Communications Systems, Inc.
Annual Report 2015

Plain-text annual report

18 August 2015 Manager of Company Announcements ASX Limited Level 6, 20 Bridge Street SYDNEY NSW 2000 By E-Lodgement JCurve's Annual Financial Results Results for Announcement to the Market The operating results for the year to 30 June 2015 are shown with comparisons to the previous corresponding period, being the year ended 30 June 2014. Year ended 30 June 2015 $ Year ended 30 June 2014 $ 11,343,889 11,637,193 Percentage increase / (decrease) over previous corresponding period 3% decrease (6,082,687) (1,211,523) 402% decrease (5,622,893) (1,424,796) 295% decrease (5,622,893) (1,424,796) 295% decrease (5,622,893) (1,424,796) 295% decrease before Revenue from continuing operations Earnings/(Loss) interest, taxation, depreciation & amortisation (EBITDA) Net loss after tax (from continuing operations only) Profit/(loss) from ordinary activities after tax attributable to members Net profit/(loss) attributable to members the period for Dividends No dividends were paid during the financial year. The Board advises that it does not intend to declare a final dividend for the financial year, and it will consider reinstating the dividend policy in the future. Net Tangible Assets / Earnings Per Share Net tangible assets per ordinary share for continuing operations Basic loss per ordinary share for continuing operations 30 June 2015 30 June 2014 0.0007 cents 0.17 cents (1.72) cents (0.60) cents Independent Audit Report The information outlined above is presented in accordance with ASX Listing Rule 4.3A and the Corporations Act 2001 (Corporations Act). The Appendix 4E is based on the audited Annual Financial Report for the year ended 30 June 2015. The Independent Audit Report is included in the Annual Financial Report attached. Accounting Policies, Estimation Methods and Measurements The accounting policies, estimation methods and measurement bases used in the Appendix 4E is the same as those used in the previous annual report and half-year report. Explanation of Result Revenue declined 3% to $11.3 million compared to $11.6 million for the previous year. Revenue exceeds the guidance provided to the market in February of Revenue in the range of $10.8 to $10.9 million. The main reason for the decline in revenue on 2014 was the decline in IBM license sales in the exited JConnects business, and the loss of the South African telco customer in the JTel Business Unit. The following are comments on the group revenue streams: 1. The TEMs revenue has increased year on year reflecting a full year of Full Circle revenue. We have experienced price pressure on our products during the year; management have responded by initiating productivity gains and cost savings within that area 2. Our South African TEMS revenue stream has been lost and the current reporting reflects run-off income 3. JCurve revenue has increased by $2 million year on year. Our focus has been to ensure that our offerings are sustainable. To this end we are focusing on the wholesale distribution vertical to build momentum rather than trying to please all comers. 4. We have sold the JConnects business as it was an area that drew attention away from our main areas of business. Millions Revenue EBITDA loss Impairment Income Tax expense (includes rebate for Research and Development) EBITDA (before impairment and after income tax expense) Year ended 30-Jun-15 $ Year ended 30-Jun-14 $ 11.3 (6.1) 5.2 0.6 (0.3) 11.6 (1.2) 0.5 (0.1) (0.8) The financial performance for the year has been disappointing but we are pleased that we have been able to report year end results within guidance of a loss of $0.3 – $0.5 million. The major impact for this year has been the assessment by the Board to write down the carrying value of certain Intangible Assets by $5.2 million. A full breakdown is available in Note 11 to the Financial Report. The main reason for this impairment is that the Board has taken a more conservative view of the future cash flows from these assets. Yours faithfully Bruce Hatchman Chairman JCurve Solutions Limited JCurve Solutions Limited Annual Financial Report For the year ended 30 June 2015 JCurve Solutions Limited ABN 63 088 257 729 Level 4, 22 Atchison Street Sydney NSW 2065 [T] +61 2 9467 9200 | [F] +61 2 9467 9201 1 | P a g e Contents JCurve Solutions Limited CORPORATE INFORMATION .......................................................................................................................................... 