Contents
03 Chairman’s Report
04 Directors’ Report
12 Remuneration Report
22 Auditor’s Independence Declaration
23 Consolidated Statement of Profit or Loss
and Other Comprehensive Income
24 Consolidated Statement of Financial Position
25 Consolidated Statement of Changes in Equity
26 Consolidated Statement of Cash Flows
27 Notes to the Financial Statements
64 Directors’ Declaration
65
Independent Audit Report to the Members
68 Corporate Governance Statement
78
Shareholder Information
80 Corporate Directory
Contents
1
Asia . Australasia . Europe . North America The $40b global online display advertising market is undergoing transformation, driven by the emergence
of technology to automate a complex trading process. Adslot is at the very forefront of this change.
Our technology is underwriting the future state of a global industry,
our vision is to be its trading platform of choice.
2
Directors’ ReportAsia . Australasia . Europe . North America The $40b global online display advertising market is undergoing transformation, driven by the emergence
of technology to automate a complex trading process. Adslot is at the very forefront of this change.
Our technology is underwriting the future state of a global industry,
our vision is to be its trading platform of choice.
Chairman’s Report
Dear Shareholders,
The 2014 Financial Year has been a year of significant progress and achievement for Adslot, as the Company
continues to establish a strategic leadership position in ”automated guaranteed” media trading globally.
As with any company emerging as a leading player in a competitive global industry, our strategic positioning
and ability to consistently deliver world-leading products is fundamental to the Company’s ongoing success.
We believe Adslot’s ability to provide the world’s media buyers and sellers with a global trading platform
and service footprint; an unwavering focus to further build-out our ecosystem of both supply and demand
partners; and continued investment in Adslot’s best-in-class technology, will result in accelerated revenue
growth in the years ahead.
During the year, we continued to grow our “supply-side” client base, which consists of some of the world’s
largest and most-recognised online publishers. These publishers recognise the significant efficiencies that
can be achieved by selling their premium ad inventory in an automated way, and have agreed to share the
revenue they derive via Adslot’s platform with us. This is particularly meaningful, as it places Adslot in a
strong position to build a highly-scalable and profitable business as the global media industry looks to
migrate ad spend to automated media trading platforms.
Equally, the Company’s acquisition of Facilitate Digital secured a meaningful position on the “demand-side”
of the industry. It is anticipated that Facilitate’s Symphony technology will manage in the order of $2 Billion
of annual online display ad spend via multi-year contracts with some of the world’s largest media buying
groups, once all current implementations are complete. As the Company further advances the integration
of Symphony and Adslot Marketplace to create true end-to-end trading capabilities, it places the Company
in the strongest possible position to capitalise on the strategic foundations it has spent the last four years
building.
In October 2013, the Company announced the launch of Adslot Marketplace, which allows media buyers
to purchase premium ad inventory across all Adslot’s premium publishers. Since the launch of this product,
initial agency demand has emerged, and transaction volume and value continue to grow. This presents very
encouraging signs for the Company’s future.
During the year, we saw the departure of directors Chris Morris and Tiffany Fuller, and welcomed onto
the Board Geoff Dixon, Ben Dixon and independent US director, Quentin George. Shortly after the end of the
financial year, we also raised $6.5m in a share placement to sophisticated and institutional investors, firming
up the Company’s cash position to enable it to move faster on its product integration initiations and world-
wide roll-out.
All in all, it’s been a big year for the Company, and the Board and Executive Team are optimistic about the
Company’s future. In calendar year 2015, we expect to see continued growth in trading revenues, as the
industry moves towards “automated guaranteed” media buying at scale. Whilst we cannot prescribe a time-
frame over which the media industry will make a full transition, we see unambiguous signs this transformation
is gathering speed, and continue to execute the strategy that ensures we are well-positioned to capitalise on
the considerable opportunity this creates.
I’d like to take this opportunity to thank all our customers and partners for their support and enthusiasm
for our products; our shareholders for your ongoing interest and support as we build the foundations upon
which to build a great Company; and finally our Board, Executive Team and every employee in our Company
for their massive contribution this last financial year.
Yours sincerely,
Andrew Barlow
Chairman Adslot Ltd
28 August 2014
Chairman’s Report
3
Asia . Australasia . Europe . North America Directors’ Report
Your Directors present their report, together with the financial report of Adslot Ltd
ACN 001 287 510 (‘the Company’) and its controlled entities (“the Group”) for the financial
year ended 30 June 2014 and the auditor’s report thereon.
Information on directors
Mr Adrian Giles, Mr Andrew Barlow and Mr Ian Lowe were directors for the whole financial year and up to the date of this report.
Mr Adrian Giles resigned from his appointment as Chairman on 26 November 2013 but remains a non-executive director. Mr Andrew Barlow
was appointed as Chairman on 26 November 2013. Mr Ben Dixon was appointed as director on 23 December 2013. Mr Geoff Dixon was
appointed as director on 23 December 2013. Mr Chris Morris resigned from his appointment as director on 21 February 2014. Ms Tiffany
Fuller resigned from her appointment as director on 14 June 2014. Mr Quentin George was appointed as director on 16 June 2014.
Andrew Barlow
Non-Executive Chairman
(Age 41)
Andrew Barlow is the founder of Adslot and an experienced technology entrepreneur. 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. Mr Barlow is also the Founder of Venturian, a
privately-owned venture capital fund with investments in early-stage technology companies with unique IP, highly
scalable business models and global market potential. Mr Barlow was also Founder and CEO of Max Super, an
online retail superannuation fund sold to Orchard Funds Management in 2007.
Mr Barlow is currently a director of Nitro Software, Inc., the second largest PDF editing software company in the
world, and Mocom Pty Ltd – owner of the Viewa augmented reality mobile app. Mr Barlow has significant expertise
in online media and business building.
Mr Adrian Giles
Non-Executive Director
(Age 40)
Adrian Giles is an entrepreneur with businesses in the Internet, information technology and manufacturing
industries. In 1997 Mr Giles 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 Mr Giles 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.
Mr Giles is Chair of the Remuneration Committee.
Mr Ian Lowe
CEO and Executive Director
(Age 44)
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.
4
Directors’ ReportAsia . Australasia . Europe . North America Mr Ben Dixon
Executive Director
(Age 41)
Ben Dixon’s career in the advertising industry goes back over 17 years and includes roles at several large
multinational agency groups including DDB and Mojo. He has wide experience across both the media buying and
account management fields having held senior positions directing accounts for advertisers such as Telstra and
Kraft Foods. In particular he was responsible for the development and implementation of eCommerce and online
strategies across a number of advertisers.
In late 1999 Ben conceptualised and then co-founded Facilitate Digital Pty Ltd, assuming the role of General
Manager. In the subsequent 3 years he played an integral role in steering the business through an industry collapse
to a position of strength. Ben was appointed Chief Executive Officer of Facilitate when Adslot acquired it in
December 2013.
Mr Geoff Dixon
Non-Executive Director
(Age 74)
Geoff Dixon is one of Australia’s most experienced and successful corporate executives. He is the former Managing
Director and Chief Executive Officer of Qantas Airways Limited and has wide experience at board level in the media,
general business and philanthropic sectors. He is a director of Crown Limited and Consolidated Media Holdings
Limited. He is also Chairman of the Garvan Research Foundation, and Chairman of Tourism Australia.
Directorships of other Australian Listed Companies during the past 3 years:
• Consolidated Media Holdings Limited from 31 May 2006 to current.
• Crown Limited from 7 July 2007 to current.
Mr Quentin George
Non-Executive Director
(Age 44)
Quentin George is one of the advertising industry’s most credentialed and respected thought leaders. Based in
the United States, Mr George has previously served as the Chief Digital and Innovation Officer at IPG Mediabrands,
where he was responsible for overseeing $2B in digital media spend across global media agency networks, as well
as specialist digital agencies for Fortune 500 brands.
Mr George has also previously held the positions of Global Head of Digital Media and Strategic Innovation, and
President, Global at Universal McCann. In 2008, Mr George led the team that architected and built the industry’s
first ever, standalone programmatic media-buying agency, Cadreon, which he successfully grew into a multi-
national organisation encompassing North America, Europe and Asia-Pacific.
Mr George has also previously served on the customer advisory boards of Google, Microsoft Advertising, Yahoo!
and AOL. He has also served on high-profile industry advisory boards including the Internet Advertising Bureau (IAB)
and the American Association of Advertising Agencies (AAAA’s), and has held senior leadership roles at digital
agencies such as Razorfish and Organic.
Mr George is currently co-founder of Unbound, a global strategic consultancy advising some of the world’s largest
companies on digital strategy.
Mr Brendan Maher
Company Secretary
(Age 46)
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
5
Asia . Australasia . Europe . North America Directors’ Report (continued)
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 Andrew Barlow
Mr Adrian Giles
Mr Ian Lowe
Mr Ben Dixon
Mr Geoff Dixon
Mr Quentin George
Ordinary Shares
#
Share Rights
#
Share Options
#
ESOP Shares
#
62,803,769
19,633,409
-
-
9,961,929
17,000,000
35,119,513
86,252,015
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
-
1,000,000
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
Adslot Ltd derives revenue from three principal activities:
1. Trading Technology – comprises Adslot, a leading global media trading technology, and Symphony, market leading workflow
automation technology, purpose built for digital media agencies.
2. Services – comprising marketing services that are provided by the company’s Webfirm division to SME clients and project based
feature customisation of Trading Technology.
3. AdServing – technology that enables advertisers to deliver and measure the performance of online display advertising (including
impressions, clicks and online sales).
Operating Results
Consolidated Group revenues from continuing operations for the FY14 period of $5,066,180 realised an increase of 25% versus the prior year
result of $4,055,721.
The consolidated operating loss before interest, income tax, depreciation and amortisation (EBITDA), including transaction costs associated
with the acquisition of Facilitate Digital, is $5,336,412, compared to a loss for the prior year of $4,275,300. EBITDA excluding transaction
costs associated with the acquisition of Facilitate Digital is a loss of $4,688,723.
The consolidated operating loss after income tax and including transaction costs associated with the acquisition of Facilitate Digital is
$10,095,562, compared to a loss for the prior year of $6,460,947. The consolidated operating loss after income tax excluding transaction
costs associated with the acquisition of Facilitate Digital is a loss of $9,447,873, which includes $2,072,836 of amortisation associated with
the acquisition of Facilitate Digital.
6
Directors’ ReportAsia . Australasia . Europe . North America Review of Operations
Online Advertising Industry – Background
Global online advertising grew from USD $72 billion in 2010 to USD $135 billion in 2014, continues to grow at a rate of approximately 15%
CAGR and is projected to grow to USD $163 billion by 2016. Online advertising consists of three core segments:
• Search advertising (e.g. advertisers buying search links from Google)
• Display advertising (banners, video ads, rich media)
• Classifieds advertising (listings appearing on online classifieds websites such as realestate.com.au, Carsales and SEEK)
In 2014, display advertising is worth approximately $50 billion, and is also growing at circa 15% CAGR. Display advertising is in turn made up
of two segments:
• premium display advertising (a circa USD $40 billion market)
•
remnant display advertising (a circa USD $10 billion market)
The Problem Adslot Is Solving
The USD $40 billion premium online display advertising market is a highly inefficient market, due in large part to the absence of a purpose
built platform through which large buyers (media agencies) and sellers (online publishers) can trade at scale. Premium online display
advertising is also a largely disorganised market, characterised by the following:
• The supply side of the premium online display market is highly fragmented. In a market such as Australia, a large media agency will
typically trade with 50 or more different publishers. In a market such as US, a large media agency will typically trade with over 100
different publishers over a 1 year period;
• Different publishers describe and define the inventory and audience they are selling differently, creating complexity for the buyer;
• There is no single ‘marketplace’ for buyers to access that aggregates all publishers and their inventory; and
• The toolsets used by buyers and sellers in support of a trade are separate and several. Furthermore, almost none of the tools used
by buyers talk to the tools used by sellers, and vice versa.
As a consequence, the selling of premium online display advertising for publishers is a manual, slow and expensive process. Correspondingly,
the buying of premium online display advertising for media agencies is also a manual, slow and expensive process.
The Opportunity
The media industry has realised the trading process for premium display advertising is unsustainable, and is aware that purpose built
technology is required to bring efficiency and scalability.
Industry research points to a cost to the industry of this inefficiency of approximately 30% of revenue, or 30% of USD $40 billion
(USD $12 billion). Adslot conducted its own study in 2013 and determined this cost to be approximately 28% of revenue.
As the inefficiencies of trading premium display advertising are universal across all markets and regions globally, the opportunity to establish
a technology solution is also global.
Accordingly, Adslot’s vision is to become the world’s leading provider of premium display media trading technology. Importantly, to achieve
this Adslot is not required to remove or replace an existing platform or technology. Rather, Adslot is reducing cost for the industry.
Adslot generates revenue in the form of a percentage of media spend traded through its platform. This percentage is paid to Adslot
by the seller (publisher).
Review of Operations
7
Asia . Australasia . Europe . North America Review of Operations (continued)
Strategy
Adslot’s strategy is predicated on building a market leading trading platform for premium display media, and bringing supply and demand
together at scale.
Supply and Demand at Scale
To capture supply and demand at scale, the Company has implemented a strategy that consists of the following in sequence:
1. Sign a critical mass of significant publishers;
2. Using this inventory, drive phase 1 adoption from large media buyers (agencies); and
3. As phase 1 adoption from media buyers builds, use this to sign additional publishers.
In parallel with this sales strategy, the Company is pursuing a partnership strategy. The objective of the partnership strategy is twofold:
1. Rapidly grow the number of publishers and media buyers that have access to Adslot’s trading technology through a community of
partners; and
2. Integrate Adslot’s trading technology into other tools and systems already being used by publishers and media buyers.
Significant Achievements
The Company has made strong progress in FY14 as it executes its product, sales and partnership strategy. Highlights include:
• Global launch of Adslot Marketplace – a media buying interface designed specifically for large media buyers (media agencies).
The Company has since secured a number of multi-national agency customers who have traded via Adslot Marketplace. The
number of buyers and the frequency and value of trades is now growing month on month.
