreign entity]. Despite the absence of a quoted market price based on share transactions that Brandscreen have conducted during the year and discussions with the Brandscreen Board, the directors are satisfied that the fair value is not below the current carrying value. 11. Non-Current Assets – Intangible Assets Internally Developed Software $ Domain Name $ Intellectual Property $ Goodwill $ Total $ Year ended 30 June 2013 Opening net book amount 113,236 38,267 7,718,460 Acquisitions Amortisation Impairment of assets 542,467 [106,869] - - - - - [2,533,916] - Carrying amount at 30 June 2013 548,834 38,267 5,184,544 - - - - - 7,869,963 542,467 [2,640,785] - 5,771,645 At 30 June 2013 Cost Accumulated amortisation and impairment 790,361 288,267 12,669,578 5,381,652 23,027,186 [241,527] [250,000] [7,485,034] [5,381,652] [17,255,541] Carrying amount at 30 June 2013 548,834 38,267 5,184,544 - 5,771,645 Internally Developed Software Internally developed software represents a number of software platforms developed with the Webfirm and Adslot divisions. During the year a net $542,467 [2012: $13,741] of innovation research & development wage costs arising from the development of the Adslot Enterprise and Publisher platforms were capitalised. Associated R&D Grant claims of $443,837 [2012: $nil] arising from the capitalised costs offset the gross amount of expenditure. Research and development costs of $1,133,425 [2012: $2,092,473] were recognised in profit or loss. The directors have assessed the accounting useful life of these internally developed software systems, for accounting purposes, to be five years. This assessment has given regard to the expected financial benefits of the technology. The remaining useful life is approximately four years. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 41 11. Non-Current Assets – Intangible Assets [continued] Domain names Domain names opening carrying value of $38,267 relates to the various domain names held by Webfirm and Adslot. 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. Intellectual property Adslot Technologies 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 the opening balance relates to this “CAP” technology. Accumulated amortisation of this asset as at 30 June 2013 was $4,004,103 [2012: $2,817,702]. 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. Accumulated amortisation of this asset as at 30 June 2013 was $162,634 [2012: $108,422]. QDC IP Technology [“QDC”] holding creative ad building and video advertising technology had licences to the Core IP valued at $6,466,517 in opening balance and attached to Adslot CGU. Accumulated amortisation of this asset as at 30 June 2013 was $3,318,297 [2012: $2,024,994]. The directors have assessed the accounting useful life of all of the above technologies for accounting purposes to be five years. This assessment has given regard to the expected financial benefits of the technologies to be potentially well beyond a five year period, together with the risk that competitors could replicate these technologies and in light of the Company’s ongoing commitment to research and development of the Core IP. The remaining useful life for accounting purposes is approximately two years. Goodwill The Goodwill balances related to the acquisitions of Webfirm and Full Circle Online which have been fully amortised or impaired in prior periods. Internally Developed Software $ Domain Name $ Intellectual Property $ Goodwill $ Total $ Prior Year Comparison Year ended 30 June 2012 Opening net book amount 146,326 38,267 10,302,375 Acquisitions Amortisation Impairment of assets 13,741 [46,831] - - - - - [2,533,915] [50,000] Carrying amount at 30 June 2012 113,236 38,267 7,718,460 - - - - - 10,486,968 13,741 [2,580,746] [50,000] 7,869,963 At 30 June 2012 Cost Accumulated amortisation and impairment 247,894 288,267 16,566,906 5,381,652 22,484,719 [134,658] [250,000] [8,848,446] [5,381,652] [14,614,756] Carrying amount at 30 June 2012 113,236 38,267 7,718,460 - 7,869,963 42 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 12. Trade and Other Payables Trade creditors Publisher creditors [i] Other creditors [i] Refer to note 1[p] for further information on publisher creditors 13. Other Liabilities Current: Unearned revenue [i] Deferred vendor consideration- QDC [ii] 2013 $ 113,854 8,977 690,273 813,104 2012 $ 72,618 - 943,187 1,015,805 2013 $ 2012 $ 651,185 - 651,185 724,505 286,545 1,011,050 [i] Unearned revenue relates 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, and advertising campaigns that have been purchased but whose deliver will occur after the reporting date. [ii] Deferred vendor consideration was the estimated value at 30 June 2012 of the balance of additional shares that became due on 6 June 2012 as further vendor consideration from the acquisition of QDC. This deferred vendor consideration was settled in full during the year after approval was gained at the 2012 Annual General Meeting. 