3 CHAIRMAN'S LETTER ...................................................................................................................................................... 4 DIRECTORS’ REPORT ..................................................................................................................................................... 5 AUDITOR’S INDEPENDENCE DECLARATION ............................................................................................................. 16 STATEMENT OF COMPREHENSIVE INCOME ............................................................................................................. 17 STATEMENT OF FINANCIAL POSITION ....................................................................................................................... 18 STATEMENT OF CASH FLOWS .................................................................................................................................... 19 STATEMENT OF CHANGES IN EQUITY ....................................................................................................................... 20 NOTES TO THE FINANCIAL STATEMENTS ................................................................................................................. 21 DIRECTORS’ DECLARATION ........................................................................................................................................ 50 INDEPENDENT AUDITOR’S REPORT .......................................................................................................................... 51 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES .....................................................................53 2 | P a g e CORPORATE INFORMATION JCurve Solutions Limited ABN 63 088 257 729 Directors Mr Bruce Hatchman Mr Graham Baillie Mr Mark Jobling Mr David Franks Company Secretary Mr David Franks Registered office Level 4, 22 Atchison Street St Leonards New South Wales 2065 Ph. (02) 9467 9200 Principal place of business Level 4, 22 Atchison Street St Leonards New South Wales 2065 Ph. (02) 9467 9200 Share Register Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 Ph. (08) 9323 2000 Solicitors Laycock Burke Castaldi Lawyers Level 1, 31-33 Watt Street Newcastle NSW 2300 Ph. (02) 4926 1733 Auditors HLB Mann Judd Level 4, 130 Stirling Street Perth WA 6000 Ph. (08) 9227 7500 Securities Exchange Listings Australian Securities Exchange ASX Code: JCS Website www.jcurvesolutions.com 3 | P a g e JCurve Solutions Limited CHAIRMAN'S LETTER Dear Shareholder, This letter is my first direct communication to all shareholders since I joined the Board in late November 2014. During the eight months of my tenure there has been significant activity and change within JCurve Solutions. The following is a brief summary of the material matters that have been undertaken by the Board. 1. During the last twelve months there has been a significant change in the composition of the Board. Most recently we have been fortunate to recruit Mark Jobling to the Board. Mark is an experienced businessman and qualified lawyer, and a long term supportive shareholder of your company. 2. At the end of 2014 Graham Baillie changed his role in the company to that of Non-Executive Director and Mark Thompson 3. filled the CEO role for a short period. In January 2015 we were pleased to appoint Stephen Canning to the role of CEO. Stephen is an experienced executive and has extensive experience in the technology space at both the technical level and in senior management. Stephen has hit the ground running hard and has proven to be an excellent addition to the team. In January 2015 the Board commenced a detailed review of the strategic plan for the company together with the governance structure. This process has resulted in an overhaul of internal systems and procedures. The outcome has been that the financial reporting and policies and procedures within the company now allow management and the Board to measure risk and performance across all operational areas. The strategic review has required more time than originally expected, but there are positive outcomes emerging from this process, and they include: a. Realignment of senior corporate roles to avoid unnecessary duplication b. Rationalisation within the TEMs sector to bring together the teams of both JTel and Full Circle. This is a work in progress but structural improvements to the