• Acquisition of Facilitate Digital – see section titled ‘Acquisition of Facilitate Digital’ for more detail.
• Partnership with Kantar Media – Kantar Media are a US based provider of media planning tools for media buyers constituting a
large percentage of the US market. Adslot’s partnership with Kantar will allow publishers signed with Adslot to have their inventory
exposed directly into the Kantar Media interface. This means media buyers using Kantar will be able to identify publishers that offer
the inventory and audience they need, then transact with them via Adslot in a single, seamless experience.
• Partnership with MediaMath – MediaMath are one of the world’s largest providers of real time bidding (RTB) technology for media
buyers, operating in all major markets around the world. RTB technology is used by buyers and sellers to monetise unsold or remnant
inventory, which today is a circa USD $10 billion market. Adslot’s partnership with MediaMath will allow media buyers to buy both
premium (via Adslot) and remnant inventory via the one interface.
• Extension of Symphony contract with GroupM APAC – GroupM are a division of WPP and the world’s largest media buying company.
Symphony is a workflow automation technology used by media agencies to compile and share buying information across the various
systems they use to track, optimise, report, invoice and pay for online advertising. Symphony was a key asset acquired by Adslot as
part of the Facilitate Digital acquisition – see section titled “Acquisition of Facilitate Digital” for more detail.
• Collaboration with Nielsen Australia – Nielsen is the industry appointed provider of online audience data in Australia, and a global
provider of ratings and research intelligence. The Adslot-Nielsen collaboration allows media buyers to profile inventory in the Adslot
Marketplace using audience data from Nielsen Online Ratings.
• Premium online publishers across US, UK and Australia have signed with Adslot, including some of the world’s largest and most
respected publishing brands, including The Daily Mail, CBS, ESPN, BBC, eBay, Carsales, REA, NPR, Fairfax and SEEK.
Acquisition of Facilitate Digital
In December 2013, Adslot announced it had completed the acquisition of Australian technology company Facilitate Digital Holdings Ltd. The
underlying premise of the acquisition of Facilitate Digital is the following:
• The vast majority of media agencies in Australia and the Asia Pacific region currently use Facilitate Digital’s Symphony software to
manage the work-flow surrounding the buying of premium digital advertising;
• Adslot believes that the current media buying managed within Symphony will ultimately be replaced by more automated, integrated
buying technology such as that provided by the Adslot Marketplace; and
• Adslot believes that the quickest and least disruptive way to get the Adslot Marketplace in front of media buyers, is to make it
available to them within the platform they already use every day – Symphony.
The acquisition of Facilitate Digital has allowed Adslot to make its Adslot Marketplace ad inventory available in the current Symphony buying
platform for media buyers to purchase directly from publishers.
8
Review of Operations
Asia . Australasia . Europe . North America The acquisition of Facilitate Digital was therefore a strategic acquisition undertaken to achieve three valuable outcomes:
1. Ownership of industry leading workflow automation technology (Symphony) for media buyers. Symphony allows media buyers to
input, output and transfer media buying information into their back-office toolset, including finance systems (accounting, billing,
invoice reconciliation), adservers (campaign performance tracking and optimisation) and business intelligence systems (tracking
spend, pricing and contract auditing by agency, agency group and market/region).
2. Direct access to USD $1 billion of premium online display ad spend, which will grow to $2 billion as contracted new deployments
of Symphony occur. This ad spend comes from the growing list of agencies using Symphony to automate back-office process.
3. Media Agency (or “buy-side”) DNA – over a period of more than 10 years, the Facilitate Digital team have developed a rich
understanding of the challenges and opportunities available to large, sophisticated media buyers such as media agencies. This is
knowledge and experience that will accelerate Adslot’s development of world-class media buying solutions, and the sales/support
of these solutions globally.
Matters subsequent to the end of the financial year
On 3 July 2014, the Company announced a Share Placement (“Placement”). On 10 July 2014, the Placement was completed and consisted
of 65 million ordinary shares at $0.10 per share.
The funds raised will be applied to:
• Accelerate development and integration of the Adslot and Symphony platforms;
• Strengthen the balance sheet; and
• Provide additional working capital.
Other significant matters subsequent to the end of the financial year include:
• Global launch of first Adslot-Symphony integration – announced on 1 August 2014 the integration of the Adslot trading platform
and the Symphony workflow platform is a key focus for the Company, forms a critical part of the strategy to integrate Adslot trading
tools into other systems being used by media agencies, and is the underlying purpose behind the acquisition of Facilitate Digital.
First agency trades have already been transacted via the Adslot-Symphony integration;
• Partnership with Microsoft – announced on 13 August 2014, Microsoft is one of the world’s largest online publishers. Adslot’s
partnership with Microsoft will allow Microsoft advertising inventory to be purchased through the Adslot Marketplace;
• Symphony contract with Starcom Australia – announced on 19 August 2014, Starcom is a Publicis Groupe agency and one of
Australia’s largest media buyers. The Starcom contract realises Adslot’s ambition to forge close ties with the three largest agency
groups in the world, being GroupM (WPP), Omnicom and Publicis. In Australia, Symphony contracts are now in place across all
three of these groups.
Other than these 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
Further Growth in Trading Technology Revenues
As highlighted in the section ‘Revenue by Segment’, the Company is seeing a number of factors that will combine to deliver continued growth
in Trading Technology revenues. Whilst this growth is expected to continue quarter on quarter, the Company also anticipates growth to
accelerate as momentum builds from adoption of the platform, and integrations with partners to create further scale are completed.
The Trading Technology revenues will also deliver improved profit performance and a reduction in net cash outflows. Adslot Trading
Technology is provided under a fixed cost base model and provisioned via the cloud, meaning there is virtually no incremental cost to provide
the technology, and virtually no incremental cost to provision a growing number of users.
Advancement of the Adslot-Symphony integration
The Company is committed to advancement of the integration of Adslot and Symphony to ensure those agencies using Symphony
find it increasingly compelling to trade via Adslot. On this basis the Company will continue to invest significant resources and capital
to realise new features and capabilities on an ongoing basis.
Further partnerships
In accordance with the Company’s partner strategy, Adslot is committed to expanding its current list of partners. Discussions have
commenced with a range of additional partner prospects and further partnership agreements are anticipated.
Review of Operations
9
Asia . Australasia . Europe . North America Review of Operations (continued)
Likely developments and business strategies (continued)
APIs to enable partnerships
In order to benefit from partnerships, Adslot must provide partners with access to its platform via an API (application programming
interface). These APIs will allow supply-side partners to expose their inventory into the Adslot Marketplace (e.g. Microsoft), and demand-side
partners representing media spend to get access to all Adslot inventory. A successful first release of Adslot’s demand-side API was
undertaken in FY14, with the supply-side API and further enhancements to both API’s scheduled for FY15.
Further Symphony contracts
As per the Company’s strategy to migrate ad spend within Symphony to trade via Adslot, the Company continues to sell Symphony as a
stand alone solution to large media buying groups and agencies. Agencies that adopt Symphony constitute a good opportunity to also adopt
Adslot. New Symphony contracts are anticipated in FY15.
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
Number under option
Options over ordinary shares
30 Sep 2014
Options over ordinary shares
30 Sep 2014
$0.116
$0.190
Total
2,000,000
300,000
2,300,000
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
Share price required (a)
Number of rights
Right to receive ordinary shares
Right to receive ordinary shares
Right to receive ordinary shares
Right to receive ordinary shares
Total
$0.200
$0.300
$0.400
$0.500
3,000,000
4,000,000
5,000,000
5,000,000
17,000,000
(a) Share price required to trade above a 30 day VWAP before entitlement to Right
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.
10
Review of Operations
Asia . Australasia . Europe . North America Directors’ Meetings
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2014 and the number of
meetings attended by each Director.
Directors
Mr Andrew Barlow
Mr Ian Lowe
Mr Adrian Giles
Mr Chris Morris
Ms Tiffany Fuller
Mr Ben Dixon
Mr Geoff Dixon
Mr Quentin George
Board of
Directors
Remuneration
Committee
Audit and Risk
Committee
Held
Attended
Held
Attended
Held
Attended
12
12
12
8
12
4
4
0
12
12
12
7
10
4
4
0
1
-
1
1
-
-
-
-
1
-
1
0
-
-
-
-
-
-
4
3
4
-
-
-
-
-
4
1
4
-
-
-
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 2014 has been received and can be found on page 22 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
11
Asia . Australasia . Europe . North America 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 6: Equity holdings and transactions
Section 7: Other transactions with key management personnel
Section 1: Non-executive directors’ remuneration
Non-executive directors’ fees are reviewed annually and are determined by the Board. In making its 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.
12
Remuneration Report
Asia . Australasia . Europe . North America 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 and its controlled entities include the following directors and executive officers:
Directors
Position
Mr Adrian Giles
Mr Andrew Barlow
Mr Ian Lowe
Mr Chris Morris
Ms Tiffany Fuller
Non-Executive Director
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Chairman
Chief Executive Officer
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Date appointed/resigned
Appointed 19 December 2007
Resigned 26 November 2013
Appointed 26 November 2013
Appointed 16 February 2010
Appointed 26 November 2013
Appointed 8 October 2012
Appointed 8 October 2012
Appointed 20 September 2010
Resigned 21 February 2014
Appointed 20 June 2011
Resigned 14 June 2014
Mr Ben Dixon
Executive Director
Appointed 23 December 2013
Mr Geoff Dixon
Non-Executive Director
Appointed 23 December 2013
Mr Quentin George
Non-Executive Director
Appointed 16 June 2014
Executive Officers
Mr Brendan Maher
Company Secretary / Chief Financial Officer
Appointed 15 November 2010
Mr Tom Peacock
Group Commercial Director
Appointed 23 December 2013
Group
2014
Name
Short-term benefits
Long Term
Benefits
Post-
employment
benefits
Share-based
payment
Salary
& fees
$
Bonus
$
Long Service
Leave
$
Other
$
Super-
annuation
$
Shares &
Rights1
$
% of remuneration
that consists of
options & shares
Total
$
Executive directors
Mr I Lowe
300,000
53,215
Mr B Dixon (i)
91,734
Non-executive directors
Mr A Giles
60,165
Mr A Barlow
60,844
Mr C Morris (ii)
32,583
Ms T Fuller (iii)
71,666
Mr G Dixon (i)
24,097
Mr Q George (iv)
-
Other key management personnel
-
-
-
-
-
-
-
Mr B Maher
259,089
45,063
Mr T Peacock (i)
104,839
-
Totals
1,005,017
98,278
-
-
-
-
-
-
-
-
-
-
-
-
17,775
228,232
599,222
38%
1,737
8,485
-
-
-
-
-
-
101,956
60,165
64,930
32,583
71,666
26,326
-
-
-
-
-
-
-
2,158
2,158
100%
17,775
63,537
385,464
1,707
9,698
38,706
154,950
3,444
60,048
332,633 1,499,420
16%
25%
22%
-
4,086
-
-
2,229
-
-
-
-
-
-
-
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 23 December 2013
(iii) to 14 June 2014
(ii)
to 21 February 2014
(iv) from 16 June 2014
Remuneration Report
13
Asia . Australasia . Europe . North America Remuneration report (continued)
Section 3: Details of remuneration (continued)
Bonuses
Bonuses appearing in the table above were paid for the year ended 30 June 2014 (but relate to the performance from the prior year) as
follows:
Name
Amount
Paid
$
Amount
available in
future periods
$
Total Bonus
Opportunity
$
Assessment Criteria
Mr I Lowe
53,215
Mr B Maher
45,063
-
-
125,000
Company performance to budget, product development and launch, and
client & partnership signings.
45,063
Division performance, governance, reporting and performance related KPI’s.
No portion of the bonuses paid to key management personnel were forfeited.
Group
2013
Short-term benefits
Long Term
Benefits
Post-
employment
benefits
Share-based
payment
Salary
& fees
$
Bonus
$
Long Service
Leave
$
Super-
annuation
$
Other
$
Shares &
Rights1
$
% of remuneration
that consists of
options & shares
Total
$
Name
Executive directors
Mr I Lowe (i)
221,320
Non-executive directors
Mr A Giles
76,040
Mr A Barlow
140,386
Mr C Morris
Ms T Fuller
50,000
75,000
Other key management personnel
-
-
-
-
-
Mr B Maher
255,892
30,000
Totals
818,638
30,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,352
186,766
420,438
44%
-
-
-
-
-
-
-
-
76,040
140,386
50,000
75,000
19,112
44,780
349,784
31,464
231,546 1,111,648
-
-
-
-
13%
21%
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
$
Mr B Maher
30,000
Amount
available in
future periods
$
-
Total Bonus
Opportunity
$
Assessment Criteria
45,063
Divisional performance, governance, reporting and performance related
KPI’s
No portion of bonuses paid to key management personnel were forfeited.
14
Remuneration Report
Asia . Australasia . Europe . North America
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
personnel.
Length of contract
Open ended
Fixed Remuneration
Remuneration comprises salary and statutory employer superannuation contributions.
Incentive Plans
Eligible to participate. Incentive criteria and award opportunities vary for each executive.
Notice Period
Resignation
Retirement
Members of the key management, including executive directors, have notice periods ranging from
three weeks to three months. The Chief Executive Officer and Chief Financial Officer have notice
periods of 3 months. Other Executives have notice periods ranging from 3 weeks to 1 month.
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)
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.