14. Provisions Current: Employee benefits Non current: Employee benefits 2013 $ 2012 $ 212,059 174,727 46,618 26,294 Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 43 15. Contributed Equity Ordinary Shares – Fully Paid 692,432,056 687,567,332 76,871,148 76,674,272 2013 Number 2012 Number 2013 $ 2012 $ 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 shareholder has one vote on a show of hands. Movements in Paid-Up Capital Date Details 30-Jun-11 Balance Number of shares Issue price Capital raising costs Number $ $ Value $ 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 Balance [including Treasury shares] 689,736,476 933,903 76,807,288 Less: Treasury shares1 [2,169,144] 0.061 - [133,016] 30-Jun-12 Balance [net of Treasury shares] 687,567,332 933,903 76,674,272 01-Jul-12 Opening balance [including Treasury shares] 689,736,476 933,903 76,807,288 14-Sep-12 Issue of shares – employee ESOP 6,229,054 0.046 10-Oct-12 Issue of shares – employee ESOP 3,000,000 0.059 27-Nov-12 Issue of shares – Balance QDC deferred vendor consideration 4,775,757 0.040 - - - 286,537 177,000 191,030 30-Jun-13 Balance [including Treasury shares] 703,741,287 933,903 77,461,855 Less: Treasury shares [cumulative]1 [11,309,231] 0.052 - [590,707] 30-Jun13 Balance [net of Treasury shares] 692,432,056 933,903 76,871,148 1. Treasury shares Treasury shares are shares in Adslot Ltd that are held by the Adslot Employee Share Trust, which administers the Adslot 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 this scheme will, subject to the provision of the Trust deed, rank equally in all respects and will have the same rights and entitlements as ordinary shares under the Constitution of the Company. 44 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 15. Contributed Equity [continued] Options movements during the financial year are summarised below: 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] Issue Type 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 7,258,824 Ordinary options 08/07/14 0.151 2,000,000 Ordinary options 30/09/14 0.116 3,000,000 Ordinary options 30/09/14 0.190 300,000 65,258,824 - - - - - - - [1,000,000] [51,700,000] [7,258,824] - - - [59,958,824] - - - - - - - - - - 2,000,000 3,000,000 300,000 5,300,000 Rights over shares movements during the financial year are summarised below: Issue Type Rights over shares Rights over shares Rights over shares Rights over shares Rights over shares Required VWAP Price $ Balance at beginning of the year [Number] 0.100 0.200 0.300 0.400 0.500 - - - - - - Granted during the year [Number] 3,000,000 3,000,000 4,000,000 5,000,000 5,000,000 20,000,000 Expired during the year [Number] Vested during the year [Number] - - - - - - - - - - - - Balance at end of the year [Number] 3,000,000 3,000,000 4,000,000 5,000,000 5,000,000 20,000,000 ESOP shares, treated as Treasury Shares, movements during the financial year are summarised below: Issue Type Escrow End Date Valuation Price $ Balance at beginning of the year [Number] Awarded during the year [Number] Forfeited during the year [Number] Transfers during the year [Number] Balance at end of the year [Number] Employee ESOP 30/11/13 0.053 413,511 Employee ESOP 01/12/13 0.060 88,967 Employee ESOP 12/12/13 0.064 833,333 Employee ESOP 18/01/14 0.060 833,333 - - - - Employee ESOP 13/09/14 Employee ESOP 09/10/13 Employee ESOP 09/10/14 0.046 0.059 0.059 - - - 6,229,054 1,500,000 1,500,000 2,169,144 9,229,054 - - - - - - - - - 413,511 [88,967] - - - - - - 833,333 833,333 6,229,054 1,500,000 1,500,000 [88,967] 11,309,231 Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 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 Reclassification vested ESOP 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 earnings1 Closing balance 2013 $ 2012 $ 902,927 106,335 29,777 1,839,510 106,335 - 1,039,039 1,945,845 1,839,510 [1,360,522] [5,846] 429,785 902,927 106,335 - 106,335 - 29,777 - 29,777 5,760,673 [4,132,208] - 211,045 1,839,510 106,335 - 106,335 [36,452] - 36,452 - 1 The foreign currency translation reserve was transferred to retained earnings in the prior year, 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 139: Financial Instruments: Recognition and Measurement. 