team continue. c. The JCurve division has delivered improved performance during the year, and the work on strategic direction is showing that we need to be more focused in our market positioning. Our plans for JCurve are nearing completion and we look forward to presenting our vision to Shareholders at the Annual General Meeting. NPAT was a loss of $5,622,893. The major impact for this year has been the assessment by the Board to write down the carrying value of certain intangible assets by $5,167,008. A full breakdown is available in Note 11 to the Financial Report. The main reason for this impairment is that the Board has taken a more conservative view of the future cash flows from these assets. The financial performance for the year has been disappointing, but we are pleased to report that the year end result, before impairment, was within the guidance of a loss of $300,000 – $500,000. The following are comments on the group revenue streams: 1. The TEMs revenue has increased year on year reflecting a full year of Full Circle revenue. We have experienced price pressure on our products during the year management have responded by initiating productivity gains and cost savings within that area 2. Our South African revenue stream has been lost and the current reporting reflects run-off income 3. JCurve revenue has increased by $2 million year on year. Our focus has been to ensure that our offerings are sustainable. To this end we are focussing on the wholesale distribution vertical to build momentum rather than trying to please all comers. 4. We have sold the JConnects business as it was an area that drew attention away from our main areas of business. I would like to thank management and shareholders for their continued support through this era of consolidation. As our strategic projects are sufficiently completed we will advise all stakeholders through a general ASX release. Bruce Hatchman Chairman 4 | P a g e JCurve Solutions Limited DIRECTORS’ REPORT Your directors submit the annual financial report of the consolidated entity for the financial year ended 30 June 2015. In order to comply with the provisions of the Corporations Act, the Directors Report is as follows: Directors The names of directors who held office during or since the end of the year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Names, qualifications, experience and special responsibilities Bruce Hatchman FCA MAICD JP (Non-Executive Chairman) Appointed 27th November 2014 Mr Hatchman is an experienced and successful finance professional. He is currently the Chairman of Armidale Investment Corporation Limited, Darwin Clean Fuels Limited, Suters Holdings Pty Ltd, and independent Advisory Board Chairman of the law firm Hunt & Hunt. As the former Chief Executive of Crowe Horwath, Mr Hatchman has 40 years’ experience in providing audit and assurance services to listed companies and large private enterprises. He is a qualified Chartered Accountant and a member of the Australian Institute of Company Directors. Graham Baillie FAICD (Non-Executive Director) Ceased as Executive Chairman 27th November 2014, Appointed Non-Executive Director 27th November 2014. Mr Baillie joined the Company in September 2007 as a non-executive Director and held the appointments of Chairman from May 2012 until December 2013, Managing Director from December 2013 until 21st July 2014 and Executive Chairman from 21st July 2014 until 27th November 2014 when he moved to the Non-Executive Director role which he currently holds. In 1994, Mr Baillie established Outsource Australia Pty Ltd (OSA) to provide outsourcing services to the Australian market. In his capacity as majority shareholder and Chief Executive Officer he developed the company nationally and internationally. Today OSA is known as Converga. Prior to this, Mr Baillie was with AUSDOC during its formative years through to its ultimate ASX listing in September 1993. In this time he was not only integral to the development of the company throughout Australia but was also involved in establishing similar business operations in New Zealand, USA and United Kingdom. David Franks B.Eco, CA (Non-Executive Director and Company Secretary) Appointed 15th September 2014 Mr Franks joined the company in 2014 as Company Secretary/Non-Executive Director. With over 20 years' experience in finance and accounting, Mr Franks has been CFO, Company Secretary and/or Director for numerous ASX listed and unlisted companies. Mr