The following table shows grants of share-based compensation to directors and senior management under the ESOP for the current financial
year ended June 2014:
Name
ESOP Series
Mr B Maher
Dec 2011
Sept 2013
March 2014
Number
Granted
-
763,602
561,526
Mr T Peacock
Jan 2014
March 2014
176,928
2,823,072
During the Financial year
Number
Vested
% of Grant
Vested
% of Grant
Forfeited
413,511
-
-
-
-
100%
-
-
-
-
-
-
-
-
-
% of Compensation for the
year Consisting of Shares
16%
25%
Remuneration Report
15
Asia . Australasia . Europe . North America Remuneration report (continued)
Section 5: Equity-based compensation (continued)
Number of
Shares
Vesting
Date
Value of shares
at grant date
$
Expensed
in FY 2014
$
Fair Value
Per Share
$
Date vested
and exercisable
ESOP Series
Sept 2013
Jan 2014
763,602
05-Sep-2015
176,928
28-Jan-2016
45,816
21,231
18,703
4,450
41,573
0.060
0.120
0.090
-
-
-
March 2014
3,384,598
04-Mar-2016
304,045
371,092
64,726
The following table shows grants of share-based compensation to directors and senior management under the ESOP during prior year
ending June 2013:
Name
ESOP Series
Mr I Lowe
Mr B Maher
Accepted on
10 Oct 12
Accepted on
14 Sep 12
Number
Granted
3,000,000
1,674,872
During the Financial year
Number
Vested
% of Grant
Vested
% of Grant
Forfeited
% of Compensation for the
year Consisting of Shares
-
-
-
-
-
-
24%
13%
ESOP Series
Number of
Shares
Vesting
Date
Value of shares
at grant date
$
Expensed
in FY 2014
$
Fair Value
Per Share
$
Date vested
and exercisable
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
77,044
88,500
88,500
32,102
66,375
33,187
0.0460
0.0590
0.0590
-
-
-
254,044
131,664
Rights over Shares
Upon commencement of employment (8 October 2012) Mr Lowe was 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.
During the year the Company achieved the required VWAP share price (10 cents) such that 3,000,000 of the rights were placed into
the Company’s ESOP Share Trust for the required 2 year escrow period. Escrow on those shares end on 24 December 2015.
16
Remuneration Report
Asia . Australasia . Europe . North America 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)
Granted
during the
year (Number)
Expired
during the
year (Number)
Exercised
during the
year (Number)
Balance at
the end of the
year (Number)
0.100
0.200
0.300
0.400
0.500
3,000,000
3,000,000
4,000,000
5,000,000
5,000,000
20,000,000
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
-
-
-
-
-
3,000,000
4,000,000
5,000,000
5,000,000
3,000,000
17,000,000
The following table shows grants of rights over shares to directors and senior management during prior year ending June 2013:
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
0.0310
2 years
64,500
0.0215
2 years
66,000
0.0165
73,000
0.0146
63,500
0.0127
360,000
-
-
-
Remuneration Report
17
Asia . Australasia . Europe . North America Remuneration report (continued)
Section 5: Equity-based compensation (continued)
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
2014
2013
2014
2013
Number
$
Number
$
Number
$
Number
$
Name
Directors
Mr Adrian Giles
Mr Ian Lowe (i)
Mr Andrew Barlow
Mr Chris Morris (ii)
Ms Tiffany Fuller (iii)
Mr B Dixon (iv)
Mr G Dixon (iv)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,000,000 $537,000
1,500,000
$88,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Mr Q George (v)
1,000,000 $105,000
Other Key Management Personnel
Mr B Maher
1,325,128
$91,861
1,674,872
$77,044
413,511
$21,916
Mr T Peacock (iv)
3,000,000
$264,015
-
-
-
-
(i) from 8 October 2012
(ii) to 21 February 2014
(iii) to 14 June 2014
(iv) from 23 December 2013
(v) from 16 June 2014
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
18
Remuneration Report
Asia . Australasia . Europe . North America The model inputs for ESOP rights to shares granted during the year ended 30 June 2014 included:
Model Input
ESOP #14-1
ESOP #14-2
ESOP #14-3
ESOP #14-4
ESOP #14-5
ESOP #14-6
Grant Date
9/07/13
5/09/13
28/01/14
06/03/14
15/06/14
15/06/14
Escrow End Date
9/07/15
5/09/15
28/01/16
04/03/16
15/06/15
2015-2018
Exercise Price
-
-
-
-
-
-
Price at Grant Date
$0.042
$0.061
$0.120
$0.090
$0.105
$0.105
The model inputs for ESOP rights to shares granted during the year ended 30 June 2013 included:
Model Input
ESOP #13-1
ESOP #13-2
ESOP #13-3
Grant Date
14/09/12
10/10/12
10/10/12
Escrow End Date
13/09/14
09/10/13
09/10/14
Exercise Price
-
-
-
Price at Grant Date
$0.046
$0.059
$0.059
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
$0.300
$0.400
$0.500
$0.059
$0.059
$0.059
$0.059
97.7%
0%
2.68%
97.7%
0%
2.68%
97.7%
0%
2.68%
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 are no expiry dates related to these rights, but assumed to be five (5) years for the purpose of valuation.
Options
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, and as such no options were granted during the year. Further no options were exercised or lapsed
during the year with respect to Directors and other key management personnel.
Remuneration Report
19
Asia . Australasia . Europe . North America Remuneration report (continued)
Section 5: Equity-based compensation (continued)
Details of options granted, exercised and lapsed during the prior year appear in the following table:
Balance
at the start
of the year
(Number)
Granted during
the year as
compensation
(Number)
Exercised
during the
year
(Number)
Forfeited
during the
year
(Number)
Lapsed
during
the year
(Number)1
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)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
1 The fair value of options lapsed during the year was $460,980
20
Remuneration Report
Asia . Australasia . Europe . North America
Section 6: Equity holdings and transactions
The number of 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:
Balance
at the start
of the year
(Number)
Received during
the year on
exercise of
options
(Number)
Received during
the year as
compensation
(Number)
Net other
changes
during the year
(Number)
Balance
at the end
of the year
(Number)
19,633,409
62,803,769
-
70,410,696
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,633,409
62,803,769
1,500,000
8,461,929
9,961,929
-
-
-
-
-
(70,410,696)
(100,000)
-
-
35,119,513
35,119,513
86,252,015
86,252,015
-
413,511
(1,078,511)
-
742,642
742,642
1,913,511
58,986,892
214,513,277
-
-
2014
Name
Directors
Mr A Giles
Mr A Barlow
Mr I Lowe (i)
Mr C Morris (ii)
Ms T Fuller (iii)
Mr B Dixon (iv)
Mr G Dixon (iv)
Mr Q George (v)
Other key management personnel
Mr B Maher
Mr T Peacock (iv)
665,000
-
Totals
153,612,874
(i) from 8 October 2012
(ii) to 21 February 2014
(iii) to 14 June 2014
(iv) from 23 December 2013
(v) from 16 June 2014
Section 7: Other transactions with Key Management Personnel
Transactions with Directors and their personally related entities:
During the year receipts of $61,594 were received from an entity related to Mr Chris Morris for website hosting and search marketing
services on normal terms and conditions.
During the year receipts of $1,050 were received from an entity related to Mr Adrian Giles for a website development project on normal terms
and conditions.
During the year receipts of $4,750 were received from an entity related to Mr Andrew Barlow and Mr Adrian Giles for a website design and
development project on normal terms and conditions.
This marks the end of the audited remuneration report.
This report is made in accordance with a resolution of directors.
Andrew Barlow
Chairman
28 August 2014
Remuneration Report
21
Asia . Australasia . Europe . North America
Auditor’s Independence Declaration
22
Auditor’s Independence Declaration
Asia . Australasia . Europe . North America Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2014
Notes
2014
$
2013
$
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 receivables
Listing & registrar fees
Legal fees
Travel expenses
Audit and accountancy fees
Finance costs
Other expenses
Loss before income tax expense
Income tax benefit/(expense)
Loss after income tax expense
Net loss attributable to members
Other comprehensive income / (loss)
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation
Write off available for sale investment
Total other comprehensive income / (loss)
3
3
4
4
4
5,066,180
4,055,721
627,482
673,756
(1,207,632)
(748,257)
(5,025,021)
(2,711,403)
(5,539,323)
(5,137,214)
(419,015)
(249,846)
(259,220)
(249,995)
(35,899)
(101,984)
(82,629)
(80,164)
(560,307)
(429,785)
(362,838)
(256,716)
(595,430)
(320,100)
(3,145)
(177,291)
(12,670)
(89,136)
(278,490)
(113,178)
(283,510)
(237,407)
(222,915)
(129,720)
(3,451)
-
(743,688)
(341,430)
(10,125,497)
(6,460,173)
5
29,935
(774)
(10,095,562)
(6,460,947)
(10,095,562)
(6,460,947)
35,515
29,777
(106,335)
(70,820)
-
29,777
Total comprehensive loss attributable to the members
(10,166,382)
(6,431,170)
Earnings per share (EPS) from loss from continuing operations attributable
to the ordinary equity holders of the company
2014 Cents
2013 Cents
Basic earnings per share
Diluted earnings per share
17
17
(1.20)
(1.20)
(0.94)
(0.94)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying
notes.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
23
Asia . Australasia . Europe . North America Consolidated Statement of Financial Position
As at 30 June 2014
Notes
2014
$
2013
$
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Total current assets
NON-CURRENT ASSETS
Property, plant & equipment
Other financial assets
Deferred tax 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
Deferred tax liabilities
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
7
8
9
10
5
11
12
13
14
14
5
15
16
3,354,051
9,132,037
3,582,201
1,796,793
6,936,252
10,928,830
100,078
-
39,677
130,079
212,664
-
33,941,462
5,771,645
34,081,217
6,114,388
41,017,469
17,043,218
2,422,088
667,707
462,287
813,104
651,185
212,059
3,552,082
1,676,348
232,494
39,677
272,171
46,618
-
46,618
3,824,253
1,722,966
37,193,216
15,320,252
108,515,858
76,871,148
1,242,375
1,039,039
(72,565,017)
(62,589,935)
37,193,216
15,320,252
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
24
Consolidated Statement of Financial Position
Asia . Australasia . Europe . North America Consolidated Statement of Changes in Equity
For the year ended 30 June 2014
2014
Balance at 1 July 2013
Issued
Capital
$
Reserves
$
Accumulated
Losses
$
Total Equity
$
Notes
76,871,148
1,039,039
(62,589,935)
15,320,252
Movement in foreign exchange translation reserve
16
Decrease in available for sale investment reserve
Other comprehensive income
Loss attributable to members of the company
Total comprehensive income
Transactions with equity holders in their capacity
as equity holders
Contributions of equity, net of transaction costs
Treasury shares
Reclassification of lapsed options to retained earnings
Reclassification of vested ESOP
Increase in employees share based payments reserve
-
-
-
-
35,515
(106,335)
(70,820)
-
-
-
35,515
(106,335)
(70,820)
-
(10,095,562)
(10,095,562)
(70,820)
(10,095,562)
(10,166,382)
15
15
16
16
16
32,953,718
(1,474,679)
-
-
-
-
32,953,718
(1,474,679)
-
(120,480)
120,480
165,671
(165,671)
-
560,307
-
-
-
-
560,307
31,644,710
274,156
120,480
32,039,346
Balance 30 June 2014
108,515,858
1,242,375
(72,565,017)
37,193,216
2013
Issued
Capital
$
Reserves
$
Accumulated
Losses
$
Total Equity
$
Notes
Balance at 1 July 2012
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
15
15
16
16
16
-
-
-
-
29,777
29,777
-
-
29,777
29,777
-
(6,460,947)
(6,460,947)
29,777
(6,460,947)
(6,431,170)
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
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
25
Asia . Australasia . Europe . North America Consolidated Statement of Cash Flows
For the year ended 30 June 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from trade and other debtors
Interest received
Government grants and other receipts
Notes
2014
$
2013
$
4,774,215
3,294,614
337,769
2,298,493
547,574
822,844
Payments to trade creditors, other creditors and employees
(11,135,733)
(8,238,911)
Income tax paid
Interest paid
(7,329)
(3,445)
(774)
-
Net cash outflows from operating activities
25
(3,736,030)
(3,574,653)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
(15,622)
(33,123)
Proceeds from sale of fixed assets
Net cash acquired via business acquisition
Payments for intangible assets
Net cash outflows from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
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
1,477
503,593
855
-
(2,458,170)
(986,304)
(1,968,722)
(1,018,572)
-
-
(5,704,752)
(4,593,225)
9,132,037
13,746,124
(73,234)
(20,862)
CASH AT THE END OF THE FINANCIAL YEAR
7
3,354,051
9,132,037
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
26
Consolidated Statement of Cash Flows
Asia . Australasia . Europe . North America Notes to the Financial Statements
For the year ended 30 June 2014
1. Summary of Significant Accounting Policies
The financial report covers Adslot Ltd (“Company”) and controlled entities (“Group”). Adslot Ltd is a listed public company, incorporated and
domiciled in Australia. The financial report is for the financial year ended 30 June 2014 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 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 2013:
• AASB 10 Consolidated Financial Statements revises the definition of control and provides extensive new guidance on its application.
These new requirements have the potential to affect which of the Group’s investees are considered to be subsidiaries and therefore
to change the scope of consolidation. The requirements on consolidation procedures are unchanged.
The Group has reviewed its control assessments in accordance with AASB 10 and has concluded that there is no effect on the
classification (as subsidiaries or otherwise) of any of the Group’s investees held during the period or comparative periods covered by
these financial statements.
• AASB 119 Employee Benefits (as revised in 2011) changes the accounting for defined benefit plans and termination benefits.
Furthermore, AASB 119 (as revised in 2011) changes the accounting for short term employee benefits. This change has resulted in
the way annual leave entitlements are measured, with all amounts expected to be settled over a period greater than 12 months from
reporting date needing to be discounted back to present value with an allowance for further salary increases.
As the Group expects all annual leave for all employees to be used wholly within 12 months of the end of the reporting period, this
change has had no impact on the measurement of the annual leave entitlements included in the financial statements.
• AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements
relocates the reporting of individual key management personnel disclosures relating to options/right holdings, equity holdings, loans
and other transactions from the financial report to the remuneration report.
The adoption of AASB 2011-4 has resulted in changes to the 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.
Notes to the Financial Statements
27
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
(a) Basis of preparation
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 net
cash outflows from operations of $3.7m for the year, and management anticipate incurring further net cash outflows from operations until
such time as sufficient revenue growth is achieved.
The ability of the Group to continue as a going concern is dependent upon revenue growth in the Adslot division and levels of cash reserves.