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. 46 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 17. Earnings Per Share [a] Basic earnings per share 2013 Cents 2012 Cents Loss attributable to the ordinary equity holders of the Company [0.94] [1.08] [b] Diluted earnings per share Loss attributable to the ordinary equity holders of the Company [0.94] [1.08] [c] Reconciliation of earnings used on calculating earnings per share [i] Loss from continuing operations attributable to the members of the Company used on calculating basic and diluted earnings per share [i] During 2013 and 2012 there were no discontinued operations or values attributable to minority interests. 2013 $ 2012 $ [6,460,947] [7,331,658] [d] Weighted average number of shares used as the denominator Weighted average number of shares on issue used in the calculation of basic EPS 690,411,814 681,316,767 2013 Number 2012 Number [e] Weighted average number of shares used as the denominator Weighted average number of shares on issue used in the calculation of diluted EPS 690,411,814 681,316,767 Weighted average number of options that could potentially dilute basic earnings per share in the future, but are not included in the calculation of diluted EPS because they are anti-dilutive for the period presented. 18. Discontinued Operations There were no discontinued operations during the year ended 30 June 2013. 2013 Number 2012 Number 57,537,132 74,062,833 19. Business Combinations There were no business combinations during the year ended 30 June 2013 or the prior year ended 30 June 2012. 20. Contingencies No contingent assets or liabilities are noted. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 47 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 2013 $ 2012 $ 296,282 6,538 302,820 296,425 261,188 557,613 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 2013 $ 2012 $ Audit and review of financial reports 93,000 90,000 During the year the following fees were paid/payable to a related entity of auditor of the company: Other services Indirect tax services 7,700 100,700 39,500 129,500 48 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 23. Key Management Personnel Disclosures Directors The following persons were directors of the Company during the financial year: Mr Adrian Giles [Non-Executive Chairman] Mr Andrew Barlow [Non-Executive Director] Mr Ian Lowe [Executive Director & CEO] Mr Chris Morris [Non-Executive Director] Ms Tiffany Fuller [Non-Executive Director] [from 8 October 2012] Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year: Name Mr Brendan Maher Position Chief Financial Officer and Company Secretary Key management personnel compensation Short-term employee benefits Post-employment benefits Other long-term employee benefits Termination benefits Share based payments Total compensation 2013 $ 848,638 31,464 - - 231,546 1,111,658 2012 $ 1,205,840 36,294 - 50,360 8,395 1,300,889 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 2013 2012 Balance at beginning $ Loans granted $ Interest charged $ - 200,000 - - - - Amounts repaid/set off $ - [200,000] Balance at end $ Highest in period $ - - - 200,000 The $200,000 loan represented financial assistance provided to a former CEO [David Burden] 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. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 49 23. Key Management Personnel Disclosures [continued] Business Acquisitions: No related party transactions during the year ended 30 June 2013. Transactions with Directors and their personally related entities: During the year payments of $90,391 were 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 a payment of $1,040 was made to Yarra Ventures Pty Ltd an entity related to Adrian Giles for consulting services on normal terms and conditions. During the year receipts of $80,460 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. During the year receipts of $2,650 was received from Venturian Pty Ltd an entity related to Mr Andrew Barlow for a website development on normal terms and conditions. 