Franks is a Chartered Accountant, Fellow of the Financial Services Institute of Australia, Justice of Peace, Registered Tax Agent and holds a Bachelor of Economics (Finance and Accounting) from Macquarie University. Mark Jobling B. Eco, B Laws (Hons) (Non-Executive Director) Appointed 8th April 2015 Mr Jobling is a substantial shareholder of the Company and holds a Bachelor of Economics and Bachelor of Laws (Hons) from Monash University. Mr Jobling manages investments in a diverse range of industries including power technology and angel investing in Asian start-up companies and is currently based in Hong Kong. He began his career as a commercial lawyer with Mallesons Stephen Jaques in Australia and went on to hold senior executive roles in multi-billion dollar companies, including Managing Director of South East Asia and Taiwan for CLP Holdings Limited, and CEO of OneEnergy Limited, a CLP/Mitsubishi Corporation joint venture in Asia. Chris Gabriel MBA, LLB, B. Bus, CPA, FAICD, FGIA (Non-Executive Director) Resigned 15th September 2014 Mr Gabriel background includes a wealth of experience from senior leadership roles in the IT and telecommunications sectors both within Australia and internationally, particularly in Africa and the Middle East. John Bond B.Com, B.Juris, B Laws, FAICD (Non-Executive Director) Resigned 27th November 2014 Mr Bond’s background spans law, investment banking as well as property investment and development. As a professional property investor, he has over 20 years’ experience in negotiating acquisitions, overseeing the development of properties and asset management. Nihal Gupta, Resigned 21 July 2014. Mr Gupta was Chairman from October 2013 until his resignation in July 2014. 5 | P a g e DIRECTORS’ REPORT (continued) Interests in the shares and options of the company and related bodies corporate As at the date of this report, the interests of the directors in the shares and options of JCurve were: JCurve Solutions Limited G Baillie M Jobling During the financial year no share options were granted as remuneration. Director: G Baillie Total Ordinary Shares Options over Ordinary Shares 83,124,215 51,204,301 134,328,516 35,714,284 - 35,714,284 Number of options granted as remuneration Number of options over ordinary shares held at date of this report - - 35,714,284 35,714,284 Details of unissued ordinary shares under options are as follows: Number of options KMP option holdings Exercise price Expiry date JCurve Solutions Ltd JCurve Solutions Ltd JCurve Solutions Ltd JCurve Solutions Ltd Total 8,928,571 8,928,571 8,928,571 8,928,571 8,928,571 8,928,571 8,928,571 8,928,571 $0.000001 $0.000001 $0.000001 $0.000001 35,714,284 35,714,284 31 March 2016 31 March 2017 31 March 2018 31 March 2019 No ordinary shares were issued during the financial year as a result of the exercise of an option. Dividends No dividends were declared or paid during the financial year ended 30 June 2015. Principal activities The principal activities of the Group during the year were two-fold: 1) the sale of a cloud-based Business Management solution targeted at the small business market in Australia and New Zealand, together with associated consulting services (JCurve Business Software); and 2) the development and marketing of Telecommunications Expense Management Solutions (JTEL and Full Circle Group). Review of operations Following the acquisitions of JCurve Business Software and Full Circle Group in 2014, these acquisitions have been fully integrated into the business structure. In the case of JCurve, this has not produced the desired returns to date which has resulted in significant impairment charges which have impacted the results of the Group as announced in the first half. The Full Circle acquisition has also underperformed to original expectations, however, this underperformance has not given rise to any impairment charges. In the review of operations last year, significant investment in product development and marketing activities associated with rebranding from Stratatel to JCurve was reported. This has delivered good results in terms of customer awareness and contributed towards improved lead generation and revenue for JCurve Business Software. In January 2015 a new CEO was appointed to take control of the business and evaluate areas where the business was not performing. The review has focused initially on JCurve and the recurring revenue associated with the exclusive Netsuite reseller agreement. The outcome of this review is continuing and an update will be provided to the market upon completion of this review. 