During FY 2014 the Company increased the earnings from its Adslot Publisher product, and acquired new revenue streams from the
Facilitate Digital acquisition. During FY 2015 the Group expects an increase in revenues from Adslot Publisher, Symphony and also revenues
from the integration of these two products.
Despite this, the Company anticipates net operating cash flows from operations will continue to be negative in FY 2015. However the
Directors believe the Group can continue to pay its debts as and when the fall due for the following reasons:
• The Group had a cash position as at 30 June 2014 of $3.4m;
• The Group raised $6.5m in July 2014 to fund growth in the business;
• The Webfirm division is expected to make continued positive net cash flows from its operations during FY 2015; 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. The Company controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has
the ability to affect those returns through its power over the subsidiary.
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.
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.
28
Notes to the Financial Statements
Asia . Australasia . Europe . North America 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 the Consolidated 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
20–30% per annum
(f) Receivables
Trade receivables are recognised initially at fair value and thereafter are measured at amortised cost, less provision for impairment. They are
non-derivative financial assets with fixed or determinable amounts not quoted in an active market. Trade accounts receivable are generally
settled between 14 and 60 days and carried at amounts recoverable.
Collectability of trade receivables is reviewed on an ongoing basis. Debts 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.
Notes to the Financial Statements
29
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
(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 of Profit or Loss and Other Comprehensive
Income over the period of the borrowing using the effective interest method.
(j) Finance costs
Finance costs are recognised as expenses in the period in which they are incurred except where they are incurred in the construction of a
qualifying asset in which case the finance costs are capitalised as part of the asset.
(k) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax
bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered
or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are
applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An
exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or
liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at
the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities 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 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.
(l) Employee benefits
Wages and salaries, annual leave and sick leave
Short-term employee benefits are current liabilities included in employee benefits, measured at the undiscounted amount that the Group
expects to pay as a result of the unused entitlement. Annual leave is included in ‘provisions’. The Group does not discount the leave liability
calculations as the Group expects all annual leave for all employees to be used wholly within 12 months of the end of reporting period.
Long service leave
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.
30
Notes to the Financial Statements
Asia . Australasia . Europe . North America 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, 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 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 while
the proceeds received, net of any directly attributable transaction costs, are credited to share capital.
(m) Intangible Assets
Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (acquisition date). Goodwill is
measured as the excess of the fair value of consideration paid over the fair value of the identifiable net assets of the entity or operations
acquired. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually, being allocated
to the cash flows of the relevant cash generating unit and is carried at cost less accumulated impairment losses. An impairment loss for
goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period.
Research & development expenditure
Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised
only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its
intention to 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, QDC IP Technology and Facilitate Digital 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 circum-stances 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, QDC IP Technology and Facilitate Digital business is 4 to 5 years.
Domain name
Acquired domain names are accounted for 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.
Notes to the Financial Statements
31
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
(n) Leased assets
Leases of assets under which the Group assumes substantially all the risks and benefits of ownership are classified as finance leases.
This is distinct from operating leases under which the lessor effectively retains substantially all such risks and benefits. Property, plant and
equipment acquired by finance leases are 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 the lease term. Associated costs such as maintenance and insurance are expensed as incurred.
(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 the 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, 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 a one year duration. While 30% of search engine
optimisation renewal revenue is recorded as earned in first month of renewal contract, the remaining 70% revenue is recognised over a one
year duration. Prepaid revenue calculated in this regard is excluded from revenue and is being treated as unearned revenue in the
Consolidated Statement of Financial Position.
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 as income at the date control of the asset passes to the buyer, usually
when the signed contract of sale becomes unconditional.
32
Notes to the Financial Statements
Asia . Australasia . Europe . North America (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.
(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.
The activities of the Group have previously been described within two main segments being Adslot and Webfirm. Following the acquisition
of the Facilitate Digital business, the Group now reports its segments based on geographical locations:
• APAC – Australia, New Zealand and Asia;
• EMEA – Europe, the Middle East and Africa; and
• The Americas – North, Central and South America.
Notes to the Financial Statements
33
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
(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.
Intellectual Property valuation
The valuation of Intellectual Property acquired during this year has been determined based on a value in use calculation using expected
revenues and expenses over a two-year period from client contracts with an assumed minimum growth rate in revenues of 20% for a further
eight years. Future cashflows were discounted at 18.23%, which included a market risk premium of 15%. No terminal value has been
assumed in the valuation.
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 requires 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 assessments are predicated largely on:
•
•
•
the continued adoption of the Adslot Marketplace product;
the rollout of Symphony to contracted and new users; and
the successful launch of the integrated Adslot and Symphony products.
In the event that these products do 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 $33,941,462 (2013: $5,771,645) and there were no
impairment losses (2013: $Nil) 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, management 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 expense for the year was $560,307 (2013: $429,785).
Unrecognised deferred tax assets
As disclosed in Note 5, the Group recognises deferred tax assets relating to temporary differences, capital losses or operating losses
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 $7,228,777 (2013: $5,352,038).
34
Notes to the Financial Statements
Asia . Australasia . Europe . North America Research and development tax concessions
A receivable of $2,041,942 (2013: $953,878) has been recognised in relation to a research and development tax concession for the 2014
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.
(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 2014 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 July 2014 or later periods, but have not been adopted. They are expected to result in minimum or no impact to the Group’s financial
statements, other than IFRS 15 for which the extent of impact has yet to be determined.
• AASB 9 Financial Instruments;
• AASB 1031 Materiality (December 2013) and related AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual
Framework, Materiality and Financial Instruments;
• AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities;
• AASB 2013-3 Recoverable Amount Disclosures for Non-Financial Assets;
• AASB 2014-1 Amendments to Australian Accounting Standards; and
•
IFRS 15 Revenue from Contracts with Customers.
Notes to the Financial Statements
35
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
2. Segment Information
2014
Business segments
External sales (i)
APAC
EMEA
The Americas
Total
4,551,808
155,785
136,625
4,844,218
Segment result from continuing operations
(7,708,784)
(711,268)
(1,225,821)
(9,645,873)
Depreciation included in segment result (Note 9)
66,256
Amortisation included in segment result (Note 11)
4,950,368
Additions to non-current assets (PP&E)
Impairment of intangibles
Statement of Financial Position
10,758
-
5,600
-
1,281
-
2,797
74,653
-
4,950,368
2,949
-
14,988
-
Segment assets
Segment liabilities
2013
Business segments
External sales (i)
43,803,054
203,673
185,753
44,192,480
(14,937,538)
(234,137)
(157,338)
(15,329,013)
APAC
EMEA
The Americas
Total
3,541,368
5,661
4,171
3,551,200
Segment result from continuing operations
(6,224,916)
(367,417)
(744,089)
(7,336,422)
Depreciation included in segment result (Note 9)
67,950
Amortisation included in segment result (Note 11)
2,640,785
1,275
-
2,598
-
1,393
70,618
-
2,640,785
4,478
-
31,374
-
24,298
-
Additions to non-current assets (PP&E)
Impairment of intangibles
Statement of Financial Position
Segment assets
Segment liabilities
13,802,417
(13,633,780)
64,083
(32,911)
176,500
14,043,000
(49,732)
(13,716,423)
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
(i) Refer to Note 3 for a description of product lines from external customers.
2014
$
2013
$
4,844,218
3,551,200
-
-
239,387
526,530
(17,425)
(22,009)
5,066,180
4,055,721
36
Notes to the Financial Statements
Asia . Australasia . Europe . North America 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 benefit/(expense)
Profit/(Loss) on sale of fixed assets
Loss on write off of asset
2014
$
2013
$
(9,645,873)
(7,336,422)
239,387
627,482
-
-
526,530
673,756
-
95,515
(560,307)
(429,785)
(42,090)
(20,862)
29,935
32
(106,329)
(774)
691
-
Other head office income/(expenses) not allocated in segment result
(637,799)
30,404
Loss before income tax from continuing operations
(10,095,562)
(6,460,947)
Reportable segment assets are reconciled to total assets as follows:
Segment Result
Total segment assets
Head office assets
Intersegment eliminations
2014
$
2013
$
44,192,480
14,043,000
48,310,079
22,826,015
(51,485,090)
(19,825,797)
Total assets as per the statement of financial position
41,017,469
17,043,218
Reportable segment liabilities are reconciled to total liabilities as follows:
Segment Result
Total segment liabilities
Head office liabilities
Intersegment eliminations
2014
$
2013
$
(15,329,013)
(13,716,423)
(865,766)
(869,926)
12,370,526
12,863,383
Total liabilities as per the statement of financial position
(3,824,253)
(1,722,966)
Notes to the Financial Statements
37
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
2. Segment Information (continued)
The Group’s revenues from external customers and its non-current assets (other than financial instruments) are divided into the following
geographical areas:
2014
$
2013
$
Revenue
Non-Current Assets
Revenue
Non-Current Assets
Australia (Domicile)
4,001,542
34,069,371
3,541,368
5,895,309
New Zealand
United Kingdom
USA
Other countries
Total
398,713
51,241
136,625
256,097
510
2,840
3,376
5,120
-
5,661
4,171
-
-
3,330
3,085
-
4,844,218
34,081,217
3,551,200
5,901,724
Revenues from external customers in the Group’s domicile, Australia, as well as its major markets, New Zealand, the United Kingdom and the
USA, have been identified on the basis of the customer’s geographical location. Non-current assets are allocated based on their physical
location.
Notes to and forming part of the segment information
Business segments
The activities of the Group have previously been described within two main segments being Adslot and Webfirm. Following the acquisition of
the Facilitate Digital business, the Group now reports its segments based on geographical locations:
• APAC – Australia, New Zealand and Asia;
• EMEA – Europe, the Middle East and Africa; and
• The Americas – North, Central and South America.
The Group has restated the comparative segment information based on the new segment allocations.
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 $17,425 (2013:
$22,009), and corresponding expenses have been eliminated on consolidation.
Major customers
The Group provides services to and derives revenue from a number of customers across all the divisions. During the year, the Group did not
derive revenue that was greater than 10% of consolidated revenue from continuing operations from one customer.
38
Notes to the Financial Statements
Asia . Australasia . Europe . North America 3. Revenue and Other Income
Revenue
Revenue from Trading Technology
Revenue from Services
Revenue from Adserving
Total revenue for services rendered
Interest income
Total revenue
Other income
Grant income
Total revenue and other income
2014
$
2013
$
1,568,673
905,517
2,449,584
2,623,674
808,536
-
4,826,793
3,529,191
239,387
526,530
5,066,180
4,055,721
627,482
627,482
673,756
673,756
5,693,662
4,729,477
Revenue derived from the three product lines are described as follows:
Trading Technology
Advertising sales automation services that reduce selling costs and increase advertising revenue for publishers, and streamline the trading
process for media buyers.
Services
Online marketing services including search engine optimisation, paid search marketing, social marketing, website hosting, non-bespoke
website builds and website amendments.
AdServing
Workflow automation technology and campaign execution toolsets that serve, track and optimise online display ad content, rich media such
as online video, and search marketing.
Notes to the Financial Statements
39
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
4. Expenses
Loss before income tax includes the following specific expenses:
Depreciation and amortisation
Amortisation – Leasehold improvements
Amortisation – Software development costs
Depreciation – Plant & equipment
Total depreciation and amortisation
Finance costs
2014
$
2013
$
14,175
7,277
4,950,368
2,640,785
60,478
63,341
5,025,021
2,711,403
Interest paid/payable to unrelated entities
3,451
-
Other charges against assets
Impairment of trade receivables
Rental expense – operating leases
Defined contribution superannuation expense
Loss on write off of available for sale asset
(Profit)/Loss on sale of PP&E & internally developed software
Deferred vendor consideration
Foreign currency loss
3,145
595,430
420,676
106,329
(32)
-
42,090
12,670
320,100
410,294
-
(691)
(95,515)
20,862
40
Notes to the Financial Statements
Asia . Australasia . Europe . North America 5. Income Tax Expense
(a) Numerical reconciliation of income tax expense to prima facie tax benefit
Loss before income tax
(10,125,497)
(6,460,173)
Prima facie tax benefit on loss before income tax at 30% (2013: 30%)
(3,037,649)
(1,938,052)
2014
$
2013
$
Tax effect of:
Other non-allowable items
Share options expensed during year
Research & development tax concession
Income tax benefit attributable to entity
6,854
168,092
995,706
4,185
128,936
635,918
(1,866,997)
(1,169,013)
Deferred tax income relating to utilisation of unused tax losses
(39,677)
-
Deferred tax assets relating to tax losses not recognised
Income tax (benefit)/expense attributable to entity
1,876,739
1,169,787
(29,935)
774
(b) Movement in deferred tax balances
Balance at 30 June 2014
Balance at
1 July 2013
$
Recognised
in Profit
& Loss
$
Acquired
in Business
combination
$
Deferred tax
assets
$
Deferred tax
liabilities
$
Net
$
Trade and other receivables
Property, plant and equipment
Intangible assets
Unused tax losses
Net tax (assets)/liabilities
-
-
-
-
(c) Deferred tax assets not brought to account
(125,957)
(125,957)
199
199
165,435
165,435
(125,957)
199
165,435
(39,677)
-
(39,677)
(39,677)
-
(39,677)
39,677
-
(39,677)
39,677
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%)
2014
$
2013
$
(3,217,981)
(4,605,182)
27,182,025
22,313,431
131,879
131,879
24,095,923
17,840,128
7,228,777
5,352,038
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.
Notes to the Financial Statements
41
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
6. Dividends
The Company did not declare any 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
8. Trade and Other Receivables
Current:
Trade debtors
Less: Allowance for impairment
Other receivables
Prepayments
The average age of the Company’s trade receivables is 61 days (2013: 35 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
Impairment recognised during the year from business combinations
Amounts written off as uncollectible
Amounts recovered during the year
Balance at the end of the year
2014
$
2013
$
3,140,845
9,123,060
213,206
8,977
3,354,051
9,132,037
2014
$
2013
$
1,725,119
(413,987)
1,311,132
605,003
(20,480)
584,523
2,060,296
1,082,879
210,773
129,391
3,582,201
1,796,793
2014
$
85,161
43,775
63,117
65,450
2013
$
67,817
1,206
72
-
257,503
69,095
20,480
15,108
408,309
470,684
13,937
-
(22,122)
(458,473)
(7,788)
413,987
(5,668)
20,480
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.