50 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 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 Adslot Ltd and other key management personnel of the group, including their personally related parties are set out below: 2013 Name Directors Mr A Giles Balance at the start of the year [Number] 11,800,000 Mr A Barlow 7,900,000 Mr I Lowe Mr C Morris Ms T Fuller - - - Other key management personnel Mr B Maher - Totals 19,700,000 2012 Name Directors Mr A Giles Balance at the start of the year [Number] 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 Granted during the year as compen- sation [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] - - - - - - - - - - - - - - [11,800,000] [7,900,000] - - - - [19,700,000] - - - - - - - - - - - - - - Granted during the year as compen- sation [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] - - - - - - - - - - - - - - - [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 * Employees departed during FY 2012 but options held for a period of time post employment based on length of service with the Company. All options held at end of the year lapsed in FY 2013. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 51 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 Adslot Ltd [formerly Webfirm Group Limited] and other key management personnel of the Group, including their personally related parties, are set out below. Received during the year on exercise of options Received during the year as compensation Net other changes during the year Held at 1 July 2012 Held at 30 June 2013 2013 Name Ordinary shares Directors Mr A Giles 18,421,288 Mr A Barlow 57,140,133 Mr I Lowe* - Mr C Morris 62,739,318 Ms T Fuller 100,000 Other key management personnel Mr B Maher - Totals 138,400,739 *shareholding effective from date of employment 2012 Name Ordinary shares Directors Mr A Giles Mr A Barlow Mr D Burden* 18,421,288 57,140,133 5,631,499 Mr A Du Preez* 12,968,051 Mr C Morris 57,130,848 Ms T Fuller 100,000 Other key management personnel Mr B Maher - Mr M Chamley* 229,089 Totals 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 1 July 2011 Held at 30 June 2012 - - - - - - - - - - - - - - 1,212,121 19,633,409 5,663,636 62,803,769 - - 7,671,378 70,410,696 - 100,000 665,000 665,000 15,212,135 153,612,874 - - - - - - - - - - - - - - - - - - - - 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 52 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 24. Share Based Payments Employee Option Plan Between 2009 and July 2010 the Company operated an options based scheme for executives and senior employees of the Group. Each share option converted into one ordinary share of Adslot Ltd 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, subject to the individual remaining an employee of the Company. 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. The total value of these options vested was assessed at $54,490. The remaining value of options to be expensed in future years amounts to $124,751. Options for the reporting period were: 2013 Grant Date Expiry Date Exercise Price $ Balance at start of the year [Number] Granted during the year [Number] Exercised during the year [Number] Lapsed during the year [Number] Forfeited during the year [Number] Balance at end of the year [Number] Vested and exer- cisable at the end of the year [Number] 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 7,258,824 28/07/10 08/07/14 0.151 2,000,000 14/10/10 30/09/14 0.116 3,000,000 14/10/10 30/09/14 0.190 300,000 Total 65,258,824 Weighted average exercise price $0.060 - - - - - - - - - - - - - - - - [1,000,000] - [43,200,000] [8,500,000] [6,958,824] [300,000] - - - - - - - - - - - - 2,000,000 1,333,334 3,000,000 2,000,000 300,000 200,000 [51,158,824] [8,800,000] 5,300,000 3,533,334 $0.054 $0.053 $0.133 $0.133 Weighted average remaining contractual life at 30 June 2013 [days] 425 There were no options granted during the year ended 30 June 2013. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 53 24. Share Based Payments [continued] Options analysis for the prior period were: 2012 Expiry Date Exercise Price $ Balance at start of the year [Number] Granted during the year [Number] Exercised during the year [Number] Lapsed during the year [Number] Forfeited during the year [Number] Balance at end of the year [Number] Grant Date Vested and exer- cisable at the end of the year [Number] 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 Total 74,839,592 Weighted average exercise price $0.064 - - - - - - - - - - - [300,000] [50,000] - - - - [1,480,000] - - - - [6,000,003] - - - - [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 [1,480,000] [6,609,592] [1,491,176] 65,258,824 61,725,491 $0.056 $0.100 $0.057 $0.060 $0.056 Weighted average remaining contractual life at 30 June 2012 [days] 260 There were no options granted during the year ended 30 June 2012. 54 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 24. Share Based Payments [continued] Employee Share Ownership Plan [ESOP] In November 2012 the Company gained approval to establish an employee incentive scheme comprising the Adslot Limited Share Option Plan and the Adslot Employee Share Trust. Awards of 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. 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. The following table shows grants of share-based compensation to directors and senior management under the ESOP for the current financial year: 2013 Grant Date Escrow End Date Valuation Price $ Balance at start of the year [Number] Granted during the year [Number] 01/12/11 30/11/13 02/12/11 01/12/13 0.053 0.060 413,511 88,967 13/12/11 12/12/13 0.064 833,333 19/01/12 18/01/14 0.060 833,333 - - - - 14/09/12 13/09/14 10/10/12 09/10/13 10/10/12 09/10/14 0.046 0.059 0.059 - - - 6,229,054 1,500,000 1,500,000 Trans- ferred during the year [Number] - [88,967] - - - - - Total 2,169,144 9,229,054 [88,967] Lapsed during the year [Number] Forfeited during the year [Number] Balance at end of the year [Number] Vested at the end of the year [Number] - - - - - - - - - - - - - - - - 413,511 - 833,333 833,333 6,229,054 1,500,000 1,500,000 11,309,231 - - - - - - - - Weighted average share price $0.060 $0.050 $0.060 $0.000 $0.000 $0.052 $0.000 Weighted average remaining contractual life at 30 June 2013 [days] 715 2012 Grant Date Escrow End Date 01/12/11 30/11/13 02/12/11 01/12/13 13/12/11 12/12/13 19/01/12 18/01/14 Total Valuation Price $ Balance at start of the year [Number] Granted during the year [Number] Trans- ferred during the year [Number] Lapsed during the year [Number] Forfeited during the year [Number] Balance at end of the year [Number] Vested at the end of the year [Number] 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 - - - - - 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 Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 55 24. Share Based Payments [continued] The model inputs for ESOP rights to shares granted during the year ended 30 June 2013 included: Model Input Grant Date Exercise Date Escrow End Date Exercise Price Price at Grant Date Expected Volatility Expected Dividend Yield Risk Free Interest Rate ESOP #13-1 ESOP #13-2 ESOP #13-3 14/09/12 14/09/14 13/09/14 - $0.046 108.3% 0% 2.86% 10/10/12 10/10/13 09/10/13 - $0.059 106.5% 0% 2.44% 10/10/12 10/10/14 09/10/14 - $0.059 106.5% 0% 2.44% The model inputs for ESOP rights to shares granted during the year ended 30 June 2012 included: Model Input Grant Date Exercise Date Escrow End Date Exercise Price Price at Grant Date Expected Volatility Expected Dividend Yield Risk Free Interest Rate ESOP #12-1 ESOP #12-2 ESOP #12-3 ESOP #12-4 01/12/11 01/12/13 30/11/13 - $0.053 45.0% 0% 3.22% 02/12/11 02/12/13 01/12/13 - $0.060 45.0% 0% 3.22% 13/12/11 13/12/13 12/12/13 - $0.064 49.0% 0% 3.08% 19/01/12 19/01/14 18/01/14 - $0.060 54.0% 0% 3.21% ESOP rights to shares are valued using the Binomial option-pricing model. The volatility calculation is based upon historical share price information for the same period as the option life to the date that the options were granted. 56 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 24. Share Based Payments [continued] Rights over Shares Upon commencement of employment [8 October 2012] during the current year Mr Lowe has been granted the right to receive the following shares after the share price of the Company trades above a 30 day VWAP as per the table below. Each right would convert into one ordinary share of Adslot Ltd when the VWAP criteria is met. No amounts are paid or payable by the recipient on receipt of the right. The rights carry no voting rights. Some rights are subject to escrow per the below table and all rights are subject to Mr Lowe remaining an employee of the Company. Issue