6 | P a g e JCurve Solutions Limited DIRECTORS’ REPORT (continued) Similarly a review of the TEMS (Telecommunications Expense Management) is underway. This incorporates a review of the former Stratatel business (JTel) and addressing the underperformance of Full Circle. The impact of savings resulting from redundancies in June 2014 and further redundancies in October 2014, which were largely in the TEMS area, have led to improved results on the back of the loss of the South African telco contract which had a major impact on revenues. The TEMS businesses also have the benefit of new products MaaS360 and Wandera which were added to the product range in February 2015, however, returns to date on these new product lines have been minimal. With the reviews of both JCurve and TEMS businesses nearing completion, the Company approaches 2016 with optimism and anticipates improved revenue performance in 2016 on a normalised basis. Operating results for the year The financial performance of the Group deteriorated with a net loss after tax (NPAT loss) from continuing operations of $5.6 million for year ended 30 June 2015 (2014: $1.4m loss). EBITDA was a loss of $6.1 million (2014: $1.2 million). The major impact for this year has been the assessment by the Board to write down the carrying value of certain Intangible Assets by $5.2 million. A full breakdown is available in Note 11 to the Financial Report. The main reason for this impairment is that the Board has taken a more conservative view of the future cash flows from these assets. Excluding the impact of impairment, the NPAT loss was within market guidance of a loss of $0.3 - $0.5 million. Shareholder returns No dividends have been paid to shareholders since the start of the financial year. Risk management The Board is committed to the identification and quantification of risk. Directors receive regular reports from management on areas where significant business risk or exposure concentrations may exist and on the management of those risks. Significant changes in the state of affairs There have been no significant changes in the state of affairs of the consolidated entity to the date of this report. Significant events after balance date There were no significant events after balance date that have occurred and have not been otherwise disclosed in this Annual Report. Likely developments and expected results Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Therefore, this information has not been presented in this report. Environmental legislation The consolidated entity is not subject to any significant environmental legislation. Indemnification and insurance of Directors and Officers The Company has agreed to indemnify all the directors and officers for any breach of laws and regulations arising from their role as directors and officers. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. JCurve has not indemnified or agreed to indemnify an auditor of the Company or any related body corporate against liability incurred as an auditor. 7 | P a g e JCurve Solutions Limited DIRECTORS’ REPORT (continued) Remuneration report (Audited) This report outlines the remuneration arrangements in place for directors and executives of JCurve Solutions Limited (the “Company”). Remuneration philosophy The performance of the Company depends upon the quality of the directors and executives. The philosophy of the Company in determining remuneration levels is to: – – – set competitive remuneration packages to attract and retain high calibre employees; link executive rewards to shareholder value creation; and establish appropriate performance hurdles for variable executive remuneration. Remuneration committee The Remuneration Committee role, until 25 February 2015 was undertaken by the full Board of directors of the Company and was responsible for determining and reviewing compensation arrangements for the directors and the executive management team. Since 26 February 2015, a separate Remuneration Committee was established. This separate committee was in compliance with the ASX Corporate Governance Principles and Recommendations up to 27 April 2015, however thereafter it has not comprised a majority of independent directors. The Board assesses the appropriateness of the nature and amount of remuneration of directors and senior executives on a periodic basis by reference to relevant employment market conditions with an overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. Remuneration structure In accordance with best practice Corporate Governance, the structure of non-executive director and executive remuneration is separate and distinct. Non-executive director remuneration The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The Company’s constitution adopted at the AGM on 9 November 2010 specifies that the aggregate remuneration of non-executive directors shall be a maximum of $400,000 per year, and can be varied by ordinary resolution of the shareholders in General Meeting. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The remuneration of non-executive directors for the year ended 30 June 2015 is detailed in Table 1 of this report. Senior executive and executive director remuneration Remuneration consists of fixed remuneration comprising base pay and benefits including superannuation. This is reviewed annually by the Board. The process consists of a review of relevant comparative remuneration in the market internally and, where appropriate, external advice on policies and practices. The Board has access to external, independent advice if required. Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group. An employee share plan was approved by shareholders at the Annual General Meeting held on 31 October 2013. Presently no shares have been allotted under this plan. The remuneration of key management personnel and company executives for the year ended 30 June 2015 is detailed in Table 1 of this report. Employment Contracts Executive Chairman, Mr Graham Baillie, was employed from 9 December 2013 under a 2 year contract under which he was entitled to receive an annual salary of $280,000, including superannuation, plus an allowance for business and non-business expenses of $50,000 per annum. It was mutually agreed to cease this contract on 27th November 2014, prior to the end of the initial 2 year period, so that Mr Baillie could take up a non-executive directorship. 8 | P a g e DIRECTORS’ REPORT (continued) Remuneration of key management personnel Table1: Key Management Personnel remuneration for the year ended 30 June 2015: Directors JCurve Solutions Limited Short-term employee benefits Post employment Equity Total Director’s Fees Bonuses / Commission Other short term benefits Super- annuation Options Perfor mance Related $ $ $ $ $ $ % Directors G Baillie (1) 2014 238,915 Chairman (executive) Director (non executive) / 2015 130,523 B Hatchman (2) 2014 - Chairman (non executive) 2015 52,039 D Franks (3) 2014 - Director (non executive) 2015 47,071 M Fairclough (4) 2014 20,000 Director (non executive) 2015 - I Macliver (5) 2014 20,000 Director (non executive) 2015 - J Bond (6) 2014 58,030 Director (non executive) 2015 24,385 C Gabriel (7) 2014 47,102 Director (non executive) 2015 15,000 N Gupta (8) 2014 69,970 Director (non executive) 2015 39,239 M Jobling (9) 2014 - Director (non executive) 2015 15,000 Total Directors Fees 2014 454,017 Total Directors Fees 2015 323,257 - - - - - - - - - - - - - - - - - - - - 10,391 18,168 - - - - - 37,500(i) - - - - - - - 20,000 - - - 11,862 - 4,944 - 4,942 1,850 - 1,850 - 5,368 2,317 4,357 1,425 5,085 2,728 - - 67,891 36,678 - 28,218 - - - - - - - - - - - - - - - - - - - - 267,474 142,385 - 56,983 - 52,013 59,350 - 21,850 - 63,398 26,702 51,459 16,425 95,055 41,967 - 15,000 558,586 351,475 - - - - - - - - - - - - - - - - - - - - (1) Mr Baillie served as non-executive Chairman from 1 July 2013 to 9 December 2013, Managing Director from 9 December 2013 to 21 July 2014, Executive Chairman from 21 July 2014 and non-executive Director from 27th November 2014. The Directors fees of $130,523 includes $43,451 of Director’s fees paid to Millenium International Pty Ltd, a company owned by Mr Baillie. (2) Appointed 27 November 2014 (3) Appointed 15 September 2014 (4) Resigned 31 October 2013 (5) Resigned 31 October 2013 (6) Resigned 27 November 2014 (7) Resigned 15 September 2014 (8) Appointed 31 October 2013, Resigned 21 July 2014 (9) Appointed 8 April 2015 9 | P a g e DIRECTORS’ REPORT (continued) Remuneration of key management personnel (continued) Table2: Key Management Personnel remuneration for the year ended 30 June 2015: Executives JCurve Solutions Limited Short-term employee benefits Post- employment Equity Total Bonuses / Commission Other short term benefits Super- annuation Options Perfor mance