42
Notes to the Financial Statements
Asia . Australasia . Europe . North America
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
2014
$
2013
$
91,320
36,385
(58,680)
(14,871)
32,640
21,514
182,107
159,090
(143,615)
(100,144)
38,492
432,398
58,946
215,159
(403,452)
(165,540)
28,946
49,619
100,078
130,079
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:
2014
Leasehold
Improvements
$
Plant and
Equipment
$
Computer
Equipment
$
Total
$
Carrying amount at 1 July 2013
21,514
58,946
49,619
130,079
Additions
Additions through business combinations (Note 19)
Disposals/write offs
-
25,301
-
-
-
-
14,988
12,002
14,988
37,303
(8,578)
(8,578)
Depreciation/amortisation expense
(14,175)
(20,454)
(40,024)
(74,653)
Net foreign exchange differences
-
-
939
939
Carrying amount at 30 June 2014
32,640
38,492
28,946
100,078
2013
Leasehold
Improvements
$
Plant and
Equipment
$
Computer
Equipment
$
Total
$
Carrying amount at 1 July 2012
28,791
80,482
58,465
167,738
Additions
Disposals/write offs
-
-
-
-
53,613
53,613
(20,654)
(20,654)
Depreciation/amortisation expense
(7,277)
(21,536)
(41,805)
(70,618)
Carrying amount at 30 June 2013
21,514
58,946
49,619
130,079
Notes to the Financial Statements
43
Asia . Australasia . Europe . North America
Notes to the Financial Statements (continued)
10. Available for sale investment carried at fair value
Investment – at fair value
During the year the investment in Brandscreen Pte Ltd (Brandscreen) (an unlisted foreign entity) was written off.
11. Non-Current Assets – Intangible Assets
2014
$
-
2013
$
212,664
Internally
Developed
Software
$
Domain Name
$
Intellectual
Property
$
Goodwill
$
Total
$
Year ended 30 June 2014
Opening net book amount
548,834
38,267
5,184,544
Acquisitions
Acquisitions through business combinations
(Note 19)
Amortisation
Impairment of assets
1,311,519
-
(343,616)
-
-
-
-
-
-
-
-
5,771,645
1,311,519
16,646,727
15,161,939
31,808,666
(4,606,752)
-
-
-
(4,950,368)
-
Carrying amount at 30 June 2014
1,516,737
38,267
17,224,519
15,161,939
33,941,462
At 30 June 2014
Cost
2,101,880
38,267
29,316,305
20,543,591
52,000,043
Accumulated amortisation and impairment
(585,143)
-
(12,091,786)
(5,381,652)
(18,058,581)
Carrying amount at 30 June 2014
1,516,737
38,267
17,224,519
15,161,939
33,941,462
Internally Developed Software
Internally developed software represents a number of software platforms developed within the Adslot and Webfirm divisions.
During the year a net $844,201 (2013: $542,467) 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 $690,710 (2013: $443,837) arising from the
capitalised costs offset the gross amount of expenditure. Research and development costs of $860,850 (2013: $1,133,425) were recognised
in profit or loss.
During the year a net $467,318 (2013: nil) of innovation research & development wage costs arising from the development of the Symphony
platform was capitalised. Associated R&D Grant claims of $457,656 (2013: nil) arising from the capitalised costs offset the gross amount of
expenditure.
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.
Domain names
Domain names opening carrying value of $38,267 (2013: $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.
44
Notes to the Financial Statements
Asia . Australasia . Europe . North America 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 (2013: $5,932,006) of
the opening balance relates to this “CAP” technology. Accumulated amortisation of this asset as at 30 June 2014 was $5,190,504 (2013:
$4,004,103). This asset has a remaining useful life for accounting purposes of one year.
Adimise Pty Ltd (“Adimise”) holding online ad-serving technology had $271,055 (2013: $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 2014 was $216,845 (2013: $162,634). This asset has a
remaining useful life for accounting purposes of one year.
QDC IP Technology (“QDC”) holding creative ad building and video advertising technology had licences to the Core IP valued at $6,466,517
(2013: $6,466,517) in theopening balance and attached to the Adslot CGU. Accumulated amortisation of this asset as at 30 June 2014 was
$4,611,601 (2013: $3,318,297). This asset has a remaining useful life for accounting purposes of one year.
The Symphony platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition (Note 19). The fair value
attributable to the Symphony technology platform intellectual property was $16,191,496. Accumulated amortisation of this asset at
30 June 2014 was $2,013,126. This asset has a remaining useful life for accounting purposes of four and a half years.
The Facilitate for Agencies (“FFA”) platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition (Note 19).
The fair value attributable to the FFA technology platform intellectual property was $455,231. Accumulated amortisation of this asset at
30 June 2014 was $59,710. This asset has a remaining useful life for accounting purposes of three and a half years.
With the exception of FFA, 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. FFA has an accounting useful life of four 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.
The Goodwill balance relating to the acquisition of Facilitate has an attributed fair value of $15,161,939 and has not been amortised or
impaired. The directors have considered the time period between the acquisition date and year-end and the movements in the share price
during this time in determining that the goodwill balance is not impaired and the fair value at the date of acquisition is still relevant.
Prior Year comparison
Year ended 30 June 2013
Internally
developed
Software
$
Domain
Name
$
Intellectual
Property
$
Goodwill
$
Total
$
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
790,361
288,267
12,669,578
5,381,652
23,027,186
Accumulated amortisation and impairment
(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
Notes to the Financial Statements
45
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
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)
2014
$
311,703
213,206
1,897,179
2,422,088
2014
$
667,707
667,707
2013
$
113,854
8,977
690,273
813,104
2013
$
651,185
651,185
(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 delivery will occur after the reporting date.
14. Provisions
Current:
Employee benefits
Non current:
Employee benefits
15. Contributed equity
2014
$
2013
$
462,287
212,059
232,494
46,618
2014
Number
2013
Number
2014
$
2013
$
Ordinary Shares – Fully Paid
969,952,370
692,432,056
108,515,858
76,871,148
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the numbers of shares.
At the shareholders meeting each ordinary share is entitled to one vote when a poll is called, otherwise each shareholders has one vote on a
show of hands.
46
Notes to the Financial Statements
Asia . Australasia . Europe . North America
Movements in Paid-Up Capital
Date
Details
Number
of shares
Number
Issue
price
$
Capital
raising costs
$
Value
$
30-Jun-12
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
Less: Treasury shares1
703,741,287
(11,309,231)
933,903
77,461,855
-
(590,707)
30-Jun-13
Balance
692,432,056
933,903
76,871,148
24-09-13
Issue of shares – employee ESOP
3,828,691
0.059
23-12-13
Scheme consideration – Facilitate Digital acquisition
273,730,778
23-12-13
Issue of shares – employee ESOP
6,250,000
0.115
0.115
16-06-14
Issue of shares – employee ESOP
1,000,000
0.105
30-Jun-14
Less: Treasury shares
30-Jun14
Balance
Treasury Shares
988,550,756
(18,598,386)
969,952,370
-
-
-
-
225,893
31,479,039
718,750
105,000
933,903
109,990,537
-
(1,474,679)
933,903
108,515,858
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.
Treasury Shares movements during the financial year are summarised below:
Issue Type
Employee ESOP
Employee ESOP
Employee ESOP
Employee ESOP
Employee ESOP
Employee ESOP
Employee ESOP
Employee ESOP
Issue or
Acquisition
Date
09/12/12
05/01/12
05/01/12
14/09/12
10/10/12
24/09/14
23/12/14
16/06/14
Issue
Price
$
0.053
0.064
0.060
0.046
0.059
0.059
0.115
0.105
Balance at
beginning
of the year
(Number)
413,511
833,333
833,333
6,229,054
3,000,000
Issued
during
the year
(Number)
-
-
-
-
-
-
-
-
3,828,691
6,250,000
1,000,000
Transfers
during
the year
(Number)
(413,511)
(833,333)
(833,333)
Balance
at end
of the year
(Number)
-
-
-
(209,359)
6,019,695
(1,500,000)
1,500,000
-
-
-
3,828,691
6,250,000
1,000,000
11,309,231
11,078,691
(3,789,536)
18,598,386
Notes to the Financial Statements
47
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
15. Contributed equity (continued)
Options movements during the financial year are summarised below:
Issue Type
Expiry Date
Exercise
Price
$
Balance at
beginning
of the year
(Number)
Issued
during
the year
(Number)
Expired
during
the year
(Number)
Exercised
during
the year
(Number)
Balance
at end of
the year
(Number)
Ordinary options
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
5,300,000
-
-
-
-
-
-
-
-
-
2,000,000
(1,000,000)
2,000,000
-
300,000
(1,000,000)
4,300,000
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
$
0.100
0.200
0.300
0.400
0.500
Balance at
beginning
of the year
(Number)
3,000,000
3,000,000
4,000,000
5,000,000
5,000,000
20,000,000
Granted
during
the year
(Number)
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
(3,000,000)
17,000,000
48
Notes to the Financial Statements
Asia . Australasia . Europe . North America 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
Decrease in available for sale investment reserve
Closing balance
Foreign currency translation reserve
Opening balance
Movement on currency translation
Transfer to retained earnings
Closing balance
2014
$
2013
$
1,177,083
-
65,292
902,927
106,335
29,777
1,242,375
1,039,039
902,927
1,839,510
(120,480)
(1,360,522)
(165,671)
560,307
1,177,083
(5,846)
429,785
902,927
106,335
106,335
(106,335)
-
-
106,335
29,777
35,515
-
-
29,777
-
65,292
29,777
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
Notes to the Financial Statements
49
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
17. Earnings Per Share
(a) Basic earnings per share
Loss attributable to the ordinary equity holders of the Company
(1.20)
(0.94)
(b) Diluted earnings per share
Loss attributable to the ordinary equity holders of the Company
(1.20)
(0.94)
2014
Cents
2013
Cents
(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
2014
$
2013
$
(10,095,562)
(6,460,947)
2014
Number
2013
Number
(d) Weighted average number of shares used as the denominator
Weighted average number of shares on issue used in the calculation of basic EPS
844,352,084
690,411,814
(e) Weighted average number of shares used as the denominator
Weighted average number of shares on issue used in the calculation of diluted EPS
844,352,804
690,411,814
(i) During 2014 and 2013 there were no discontinued operations or values attributable to minority interests.
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 2014.
2014
Number
2013
Number
32,490,393
57,537,132
50
Notes to the Financial Statements
Asia . Australasia . Europe . North America
19. Business Combinations
2014 – Facilitate Digital Holdings Limited and controlled entities
On 23 December 2013, Adslot Ltd acquired 100% of the equity of Facilitate Digital Holdings Limited (Facilitate) via a court approved Scheme
of Arrangement. Facilitate is a global provider of digital workflow and trading technology for media agencies. The acquisition will combine
Adslot’s expertise in media technology for publishers with Facilitate’s platform for media buyers. The benefits expected to arise from this
integration are reflected in the goodwill balance as detailed below.
The purchase consideration was 1.216 Adslot shares for each Facilitate share and is valued as follows:
Equity 273,730,778 fully paid ordinary shares @ 11.5 cents per share (i)
Total consideration paid
$
31,479,039
31,479,039
(i) Being the closing price of Adslot shares on 20 December 2013. This was the last trading day prior to the Scheme Implementation.
Details of assets and liabilities acquired are as follows:
Purchase consideration
Fair value of net identifiable assets acquired:
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Trade and other payables
Employee benefits
Deferred tax liabilities
Acquiree’s
Carrying Amount
$
Fair Value
$
$
31,479,039
503,593
503,593
2,205,040
2,205,040
37,303
37,303
(2,554,514)
(2,554,514)
(481,372)
(481,372)
-
(39,677)
Intellectual property – platform technology
4,739,577
16,646,727
Goodwill on business acquisition
Net identifiable assets acquired
-
15,161,939
4,449,627
31,479,039
31,479,039
The valuation of Intellectual Property acquired during this year has been determined based on a value in use calculation using expected
revenues and expenses over a two-year period from client contracts with an assumed minimum growth rate in revenues of 20% for a further
eight years. Future cashflows were discounted at 18.23%, which included a market risk premium of 15%. No terminal value has been
assumed in the valuation.
The Symphony technology platform intellectual property will be amortised over five years and the Facilitate for Agencies (“FFA”) technology
platform intellectual property will be amortised over four years, in accordance with AASB 138 Intangible Assets.
At 31 December 2013, the fair values of the identifiable intangible assets were determined provisionally, which was reflected in the Appendix
4D issued at half year. Based on further analysis, the Group has restated the acquired intangibles giving rise to a decrease of $166,984 to
Goodwill on business acquisition. The main contributors to this decrease in Goodwill is a combination of the re-measurement of the fair
value of Trade Receivables and other receivables, and the revaluation of the Symphony and FFA platforms.
The acquisition costs related to this acquisition were $647,689 which has been included in Consulting, Legal, Listing and Registrar fees in
the Statement of Profit or Loss and Other Comprehensive Income.
The acquired business contributed $1,448,196 in revenue and a net loss of $2,717,563 to the Group for the period from 23 December 2013
to 30 June 2014. Had the acquisition occurred on 1 July 2013, the Group’s revenue would have been $6,622,783 and loss would have been
$12,670,587. The additional pre acquisition net loss that would have been contributed by Facilitate has been calculated using Facilitate’s
accounting policies and includes one-off acquisition related costs of $667,007.
Notes to the Financial Statements
51
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
19. Business Combinations (continued)
Statement of Cash Flows
For the purposes of the Statement of Cash Flows, the acquisition resulted in net cash acquired of $503,593.
2013
There were no business combinations during the year ended 30 June 2013.
20. Contingencies
No contingent assets or liabilities are noted.