Date 8-Oct-2012 8-Oct-2012 8-Oct-2012 8-Oct-2012 8-Oct-2012 Number of Rights over shares Required VWAP Price $ Value of rights at grant date $ Fair Value Per right $ Escrow Required from award 3,000,000 3,000,000 4,000,000 5,000,000 5,000,000 0.10 0.20 0.30 0.40 0.50 93,000 64,500 66,000 73,000 63,500 360,000 0.0310 0.0215 0.0165 0.0146 0.0127 2 years 2 years - - - The model inputs for these rights granted during the year ended 30 June 2013 included: Model Input Grant Date Exercise Date [i] Expiry Date [ii] Exercise Price Price at Grant Date Expected Volatility Expected Dividend Yield Risk Free Interest Rate Class #C1 Class #C2 Class #C3 Class #C4 Class #C5 08/10/12 08/10/12 08/10/12 08/10/12 08/10/12 - - $0.100 $0.059 97.7% 0% 2.468% - - $0.200 $0.059 97.7% 0% 2.68% - - $0.300 $0.059 97.7% 0% 2.68% - - $0.400 $0.059 97.7% 0% 2.68% - - $0.500 $0.059 97.7% 0% 2.68% [i] There is no exercise date as the right vests upon the company shares reaching the exercise price, assumed to be after three [3] years for the purpose of valuation. [ii] There is no expiry dates related to these rights, but assumed to be five [5] years for the purpose of valuation. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 57 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 gain/[loss] Grant receivable offset against capitalised intangible assets 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 2013 $ 2012 $ [6,460,947] [7,331,658] 2,711,403 2,658,506 - 429,785 12,670 [691] 29,777 443,837 50,000 211,045 70,091 [20,274] 43,541 - [447,469] [40,650] [293,018] [337,022] [3,574,653] [4,696,421] 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. Disclosures relating foreign currency risks are covered in Note 26[d], interest rate risk covered in Note 26[e] and price risk is covered in Note 26[f]. 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. 58 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 26. Financial Risk Management [continued] The Group held the following financial assets with potential credit risk exposure: Financial assets Cash and cash equivalents Trade and other receivables [c] Liquidity risk Financial liabilities Trade and other payables 2013 $ 2012 $ 9,132,037 1,687,882 10,819,919 13,746,124 1,783,448 15,529,572 2013 $ 2012 $ 813,104 1,015,805 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. [d] Foreign currency risk Most of the Group’s transactions are carried out in Australian Dollars [AUD]. Exposures to currency exchange rates arise from the Group’s overseas operations which are primarily denominated in US dollars [USD] and Pound Sterling [GBP]. Foreign currency exposure is monitored by the Board on a monthly basis. Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into AUD at the closing rate: USD in $ GBP in $ Euro in $ 30 June 2013 Financial Assets 175,877 65,473 Financial Liabilities [49,732] [32,911] Total Exposure 126,145 32,562 30 June 2012 Financial Assets 639,073 64,652 Financial Liabilities - [11,542] Total Exposure 639,073 53,110 54 - 54 98 - 98 Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 59 26. Financial Risk Management [continued] The following table illustrates the sensitivity of profit in regards to the Group’s financial assets and financial liabilities and the USD/AUD exchange rate and GBP/AUD exchange rate ‘all other things being equal’. It assumes a +/- 10% change of the AUD/USD exchange rate for the year ended at 30 June 2013 [2012: 10%]. A +/- 10% change is considered for the AUD/GBP exchange rate [2012: 10%]. Both of these percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. There is no Equity exposure to foreign currency risk. +10% GBP in $ USD in $ Total $ 30 June 2013 [11,468] [2,960] [14,428] 30 June 2012 [58,098] [4,646] [62,744] -10% GBP in $ 3,618 5,678 Total $ 17,634 76,686 USD in $ 14,016 71,008 [e] Cash flow and 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; +1% $ -1% $ 155,723 [113,294] 163,667 [155,139] 30-Jun-13 30-Jun-12 This is mainly attributable to the Group’s exposure to interest rate on its bank balances bearing interest. [f] 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: 2013 $ 2012 $ 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. 