Related $ $ $ $ $ % Salary $ Executives J Butchers (1) 2014 261,828 10,000 3,531 17,775 Chief Financial Officer 2015 37,539 - 126,702 6,478 J Slaiman (2) 2014 229,346 10,000 - 17,775 General Manager MTN 2015 189,512 32,500 55,522 17,937 A Simmons (3) 2014 9,000 General Manager JTEL 2015 209,152 M Thompson (4) 2014 51,885 General Manager JCBS 2015 117,083 S Canning (5) 2014 - Chief Executive Officer 2015 132,821 B Doughty (6) 2014 - Chief Financial Officer 2015 151,250 - - - - - - - - - 223 - - - - - - 833 14,664 4,799 10,774 - 9,392 - 14,369 Total Executive Rem. 2014 552,059 20,000 3,531 41,182 - - - - - - - - - - - - - 293,134 3 170,719 257,121 4 295,471 11 9,833 224,039 56,684 127,857 - 142,213 - 165,619 616,772 - - - - - - - 3 3 Total Executive Rem. 2015 837,357 32,500 182,447 73,614 - 1,125,918 (1) (2) resigned 5 August 2014, bonus of $10,000 was paid in 2014 based on performance related KPIs resigned 31 March 2015, bonuses of $32,500 in 2015 was paid for relocating from Melbourne to Sydney, and $10,000 in 2014 was paid based on performance related KPIs resigned 8 April 2015 resigned 30 January 2015 (3) (4) (5) appointed 12 January 2015 (6) appointed 1st August 2014 Table3: Options granted as part of remuneration during the year ended 30 June 2015 Total value of options granted, exercised and lapsed $ Value of options lapsed $ Value of options exercised $ Value of options granted $ Value of options included in remuneration for the year $ % remuneration consisting of options for the year J Butchers J Slaiman M Thompson A Simmons S Canning B Doughty - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - For further details on options currently on issue, please refer to Note 16. There were no alterations to the terms and conditions of options granted as remuneration since their grant date. 10 | P a g e  JCurve Solutions Limited DIRECTORS’ REPORT (continued) KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Compensation options: Granted and vested during the year (Consolidated) There was no share option scheme in place during the financial year. For further details relating to the options, refer to Note 16. (b) Option holdings of Key Management Personnel (Consolidated) Balance at beginning of period Granted as remune- ration Options exercised Net change Other # Balance at end of period Exercisable Not Exercisable Vested as at end of period 35,714,284 - - - - - - - - - - - - 35,714,284 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 35,714,284 - - - - - - - - - - - - 35,714,284 - - - - - - - - - - - - - - 35,714,284 - - - - - - - - - - - - 35,714,284 30 June 2015 Directors G Baillie B Hatchman J Bond C Gabriel N Gupta D Franks M Jobling Executives J Butchers J Slaiman A Simmons M Thompson S Canning B Doughty Total # Includes forfeitures, rights issue and balance on resignation Balance at beginning of period Granted as remune- ration Options exercised Net change Other # Balance at end of period Exercisable Not Exercisable Vested as at end of period 30 June 2014 Directors G Baillie J Bond C Gabriel N Gupta Executives J Butchers J Slaiman A Simmons M Thompson Total - - - - 300,000 - - - 300,000 - - - - - - - - - - - - - - - - - - 35,714,284 35,714,284 - - - (300,000) - - - - - - - - - - 35,414,284 35,714,284 # Includes forfeitures, rights issue and balance on resignation - - - - - - - - - 35,714,284 - - - - - - - 35,714,284 11 | P a g e DIRECTORS’ REPORT (continued) KEY MANAGEMENT PERSONNEL DISCLOSURES (Continued) (c) Shareholdings of Key Management Personnel (Consolidated) Ordinary shares held in JCurve Solutions Limited (number) JCurve Solutions Limited 30 June 2015 Directors G Baillie B Hatchman J Bond C Gabriel N Gupta D Franks M Jobling Executives J Butchers J Slaiman A Simmons S Canning B Doughty Total Balance 01 Jul 14 Granted as remuneration On Exercise of Options Net Change Other (1) Balance 30 Jun 15 81,319,478 - 31,198,481 - 4,064,020 - - 197,698 100,333 6,380,943 - - 123,260,953 - - - - - - - - - - - - - - - - - - - - - - - - - - 1,804,737 83,124,215 - (31,198,481) - (4,064,020) - - - - - - 51,204,301 51,204,301 (197,698) (100,333) (6,380,943) 2,000,000 1,571,320 - - - 2,000,000 1,571,320 14,638,883 137,899,836 (1) Includes disposal of shares as well as number of shares held at date of resignation 30 June 2014 Directors G Baillie M Fairclough I Macliver J Bond C Gabriel N Gupta Executives J Butchers J Slaiman A Simmons Total Balance 01 Jul 13 Granted as remuneration On Exercise