21. Commitments
Operating lease commitments
Total operating lease expenditure contracted for at balance date but not capitalised in the
financial statements payable:
Within 1 year
Between 1 and 5 years
2014
$
2013
$
640,432
296,282
788,260
6,538
1,428,692
302,820
The lease commitments detailed above relate to rental premises and lease rental of printer/copier.
Capital commitments
The Group and the Company have not entered any capital expenditure contracts at reporting date that are not recognised as liabilities on the
Statement of Financial Position.
22. Remuneration of auditors
During the year the following fees were paid/payable to the auditor of the Company:
Audit services
Audit and review of financial reports
115,500
93,000
During the year the following fees were paid/payable to a related entity of auditor of the
company:
2014
$
2013
$
Other services
Indirect tax services
-
7,700
115,500
100,700
52
Notes to the Financial Statements
Asia . Australasia . Europe . North America
23. Key Management Personnel Disclosures
Directors
The following persons were directors of the Company during the financial year:
Mr Andrew Barlow (Non-Executive Chairman)
Mr Adrian Giles (Non-Executive Director)
Mr Ian Lowe (Executive Director & CEO)
Mr Chris Morris (Non-Executive Director)
(to 21 February 2014)
Ms Tiffany Fuller (Non-Executive Director)
(to 14 June 2014)
Mr Ben Dixon (Executive Director)
(from 23 December 2013)
Mr Geoff Dixon (Non-Executive Director)
(from 23 December 2013)
Mr Quentin George (Non-Executive Director)
(from 16 June 2014)
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or
indirectly, during the financial year:
Name
Position
Mr Brendan Maher
Chief Financial Officer and Company Secretary
Mr Tom Peacock
Group Commercial Director
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Termination benefits
Share based payments
Total compensation (a)
2014
$
2013
$
1,103,295
848,638
60,048
3,444
-
31,464
-
-
332,633
231,546
1,499,420
1,111,648
(a) There were 10 key management personnel throughout 2014, some of whom have a part year of service (2013: 6).
Business Acquisitions:
No related party transactions during the year ended 30 June 2014.
Transactions with Directors and their personally related entities:
During the year receipts of $61,594 (2013: $80,460) were received from an entity related to a Director for website hosting and search
marketing services on normal terms and conditions.
During the year receipts of $1,050 (2013: nil) were received from an entity related to a Director for a website development project on normal
terms and conditions.
During the year receipts of $4,750 (2013: nil) were received from an entity related to two Directors for a website design and development
project on normal terms and conditions.
Notes to the Financial Statements
53
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
24. Share Based Payments
Employee Option Plan
Between 2009 and October 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 $6,397. The remaining value of options to be expensed in future years amounts is
Nil. There were no options granted during the years ended 30 June 2014 and 30 June 2013. Options for the reporting period were:
2014
Exercise
Price
$
Balance
at start
of the year
(Number)
Granted
during
the year
(Number)
Exercised
during
the year
(Number)
Lapsed
during
the year
(Number)
Forfeited
during
the year
(Number)
Balance
at end
of the year
(Number)
Vested and
exercisable
at the end
of the year
(Number)
Grant Date
Expiry Date
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
5,300,000
Weighted average exercise price
$0.133
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
2,000,000
(1,000,000)
2,000,000
2,000,000
-
300,000
200,000
(1,000,000)
4,300,000
4,200,000
$0.116
$0.137
$0.137
Weighted average remaining contractual life at 30 June 2014 (days)
53
Options analysis for the prior period were:
2013
Exercise
Price
$
Balance
at start
of the year
(Number)
Granted
during
the year
(Number)
Exercised
during
the year
(Number)
Lapsed
during
the year
(Number)
Forfeited
during
the year
(Number)
Balance
at end
of the year
(Number)
Vested and
exercisable
at the end
of the year
(Number)
Grant Date
Expiry Date
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
54
Notes to the Financial Statements
Asia . Australasia . Europe . North America
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:
2014
Grant Date
Escrow
End Date
Valuation
Price
$
Balance
at start of
the year
(Number)
Granted
during
the year
(Number)
Transferred
during
the year
(Number)
Forfeited
during
the year
(Number)
Balance
at end of
the year
(Number)
Vested
at the end
of the year
(Number)
01/12/11
30/11/13
0.053
413,511
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
0.046
6,229,054
10/10/12
09/10/13
0.059
1,500,000
10/10/12
09/10/14
0.059
1,500,000
-
-
-
-
-
-
09/07/13
09/07/15
05/09/13
05/09/15
24/12/13
24/12/15
28/01/14
24/01/16
06/03/14
04/03/16
15/06/14
15/06/15
15/06/14
2015-2018
0.042
0.061
Converted
Right
0.120
0.090
0.105
0.105
-
-
-
-
-
-
-
666,667
3,580,744
3,000,000
176,928
7,845,045
250,000
750,000
(413,511)
(833,333)
(833,333)
-
-
-
-
-
-
(209,359)
(977,010)
5,042,685
(1,500,000)
-
-
-
-
-
-
-
-
-
-
-
1,500,000
666,667
(677,809)
2,902,935
-
-
-
-
-
3,000,000
176,928
7,845,045
250,000
750,000
Total
11,309,231
16,269,384
(3,789,536)
(1,654,819)
22,134,260
Weighted average share price
$0.052
$0.081
$0.060
$0.052
$0.061
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Weighted average remaining contractual life at 30 June 2014 (days)
416
Notes to the Financial Statements
55
Asia . Australasia . Europe . North America
Notes to the Financial Statements (continued)
24. Share Based Payments (continued)
2013
Grant Date
Escrow End
Date
Valuation
Price
$
Balance
at start of the
year
(Number)
Granted
during the
year
(Number)
Vested during
the year
(Number)
Forfeited
during the
year
(Number)
01/12/11
30/11/13
0.053
413,511
02/12/11
01/12/13
0.060
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
-
(88,967)
-
-
-
-
-
-
-
-
-
-
-
-
Balance
at end of
the year
(Number)
413,511
-
833,333
833,333
6,229,054
1,500,000
1,500,000
Total
2,169,144
9,229,054
(88,967)
-
11,309,231
Vested
at the end
of the year
(Number)
-
-
-
-
-
-
-
-
Weighted average share price
$0.060
$0.050
$0.060
$0.000
$0.052
$0.000
Weighted average remaining contractual life at 30 June 2013 (days)
715
The model inputs for ESOP rights to shares granted during the year ended 30 June 2014 included:
Model Input
ESOP #14-1
ESOP #14-2
ESOP #14-3
ESOP #14-4
ESOP #14-5
ESOP #14-6
Grant Date
9/07/13
5/09/13
28/01/14
06/03/14
15/06/14
15/06/14
Escrow End Date
9/07/15
5/09/15
28/01/16
04/03/16
15/06/15
2015-2018
Exercise Price
-
-
-
-
-
-
Price at Grant Date
$0.042
$0.061
$0.120
$0.090
$0.105
$0.105
The model inputs for ESOP rights to shares granted during the year ended 30 June 2013 included:
Model Input
Grant Date
Exercise Date
ESOP #13-1
ESOP #13-2
ESOP #13-3
14/09/12
10/10/12
10/10/12
14/09/14
10/10/13
10/10/14
Escrow End Date
13/09/14
09/10/13
09/10/14
Price at Grant Date
$0.046
$0.059
$0.059
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
Notes to the Financial Statements
Asia . Australasia . Europe . North America
Rights over Shares
No Rights over Shares were issued in 2014. The following table shows movement in the Rights over Shares for the current financial year:
2014
Issue Date
8-Oct-2012
8-Oct-2012
8-Oct-2012
8-Oct-2012
8-Oct-2012
Total
2013
Required
VWAP
Price
$
Escrow
Required
from award
Valuation
Price
$
Balance
at start
of the year
(Number)
Granted
during
the year
(Number)
Vested
during
the year
(Number)
Forfeited
during
the year
(Number)
0.10
0.20
0.30
0.40
0.50
2 years
93,000
3,000,000
2 years
64,500
3,000,000
-
-
-
66,000
4,000,000
73,000
5,000,000
63,500
5,000,000
-
-
-
-
-
(3,000,000)
-
-
-
-
360,000
20,000,000
-
(3,000,000)
-
-
-
-
-
-
Balance
at end of
the year
(Number)
-
3,000,000
4,000,000
5,000,000
5,000,000
17,000,000
Upon commencement of employment (8 October 2012) Mr Lowe was 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
3,000,000
3,000,000
4,000,000
5,000,000
5,000,000
Required
VWAP
Price
$
0.10
0.20
0.30
0.40
0.50
Value of
rights at
grant date
$
93,000
64,500
66,000
73,000
63,500
360,000
Fair Value
Per right
$
0.0310
0.0215
0.0165
0.0146
0.0127
Escrow
Required
from award
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
57
Asia . Australasia . Europe . North America
Notes to the Financial Statements (continued)
25. Cash Flow reconciliation
Reconciliation of Net Cash Flows from Operating Activities to Loss for the year
Loss for the year after income tax
Depreciation and amortisation
Impairment of intangibles
Share based payment
Impairment of receivables
(Profit)/Loss on asset write off
Unrealised foreign currency (loss)/gain
2014
$
2013
$
(10,095,562)
(6,460,947)
5,025,021
2,711,403
-
-
560,307
429,785
3,145
(32)
42,089
12,670
(691)
29,777
Grant receivable offset against capitalised intangible assets
1,323,323
443,837
Changes in assets and liabilities (net of effects of acquisition and disposal of entities)
(Increase)/Decrease in receivables
(Increase)/Decrease in deferred taxes
(Decrease)/Increase in payables and other provisions
Net cash outflow from operating activities
419,632
(447,469)
(39,677)
-
(974,276)
(293,018)
(3,736,030)
(3,574,653)
58
Notes to the Financial Statements
Asia . Australasia . Europe . North America 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.
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
2014
$
2013
$
3,354,051
9,132,037
3,371,428
1,687,882
6,725,479
10,819,919
2,422,088
813,104
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.
Notes to the Financial Statements
59
Asia . Australasia . Europe . North America
Notes to the Financial Statements (continued)
26. Financial Risk Management (continued)
(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), Pound Sterling (GBP), Euros (EUR), New Zealand dollars (NZD) and
Chinese Yuan (CNY).
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:
30 June 2014
Financial Assets
Financial Liabilities
Total Exposure
30 June 2013
Financial Assets
Financial Liabilities
Total Exposure
USD
A$
GBP
A$
EUR
A$
NZD
A$
CNY
A$
511,862
69,656
136,906
203,710
1,319
(157,338)
(112,051)
(102,306)
(39,313)
(7,256)
354,524
(42,395)
34,600
164,397
(5,937)
175,877
65,473
(49,732)
(32,911)
126,145
32,562
54
-
54
-
-
-
-
-
-
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, GBP/AUD exchange rate, EUR/AUD exchange rate, NZD/AUD exchange rate and CNY/AUD exchange rate ‘all other things being
equal’. It assumes a +/- 10% change of the following exchange rates for the year ended 30 June 2014:
• AUD/USD exchange rate (2013: 10%);
• AUD/GBP exchange rate (2013: 10%);
• AUD/EUR exchange rate (2013: nil);
• AUD/NZD exchange rate (2013: nil); and
• AUD/CNY exchange rate (2013: nil).
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.
30 June 2014
30 June 2013
USD
A$
GBP
A$
+10%
EUR
A$
NZD
A$
(32,229)
3,854
(3,145)
(14,945)
CNY
A$
540
Total
A$
(45,925)
(11,468)
(2,960)
-
-
-
(14,428)
USD
A$
GBP
A$
-10%
EUR
A$
NZD
A$
30 June 2014
30 June 2013
39,391
(4,711)
3,844
18,266
14,016
3,618
-
-
CNY
A$
(660)
-
Total
A$
56,130
17,634
60
Notes to the Financial Statements
Asia . Australasia . Europe . North America
(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%
$
30 June 2014
68,693
(61,810)
30 June 2013
155,723
(113,294)
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:
Available-for-sale financial assets
Investments in unlisted equities
2014
$
2013
$
-
212,664
The fair value of unlisted equities was been determined with reference to comparable equity transactions made by the unlisted company.
During the year the investment in unlisted equities was written off (Note 10)
(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.
Notes to the Financial Statements
61
Asia . Australasia . Europe . North America Notes to the Financial Statements (continued)
27. Parent Entity Information
The following details of information are related to the parent entity, Adslot Ltd, at 30 June 2014. 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
2014
$
2013
$
2,794,138
8,971,377
45,363,941
13,666,774
48,158,079
22,638,151
154,127
120,969
-
-
154,127
120,969
109,990,537
77,461,855
1,177,084
-
902,927
106,335
(63,163,669)
(55,953,935)
48,003,952
22,517,182
(7,330,213)
(2,202,065)
(7,330,213)
(2,202,065)
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 $330,999 (2013: $274,324).
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
On 3 July 2014, the Company announced a Share Placement (“Placement”). On 10 July 2014, the Placement was completed and consisted
of 65.0 million ordinary shares at $0.10 per share.
The funds raised will be applied to:
• Accelerate development and integration of the Adslot and Symphony platforms;
• Strengthen the balance sheet; and
• Provide additional working capital.
Other than this there has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly
affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in future
years
62
Notes to the Financial Statements
Asia . Australasia . Europe . North America 30. Consolidated Entities
Name
Parent entity
Adslot Ltd
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.
Facilitate Digital Holdings Limited
Facilitate Digital Pty Ltd
Symphony Media Pty Ltd
Facilitate Digital (Shanghai) Software
Facilitate Digital Limited
The Facilitate Digital Trust
Facilitate Digital, LLC
Facilitate Digital UK Limited
Facilitate Digital Deutschland GmbH
Facilitate Digital Europe Marketing Technology Ltd
Republic of Ireland
Equity interests in all controlled entities are by way of ordinary shares.
Country of
Incorporation
Ordinary Share
Consolidated Equity Interest
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
United States
Australia
Australia
Australia
China
New Zealand
New Zealand
United States
United Kingdom
Germany
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
Notes to the Financial Statements
63
Asia . Australasia . Europe . North America 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 23 to 63 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 2014 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 12 to 21 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.