60 Adslot | Annual Report 2013 Notes to the Financial Statements Notes to the Financial Statements 26. Financial Risk Management [continued] [g] Net fair value of financial assets and liabilities The net fair value of cash and cash equivalents and other short-term financial assets and financial liabilities of the Group approximates their carrying value. The net fair value of other 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. 27. Parent Entity Information The following details of information are related to the parent entity, Adslot Ltd [formerly Webfirm Group Limited], at 30 June 2013. 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 2013 $ 8,971,377 13,666,774 22,638,151 120,969 - 120,969 2012 $ 12,887,682 13,209,612 26,097,294 168,682 - 168,682 77,461,855 76,807,288 902,927 106,335 [55,953,935] 22,517,182 [2,202,065] [2,202,065] 1,839,510 106,335 [52,824,521] 25,928,612 [11,547,299] [11,547,299] The Commitments Note 21 includes commitments incurred by the parent entity related to leases of the head office premises at 85 Coventry Street, South Melbourne for an amount of $274,234 [2012: $544,537]. 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. Notes to the Financial Statements Notes to the Financial Statements Adslot | Annual Report 2013 61 30. Consolidated Entities Name Parent entity Country of Incorporation Ordinary Share Consolidated Equity Interest 2013 % 2012 % Adslot Ltd [formerly Webfirm Group Limited] Australia Controlled entities Adslot Technologies Pty Ltd Ansearch.com.au Pty Ltd Ansearch Group Services Pty Ltd Webfirm Media Pty Ltd Searchworld Pty Ltd Webfirm Pty Ltd Adimise Pty Ltd Full Circle Online Pty Ltd QDC IP Technologies Pty Ltd Adslot UK Limited Adslot Inc. 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 Equity interests in all controlled entities are by way of ordinary shares. 62 Adslot | Annual Report 2013 Notes to the Financial Statements Directors’ Declaration Directors’ Declaration The directors declare that the financial statements, comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, accompanying notes, as set out on pages 20 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 2013 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 18 of the Directors’ Report comply with section 300A of the Corporations Act 2001. The directors have been given the declaration by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Adrian Giles | Chairman , Adslot Ltd | 28 August 2013 Notes to the Financial Statements Directors’ Declaration Adslot | Annual Report 2013 63 Independent Audit Report to the Members 64 Adslot | Annual Report 2013 Independent Audit Report to the Members Independent Audit Report to the Members Independent Audit Report to the Members Independent Audit Report to the Members Independent Audit Report to the Members Adslot | Annual Report 2013 65 66 Adslot | Annual Report 2013 Independent Audit Report to the Members Corporate Governance Statement Corporate Governance Statement The directors of Adslot Ltd 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. Different individuals hold the role of chair and chief executive officer. 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. Independent Audit Report to the Members Corporate Governance Statement Adslot | Annual Report 2013 67 Corporate Governance Statement [continued] Principle 3: Promote ethical and responsible decision-making The Company has a code of conduct for directors that provides policy and guidance on matters of conduct as directors. The aim of the code is to guide directors in the execution of their responsibilities, to ensure all legal obligations and stakeholder requirements are considered, and to provide all stakeholders with confidence in the integrity of the Company and the directors. The company actively complies with this policy. The code of conduct is published on the Company’s website. The Company has a policy concerning trading in company securities by directors and employees. The aim of this policy to provide guidance to directors and senior employees when acquiring or disposing of shares in the Company, and to ensure any acquisition or disposal of shares in the Company by a director or senior employee is conducted in accordance with legal and regulatory requirements and good corporate governance practice. The company actively complies with this policy. This policy is published on the Company’s website. To enable a director to carry out his or her duties, the board allows individual directors to seek independent professional advice after discussion with the chairman in the first