Andrew Barlow
Chairman Adslot Ltd
28 August 2014
64
Directors’ Declaration
Asia . Australasia . Europe . North America Independent Audit Report
to the Members
Independent Audit Report to the Members
65
Asia . Australasia . Europe . North America Independent Audit Report to the Members (continued)
2
66
Independent Audit Report to the Members
Asia . Australasia . Europe . North America 3
Independent Audit Report to the Members
67
Asia . Australasia . Europe . North America Corporate Governance Statement
The directors of Adslot Ltd (“Adslot” or “the Company”) recognise the benefits of good corporate governance in achieving long-term
shareholder value.
As such, the Company endeavours to comply with the Australian Stock Exchange Corporate Governance Principles and Recommendations
(3rd Edition) (‘ASX Principles’) where appropriate. However, in some circumstances, the directors have elected adopt different governance
practices taking into account the size, complexity, history and corporate culture of the Company, or dispense with some ASX Principles
altogether.
Given Adslot operates in a nascent, fast-emerging and highly-competitive niche of the global media industry (broadly referred to as the “ad
tech” industry), the ability to adapt quickly to an ever-changing competitive environment is paramount to success. We need to “think big” to
unlock global revenue opportunities, but “act small” to minimise costs and allow the Company to remain nimble while we get the Company
to profitability.
Adslot’s Corporate Governance practices are therefore specifically designed to allow the Company to operate with an appropriate level of
efficiency, effectiveness, practicality and flexibility to remain competitive and significantly grow shareholder value.
Where Adslot considers that an ASX Principle is not appropriate to its particular circumstances, and it has chosen not to adopt it, detailed
reasons (and alternative practices, if appropriate) have been provided below.
The explanations regarding the Company’s governance arrangements are openly provided to ensure the market receives an appropriate level
of information so that:
• security holders and other stakeholders in the investment community can have a meaningful dialogue with the board and
management on governance matters;
• security holders can factor that information into their decision on how to vote on particular resolutions; and
•
investors can factor that information into their decision on whether or not to invest in the Company’s securities.
Principle 1: Lay solid foundations for management and oversight
A listed entity should establish and disclose the respective roles and responsibilities of its board and management and how their
performance is monitored and evaluated.
Recommendation 1.1
A listed entity should disclose:
(a) the respective roles and responsibilities of its board and management; and
(b) those matters expressly reserved to the board and those delegated to management.
The Company has separate functions for the Board and Senior Management.
The Board is responsible for:
• providing leadership and setting the strategic objectives of the Company;
• appointing the Chair;
• appointing, and when necessary replacing, the CEO;
• appointing, and when necessary replacing, the CFO and Company Secretary;
• approving the appointment, and when necessary replacement, of other Senior Management team members;
• overseeing Management’s implementation of the Company’s strategic objectives and its performance generally;
• approving operating plans, budgets and major capital expenditure;
• overseeing the integrity of the Company’s accounting and corporate reporting systems, including the external audit;
• overseeing the Company’s process for making timely and balanced disclosure of all material information concerning the Company;
• ensuring that the Company has an appropriate risk management framework and setting the risk appetite within which the board
expects Management to operate;
68
Corporate Governance Statement
Asia . Australasia . Europe . North America • approving the Company’s remuneration framework; and
• monitoring the effectiveness of the Company’s governance practices.
Senior Management is responsible for:
• preparation and implementation of the board-approved operating plan and budget, based on the strategic objectives of the Company
as set by the board, and operating within the risk appetite set by the board;
• all aspects of the day-to-day running of the business;
• attraction, recruitment, retention and motivation of quality staff to achieve the Company’s strategic objectives within the confines of
the board-approved budget and operating plan;
• achieving the Company’s product development, sales & marketing and financial goals in a timely and effective manner;
• providing the board with accurate, timely, clear and concise financial and operating information, and broader market intelligence, to
enable the board to perform its responsibilities; and
• securing key strategic partnerships to ensure the long-term success of the Company, and to gain competitive advantage within the
industry in which it operates.
The Board and Senior Management functions are also 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 every two months as
well as additional ad hoc meetings where required. The Management team meet regularly, usually multiple times a week across the group.
As such, the Company operates in accordance with ASX Corporate Governance Principle 1.1.
Recommendation 1.2
A listed entity should:
(a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and
(b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.
In appointing new members to the Board or Senior Management team, the Company undertakes various checks prior to appointing the
candidate, such as character, experience, education, criminal record and bankruptcy history checks. The Company provides security holders
with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.
As such, the Company operates in accordance with ASX Corporate Governance Principle 1.2.
Recommendation 1.3
A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment.
Each member of the Board and Senior Management team has entered into a written agreement with the Company, which outlines their roles
and responsibilities and the Company’s expectations of them. The material terms of any employment, service or consultancy agreement the
Company enters into with the CEO or its directors is disclosed under the ASX Listing Rules at the time of appointment, and at any other
time if there is any material variation to such an agreement.
As such, the Company operates in accordance with ASX Corporate Governance Principle 1.3.
Recommendation 1.4
The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper
functioning of the board.
Adslot has a highly-experienced and well-seasoned public company secretary who supports the effectiveness of the Board and its
Committees. The role of the Company Secretary includes:
• advising the Board and its Committees on governance matters;
• monitoring that Board and Committee policy and procedures are followed;
• co-ordinating the timely completion and dispatch of Board and Committee papers;
• ensuring that the business at Board and Committee meetings is accurately captured in the minutes; and
• helping to organise and facilitate the induction and professional development of directors.
Each of the Board members has direct and unfettered access to the Company Secretary.
As such, the Company operates in accordance with ASX Corporate Governance Principle 1.4.
Corporate Governance Statement
69
Asia . Australasia . Europe . North America Corporate governance statement (continued)
Principle 1: Lay solid foundations for management and oversight (continued)
Recommendation 1.5
A listed entity should:
(a) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for
achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them;
(b) disclose that policy or a summary of it; and
(c) disclose as the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant
committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them, and either:
a. the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including
how the entity has defined “senior executive” for these purposes); or
b. if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”,
as defined in and published under that Act.
The Company is committed to diversity in the work place on all levels. Whilst the Company recognises the benefits of gender equality and diversity
in a competitive labour market and the importance of being able to attract, retain and motivate employees from the widest possible pool of
available talent, the Company unfortunately receives very few applications from women for predominantly technical roles within the organisation.
Outside of technical roles, the Company has strong representation of women in all other areas of the business, including sales and
marketing, account service, customer support, finance and administration.
Discrimination, harassment, vilification and victimisation are not tolerated at any level. Recruitment and selection practices from the Board
down are structured so that a diverse range of candidates are considered and that there are no conscious or unconscious biases that might
discriminate against certain candidates.
All recruitment decisions within the Company are made purely based on appointing the candidate with the best skills, experience, knowledge,
hunger for the role and cultural fit. The Company has not yet adopted or published an Equality and Diversity Policy. As the Company currently
employs less than 100 employees in Australia, it is not required to make regular filings under the Workplace Gender Equality Act, and does
not set specific targets for “Gender Equality Indicators”. The Company simply appoints the best people it can find for the job, regardless of
gender, age, disability, ethnicity, marital or family status, religious or cultural background, or sexual orientation. This approach to diversity is
reflected in the highly diverse ethnic backgrounds of employees employed by the Company.
At 30 June 2014, Women filled 0% of the Company’s Board, 0% of the Company’s Senior Management and 34% of all staff positions within
the Company. Once profitable and of meaningful size, the Board will actively look at ways to improve its gender diversity at both Board and
Senior Management level.
As such, although the Company actively embraces the philosophical pillars of ASX Corporate Governance Principle 1.5, the Company does
not currently operate in full accordance with this principle.
Recommendation 1.6
A listed entity should:
(a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and
(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with
that process.
The Board’s process for evaluating the performances of the board, its committees and individual directors is currently an irregular and
subjective affair. As a small micro-cap company that is pre-profitability, the directors believe a Board made up of people with significant
industry experience and a track-record of previous entrepreneurial success are best placed to grow and protect shareholder value in what is
a high-risk investment. The Board therefore does not undertake any formal evaluation process, due to time and cost, and a view that the
board’s energies are currently best spent on building the business to create value for shareholders.
As such, the Company does not currently operate in accordance with ASX Corporate Governance Principle 1.6.
Recommendation 1.7
A listed entity should:
(a) have and disclose a process for periodically evaluating the performance of its senior executives; and
(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with
that process.
70
Corporate Governance Statement
Asia . Australasia . Europe . North America The company has a process for evaluating the performance of senior executives, including the evaluation of performance against key
performance indicators (KPIs). The CEO’s KPIs are set by the Board, and the senior executives KPIs are set by the CEO. 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.
As such, the Company currently operates in accordance with ASX Corporate Governance Principle 1.7.
Principle 2: Structure the board to add value
A listed entity should have a board of an appropriate size, composition, skills and commitment to enable it to discharge its duties effectively.
Recommendation 2.1
The board of a listed entity should:
(a) have a nomination committee which:
a. has at least three members, a majority of whom are independent directors; and
b. is chaired by an independent director,
and disclose:
c. the charter of the committee;
d. the members of the committee; and
e. as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances
of the members at those meetings; or
(b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to
ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its
duties and responsibilities effectively.
Given:
•
•
the small size of the Company and the specific industry niche within which it operates;
that the Company’s strategy is critical to the Company’s future success and ability to achieve profitability and unlock significant
value for shareholders;
the Board seeks to ensure:
•
•
•
that its membership consists predominantly of directors with specific and relevant industry experience, expertise and knowledge;
that the size of the board is conducive to effective discussion and efficient decision-making;
that the cost of the board remains reasonable relevant to the size of the business, and in any event, remains in the bottom quartile
of all ASX listed companies until profitable.
The Board also considers that successful start-ups require active and engaged directors who have significant shareholdings at risk, and/or
directors who have intimate familiarity with the business and the industry in which it operates, in order to ensure that the Company succeeds
in the best interests of all shareholders.
The Board is therefore currently comprised of six board members, all with significant commercial expertise; five of them specifically in the
Company’s relevant field of endeavour; and five of them being Top 20 shareholders in the Company.
The directors collectively perform the functions of a nomination committee, and the directors do not consider that any increase in efficiency
or effectiveness would be achieved through the formation of a nomination committee.
As such, the board composition is not in accordance with ASX Corporate Governance principle 2.1. 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.
Recommendation 2.2
A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to
achieve in its membership.
The Company does not currently have a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking
to achieve in its membership. As such, the Company does not operate in accordance with ASX Corporate Governance Principle 2.2.
However, all the existing directors have significant experience as Chief Executive Officers or Senior Executives of large private and public
companies, with the majority of directors having relevant and successful business-building experience in the industry in which the Company
operates.
Although the Board already has extensive financial experience in both Board and operational roles, the Board does recognise the need to add
Corporate Governance Statement
71
Asia . Australasia . Europe . North America
Corporate governance statement (continued)
Principle 2: Structure the board to add value (continued)
Recommendation 2.2 (continued)
additional, appropriately qualified, financial, audit and risk management skills to the Board. The Board is currently undertaking a search
process in this regard. Once complete, the Board will be satisfied it has the appropriate mix of skills and diversity on its Board.
Recommendation 2.3
A listed entity should disclose:
(a) the names of the directors considered by the board to be independent directors;
(b) if a director has an interest, position, association or relationship of the type described in Box 2.3 but the board is of the opinion that it
does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an
explanation of why the board is of that opinion; and
(c) the length of service of each director.
The Board currently consists of six directors, of which two are executive directors, and four are non-executive directors. Of the four non-
executive directors, two are independent directors: Mr Quentin George and Mr Adrian Giles.
The two executive directors (Mr Ian Lowe and Mr Ben Dixon) are not considered independent (as defined under the ASX Principles) based on
their executive roles within the organisation.
Mr Andrew Barlow is considered not independent based on his previous appointment as an executive of the Company in the past three years
and his substantial security holdings in the Company as defined under Section 9 of the Corporations Act.
Mr Geoff Dixon is considered not to be independent based on his substantial security holdings in the Company as defined under Section 9 of
the Corporations Act.
Despite the above, the Board’s view is that the disclosed interests of the non-independent directors will not influence, in any material respect,
their capacity to bring an independent judgment to bear on issues before the Board, and that they still have the capacity, and understand the
obligation, to always act in the best interests of the Company and its security holders generally.
All candidates for election as a director are required to disclose all interests, positions, associations or relationships to the Company prior to
their appointment. Further, directors must notify the Company of any change in a non-executive director’s interest, position, association or
relationship that could bear upon his or her independence.
The nature of any directors’ interest, position, association or relationship with the Company, and the length of service of each director, is
disclosed in the Directors’ Report section of the Company’s Annual Report.
As such, the Company is operating in accordance with ASX Corporate Governance Principle 2.3.
Recommendation 2.4
A majority of the board of a listed entity should be independent directors.
Although the majority of the Board consists of non-executive directors, the Board does not currently consist of a majority of independent
directors as defined under the ASX Principles. As such, the Company does not currently operate in accordance with ASX Corporate
Governance Principle 2.4.
However, as previously stated, the two non-independent, non-executive directors (Mr Andrew Barlow and Mr Geoff Dixon) are the two largest
shareholders in the Company, and therefore their interests are firmly aligned with all other shareholders, i.e. to create a valuable business, and
thereby increase the value for all shareholders in the business. Non-executive directors confer periodically without the executive directors or
other senior executives present to avoid there being any bias towards the interests of management.
Recommendation 2.5
The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity.
The chair of the board of Adslot Ltd, Mr Andrew Barlow, is not an independent director as defined under the ASX Principles. However, the
roles of chair and chief executive officer are held by different individuals in accordance with the ASX Principles. As such, the Company
operates partially in accordance with ASX Corporate Governance Principle 2.5.
With regards to the Chairman not being independent: Mr Barlow is the founder of Adslot and one of the largest shareholders in the business.