instance. The aim of this practice is to ensure that all directors are in a position to have or to obtain all necessary information required for them to make an informed decision about any matter concerning the Company. Any necessary advice is obtained at the company’s expense and advice obtained is made available to all directors. The Company is committed to diversity in the work place and the benefit from accessing all available talent. The Company has not yet adopted or published an Equality and Diversity Policy. At 30 June 2013 Women filled 20% of the Company’s Board, 0% of the Company’s Senior Management and 24% of all staff positions within the Company. Principle 4: Safeguard integrity in financial reporting In July 2012 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, and 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 themself 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. 68 Adslot | Annual Report 2013 Corporate Governance Statement Corporate Governance Statement Corporate Governance Statement [continued] 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 via the Audit & Risk Committee it identifies and evaluates risks, and their associated mitigation strategies. 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 that 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. Corporate Governance Statement Corporate Governance Statement Adslot | Annual Report 2013 69 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 13 August 2013. 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 123 229 297 13,639 702,403 2,409,899 1,026 42,956,306 767 657,659,040 2,442 703,741,287 - - - - 4 4 - - - - 5,300,000 5,300,000 The number of shareholders holding less than a marketable parcel of shares [11,628 shares]: 685 3,520,420 70 Adslot | Annual Report 2013 Shareholder Information Shareholder Information Shareholder Information [continued] The names of the twenty largest holders of quoted shares are: Twenty largest shareholders 1 VENTURIAN PTY LTD2 FINICO PTY LIMITED 3 OVERACHIEVE PTY LTD 4 ANDAMA HOLDINGS PTY LTD 5 ANSEARCH COM AU PTY LTD 6 CAPITAL ACCRETION PTY LTD 7 FINICO PTY LIMITED 8 YARRA VENTURES PTY LTD 9 MR JASON CONRAD SQUIRE 10 KHALON PTY LIMITED 11 UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD 12 COTU INVESTMENTS PTY LTD 13 PHILIP MURPHY INVESTMENTS PTY LTD 14 K PAGNIN PTY LTD
15 HSBC CUSTODY NOMINEES [AUSTRALIA] LIMITED 16 SISUG PTY LTD 18 YARRA VENTURES PTY LTD 19 ALCATT PTY LTD 20 MS & IM 67 FUND PTY LTD Total Top 20 holders of Ordinary Shares Remaining holders balance Listed Ordinary Shares Number of Shares % of Shares 61,055,667 55,148,796 28,500,000 23,000,000 11,309,232 10,000,000 9,179,849 8,706,577 8,500,000 7,990,330 7,755,539 7,600,000 7,310,222 6,700,000 6,386,531 6,194,236 5,569,629 5,487,858 5,000,000 8.68 7.84 4.05 3.27 1.61 1.42 1.30 1.24 1.21 1.14 1.10 1.08 1.04 0.95 0.91 0.88 0.85 0.79 0.78 0.71 287,362,988 40.83 416,378,299 59.17 17 D & J PAGNIN SUPERANNUATION FUND PTY LTD 5,968,522 Classes of Shares Adslot Ltd has only one class of share on issue, being fully paid ordinary shares. Substantial Shareholders Chris Morris Andrew Barlow Voting Rights All ordinary shares carry one vote per share without restrictions. Shares 70,410,696 62,803,769 % Shares 10.01% 8.92% Shareholder Information Shareholder Information Adslot | Annual Report 2013 71 Corporate Directory Auditors Grant Thornton Australia The Rialto Level 30, 525 Collins Street Melbourne Vic 3000 Bankers National Australia Bank Limited 424 St Kilda Road St Kilda Vic 3004 Share Register Computershare Registry Services Pty Ltd Yarra Falls 452 Johnston Street Abbotsford Vic 3001 Home Stock Exchange Australian Stock Exchange Limited Level 45, South Tower Rialto, 525 Collins Street Melbourne Vic 3000 ASX Code: ADJ Directors Mr Adrian Giles – Chairman Mr Ian Lowe – Executive Director Mr Andrew Barlow – Non-Executive Director Mr Chris Morris – Non-Executive Director Ms Tiffany Fuller – Non-Executive Director Chief Executive Officer Mr Ian Lowe Company Secretary Mr Brendan Maher Head Office Adslot Ltd Level 2, 85 Coventry Street South Melbourne Vic 3205 Australia Phone: + 61 3 8695 9199 Fax: + 61 3 9696 0700 Toll free 1300 852 722 Registered Office Adslot Ltd Level 2, 85 Coventry Street South Melbourne Vic 3205 Australia Phone: + 61 3 8695 9199 Fax: + 61 3 9696 0700 Toll free 1300 852 722 72 Adslot | Annual Report 2013