Mr Barlow therefore has a significant vested interested in ensuring the success of the business, and ensuring the Board performs its role in
setting the strategy and holding the management team accountable. Mr Barlow has extensive private and public Company board experience
in the role of Chairman, and within the relevant industry. As a global Company with significant operations in the US market, the board also
72
Corporate Governance Statement
Asia . Australasia . Europe . North America believes that it is acceptable, and preferable at this stage of the Company’s evolution, to adopt the conventions adopted by similar-type
(early-stage technology companies) in the US, where it is common practice to retain its Founder as Chairman.
The board does not believe that the appointment of an independent chairman at this stage of the Company’s evolution would result in any
improved performance of the business, and believe cash conservation demands a small Board with the relevant experience – especially as it
pertains to the appointment of independent directors.
Recommendation 2.6
A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to
develop and maintain the skills and knowledge needed to perform their role as directors effectively.
Because the Company has a board consisting of only six directors, the directors collectively perform the functions of a nomination
committee, as the directors do not consider that any increase in efficiency or effectiveness would be achieved through the formation of a
nomination committee.
The directors have access to a broad range of professional advisors who provide advice and assistance as requested by the directors, and at
the expense of the Company. The Company is yet to implement a formal process for evaluating the performance of the board, its committees
or individual directors. The Company is therefore not currently operating in accordance with ASX Corporate Governance Principle 2.6.
However, the Company supports any director who wishes to undertake further education and training that supports their role as a director,
and self-regulates on an informal basis. The board does not believe the cost of introducing more formal processes at this stage of the
Company’s evolution is warranted, but the board aims to achieve compliance with ASX Corporate Governance Principle 2.6 when appropriate
size and scale of the business is achieved.
Principle 3: Act ethically and responsibly
A listed entity should act ethically and responsibly.
Recommendation 3.1
A listed entity should:
(a) have a code of conduct for its directors, senior executives and employees; and
(b) disclose that code or a summary of it.
The Company has a code of conduct for directors, senior executives and employees that provides policy and guidance on matters of
conduct. The aim of the code is to guide directors, senior executives and employees 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 therefore operates in accordance with ASX Corporate Governance Principle 3.1.
Principle 4: Safeguard integrity in corporate reporting
A listed entity should have formal and rigorous processes that independently verify and safeguard the integrity of its corporate reporting.
Recommendation 4.1
The board of a listed entity should:
(a) have an audit committee which:
i. has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and
ii.
is chaired by an independent director, who is not the chair of the board,
and disclose:
iii. the charter of the committee;
Corporate Governance Statement
73
Asia . Australasia . Europe . North America
Corporate governance statement (continued)
Principle 4: Safeguard integrity in corporate reporting (continued)
Recommendation 4.1 (continued)
iv. the relevant qualifications and experience of the members of the committee; and
v.
in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of
the members at those meetings; or
(b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity
of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit
engagement partner.
In July 2012, the Company formed an Audit & Risk Committee. An independent director, Ms Tiffany Fuller, chaired the Audit & Risk
Committee. Mr Chris Morris and Mr Adrian Giles were the committee’s other two members.
As recommended by the ASX Principles, the committee had at least three members, and was chaired by an independent chair who was
not chair of the board. The Audit & Risk Committee however did not have only non-executive directors as members, nor consist of a majority
of independent directors, as there were no other directors defined as “independent” as defined by the ASX Principles at the time.
The Audit & Risk Committee adopted a Charter that clearly set out its role and conferred on it all necessary powers to perform that role. The
Audit & Risk Committee Charter was published on the Company’s website.
The Committee had the power to 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 had access to professional advisors who provided advice and assistance as requested by the Committee
members, and 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.
Recommendation 4.2
The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a
declaration that, in their opinion, the financial records of the entity have been properly maintained and the financial statements comply with the
appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been
formed on the basis of a sound system of risk management and internal control which is operating effectively.
A signed declaration from the CEO and CFO (as outlined above) was obtained by the Board prior to the directors approving the entity’s
financial statements for the financial period. The Company acts in accordance with ASX Corporate Governance Principle 4.2.
Recommendation 4.3
A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders
relevant to the audit.
The Company currently holds an AGM every year no later than 30 November, in accordance with this ASX Principle and the ASX Listing
Rules. The AGM is typically held at the Company’s auditors’ offices, and the Company’s auditors are available to shareholders to answer any
questions relevant to the audit.
The Company acts in accordance with ASX Corporate Governance Principle 4.3.
Principle 5: Make timely and balanced disclosure
A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a
material effect on the price or value of its securities.
Recommendation 5.1
A listed entity should:
(a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and
(b) disclose that policy or a summary of it.
The Company has a written policy for complying with the ASX Listing Rules continuous disclosure requirements. The company actively
complies with this policy. The policy is published on the Company website in the Investor Relations section.
74
Corporate Governance Statement
Asia . Australasia . Europe . North America Principle 6: Respect the rights of security holders
A listed entity should respect the rights of its security holders by providing them with appropriate information and facilities to allow them to
exercise those rights effectively.
Recommendation 6.1
A listed entity should provide information about itself and its governance to investors via its website.
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 regular shareholder presentations.
In addition, the Company maintains an up-to-date Investor Relations section on its website, which contains links to:
•
•
•
the names, photographs and brief biographical information for each of its directors and senior executives;
its constitution, its board charter and the charters of its board committees;
the corporate governance policies and other corporate governance materials referred to in these recommendations;
• copies of its annual reports and financial statements;
• copies of its announcements to the ASX;
• copies of notices of meetings of security holders and any accompanying documents;
• copies of its media releases, which are also published on LinkedIn, Facebook and Twitter (where appropriate);
•
if it keeps them, webcasts and/or transcripts of meetings of security holders or investor or analyst presentations and copies of any
materials distributed at those presentations;
• contact details for enquiries from shareholders, analysts or the media; and
• contact for its securities registry.
The Company, and some of its directors and employees, are also active on social media, including LinkedIn, Facebook and Twitter.
The Company therefore acts in accordance with ASX Corporate Governance Principle 6.1.
Recommendation 6.2
A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors.
The Company has both a formal and informal investor relations program, which is appropriate to its size.
In addition to the Company’s Annual General Meeting, the Company undertakes to deliver two additional shareholder update presenta-tions
throughout the year, usually following the half-year and full-year results announcements. Shareholder update presentations are usually held in
both Sydney and Melbourne, and are held with both institutional and private investors by arrangement, and to the broader public and
shareholder base where interest is sufficient to justify them.
In addition to the formal investor relations program outlined above, the Company also actively engages with shareholders, either by meeting
with them upon request (where reasonable) and responding to any enquiries they make from time to time.
The Company has appointed an internal Investor Relations team, which includes to the CEO and CFO, to ensure all enquiries from
shareholders receive an appropriate response within as short a time-frame as possible.
As such, the Company currently acts in accordance with ASX Corporate Governance Principle 6.2.
Recommendation 6.3
A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.
Notices of shareholder meetings are sent to all shareholders in advance of the meeting. These notices contain detailed background to all
resolutions and the processes to vote.
Recommendation 6.4
A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security
registry electronically.
The Company currently allows shareholders to receive communications from the Company and its security registry (Computershare)
electronically.
In addition, the Company allows shareholders to communicate with the Company via email to investor.relations@adslot.com.
The Company currently operates in accordance with ASX Corporate Governance Principle 6.4.
Corporate Governance Statement
75
Asia . Australasia . Europe . North America Corporate governance statement (continued)
Principle 7: Recognise and manage risk
A listed entity should establish a sound risk management framework and periodically review the effectiveness of that framework.
Recommendation 7.1
The board of a listed entity should:
(a) have a committee or committees to oversee risk, each of which:
i. has at least three members, a majority of whom are independent directors; and
ii.
is chaired by an independent director;
and disclose:
iii. the charter of the committee;
iv. the members of the committee; and
v. as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of
the members at those meetings; or
(b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the
entity’s risk management framework.
The directors of the Company take the management of business risk seriously. Formerly via the Audit & Risk Committee, and now via the full
Board, 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 Corporations 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.
Recommendation 7.2
The board or a committee of the board should:
(a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and
(b) disclose, in relation to each reporting period, whether such a review has taken place.
The Audit & Risk Committee reviewed the risk management framework during the year and no substantive changes were made from the
framework in place at the time.
Recommendation 7.3
A listed entity should disclose:
(a)
if it has an internal audit function, how the function is structured and what role it performs; or
(b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the
effectiveness of its risk management and internal control processes.
The Company does not have an internal audit function. The Audit & Risk Committee throughout the year evaluated risk management and
internal control processes. Further, in accordance with section 295A of the Corporation Act, the Company 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
Recommendation 7.4
A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it
manages or intends to manage those risks.
The Company believes it does not have any material exposure to economic, environmental or social sustainability risks and as such does not
produce a sustainability report.
76
Corporate Governance Statement
Asia . Australasia . Europe . North America
Principle 8: Remunerate fairly and responsibly
Recommendation 8.1
The board of a listed entity should:
(a) have a remuneration committee which:
1. has at lest three members, a majority of whom are independent; and
2. is chaired by an independent director,
and disclose:
3. the charter of the committee;
4. the members of the committee; and
5. as at the end of each reporting periods the number of times the committee met throughout the period and the individual attendances
of the members at those meetings, or
(b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of
remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive.
The Company operates a Remuneration Committee and its Charter is published on the Company website. The members of the
Remuneration Committee were formerly Mr Andrew Barlow (Chair), Mr Chris Morris and Mr Adrian Giles. Since the appointment of Mr Geoff
Dixon and Mr Quentin George to the Board of Directors; the resignation of Mr Chris Morris from the Board; the resignation of Adrian Giles
as Chair of the Board, and the subsequent appointment of Mr Andrew Barlow as Chair of the Board: the remuneration committee now
consists of Mr Adrian Giles (Chair), Mr Andrew Barlow, Mr Geoff Dixon and Mr Quentin George.
The committee meets the ASX principles by having at least three members, and chaired by an independent director, but a majority of its
members are not independent. Despite this the Board believes the composition of the Remuneration Committee operates effectively. The
directors have access to professional advisors who provide advice and assistance as requested by the directors.
Recommendation 8.2
A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of
executive directors and other senior executives.
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
77
Asia . Australasia . Europe . North America
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 22 August 2014.
Distribution of equity securities
The number of shareholders by size of shareholding in each
class of shares are:
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 +
TOTAL
The number of shareholders holding less than a marketable
parcel of shares (4,546 shares):
Ordinary Shares
Options
Number of
Holders
Number of
Shares
Number of
Holders
Number of
Options
173
385
637
18,878
1,319,089
5,219,262
1,946
81,901,548
994
965,091,979
4,135
1,053,550,756
462
866,066
-
-
-
-
2
2
-
-
-
-
2,300,000
2,300,000
78
Shareholder Information
Asia . Australasia . Europe . North America
Twenty largest shareholders
The names of the twenty largest holders of quoted shares are:
1. DAWNIE DIXON PTY LTD
Listed Ordinary Shares
Number of Shares
% of Shares
72,452,688
61,055,667
55,148,796
37,266,085
31,607,563
24,500,000
21,000,000
19,769,261
18,500,000
16,598,387
12,302,184
9,995,299
9,336,771
9,179,849
8,900,000
8,706,577
8,593,956
8,000,000
7,398,153
7,310,222
6.88
5.80
5.23
3.54
3.00
2.33
1.99
1.88
1.76
1.58
1.17
0.95
0.89
0.87
0.84
0.83
0.82
0.76
0.70
0.69
Total Top 20 holders of Ordinary Shares
Remaining holders balance
447,621,458
605,929,298
42.49
57.51
Classes of Shares
Adslot Ltd has only one class of share on issue, being fully paid ordinary shares.
Substantial Shareholders
Geoff Dixon
Chris Morris
Andrew Barlow
Voting Rights
All ordinary shares carry one vote per share without restrictions.
Shares
% Shares
86,252,015
70,410,696
62,803,769
8.19%
6.68%
5.96%
Shareholder Information
79
Asia . Australasia . Europe . North America Corporate Directory
Directors
Chairman
Mr Andrew Barlow
Executive Director
Mr Ian Lowe
Mr Ben Dixon
Europe
United Kingdom
79 Wardour Street
Soho, London W1D 6QB
United Kingdom
Bankers
National Australia Bank Limited
424 St Kilda Road
St Kilda, VIC 3004
Phone: +44 7 432 637 446
Share Register
Non-Executive Director
Germany
Computershare Registry Services Pty Ltd
Hamburg Business Center
Poststrasse 33
20354 Hamburg
Germany
Yarra Falls
452 Johnston Street
Abbotsford, VIC 3001
Phone: +49 40 3508 5730
Home Stock Exchange
Australian Securities Exchange Limited
Level 45, South Tower Rialto,
Asia Pacific Offices
Melbourne
Level 2, 85 Coventry Street
South Melbourne, VIC 3205
Australia
Phone: +61 3 8695 9100
Sydney
Level 6, 241 Commonwealth St
Surry Hills NSW 2010
PO Box 1721 Darlinghurst NSW 1300
525 Collins Street
Melbourne, VIC 3000
ASX Code: ADJ
Website
www.adslot.com
Phone: +61 2 9690 3900
Shanghai
1-231, Shanghai 1933
No 10 Shajing Road
Shanghai 200080
China
Phone: +86 21 6467 9909
Auckland
Level 3, 48-52 Wyndham St
Auckland 1010
New Zealand
Phone: +64 9 374 1450
Auditors
Grant Thornton Australia
The Rialto
Level 30, 525 Collins St
Melbourne, VIC 3000
Mr Adrian Giles
Mr Geoff Dixon
Mr Quentin George
Chief Executive Officer
Mr Ian Lowe
Company Secretary
Mr Brendan Maher
Head Office
Adslot Ltd
Level 2, 85 Coventry St
South Melbourne, VIC 3205
Australia
Phone: +61 3 8695 9100
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 9100
Fax: +61 3 9696 0700
Toll free 1300 852 722
North America Offices
New York
41 E 11th Street, 11th Floor
New York, NY 10003
United States of America
San Franciso
156 2nd Street
San Francisco, CA 94105
United States of America
Phone: +1 800 853 146
80
Corporate Directory
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