of Options Net Change Other (1) Balance 30 Jun 14 9,890,907 14,048,877 6,064,020 31,198,481 - - 197,698 100,333 - 61,500,316 - - - - - - - - - - - - - - - - - - - - 71,428,571 81,319,478 (14,048,877) (6,064,020) - - - - 31,198,481 - 4,064,020 4,064,020 - - 197,698 100,333 6,380,943 6,380,943 61,760,637 123,260,953 All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the company would have adopted if dealing at arm's length. (1) Includes disposal of shares as well as number of shares held at date of resignation 12 | P a g e DIRECTORS’ REPORT (continued) KEY MANAGEMENT PERSONNEL DISCLOSURES (Continued) Transactions with Directors The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year. JCurve Solutions Limited Purchases from Related Parties Grange Consulting Group Pty Limited Corporate Consultancy Secretarial Services Taos Creative Pty Ltd Digital marketing & consulting Alive Mobile Pty Ltd Analysis & product development Franks & Associates Pty Ltd Company secretarial services Millennium International Pty Ltd Corporate Consultancy Directors Fees (included in Table 1) Outserve Aus Pty Ltd Professional Services 2015 $ - 40,613 40,613 240,500 240,500 - - 74,011 74,011 45,000 43,452 88,452 131,781 131,781 2014 $ 42,000 107,100 149,100 378,870 378,870 95,000 95,000 - - - - - - - JCurve Solutions Limited former Director Mr Ian Macliver is the Managing Director of Grange Consulting Group Pty Ltd, which provided corporate advisory services to the consolidated entity amounting to $42,000 net of GST in 2014. The Company Secretary responsibilities up to 15th September 2014 were performed by Sarah Smith of Grange Consulting Group Pty Ltd. The company secretarial services provided by Grange Consulting include providing guidance on corporate compliance requirements pursuant to the Company’s constitution, ASX Listing Rules and Corporations Act, assistance in drafting notices of meeting and announcements; Board documentation, and assistance with preparation of annual and half yearly financial reports. Company secretarial service fees for the year ended 30 June 2015 amounted to $40,613 net of GST (2014 $107,100). Former Chairman and current Non-Executive Director Graham Baillie’s step-daughter Sam Brown is currently the majority shareholder and Director of Taos Creative Pty Ltd, which specialise in digital marketing & consulting services for business. The JCurve Solutions Group for the 2015 Financial Year was provided with services on commercial terms from Taos Creative Pty Ltd amounting to $240,400 net of GST (2014: $378,870). JCurve Solutions Limited Director Mr Christopher Gabriel is the Chairman of Alive Mobile Group which provided analysis and redesign of JTEL product amounting to $95,000 net of GST in 2014. Mr Gabriel resigned as a Non-Executive Director on 15th September 2014. David Franks was appointed as Company Secretary on 15th September 2014 and was also appointed as a Non-Executive Director on that date. David is the Proprietor of Franks and Associates, a firm that has provided guidance on corporate compliance requirements pursuant to the Company’s constitution, ASX Listing Rules and Corporations Act, assistance in drafting notices of meeting and announcements; Board documentation, and assistance with preparation of annual and half yearly financial reports. 13 | P a g e  JCurve Solutions Limited DIRECTORS’ REPORT (continued) KEY MANAGEMENT PERSONNEL DISCLOSURES (Continued) Transactions with Directors (continued) Company secretarial service fees for the year ended 30 June 2015 amounted to $74,011 net of GST (2014: nil) and were provided on commercial terms. Millenium International is a company fully owned by former Chairman and non-executive Director Graham Baillie. Millenium invoices JCurve for Mr Baillie’s Directors fees, which has been included in Table 1, and also was engaged to provide consultancy services amounting to $45,000 during the financial year. Former Chairman and current Non-Executive Director Graham Baillie’s son-in-law Stephen John Nankervis is a Director of Outserve Aus Pty Limited who have been engaged to provide professional services on commercial terms. The services provided by Outserve amounted to $131,781 net of GST for the year ended 30 June 2015 (2014: $nil). Sales to and purchases from related parties are made in arm's length transactions both at normal market prices and on normal commercial terms. Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash. End of Remuneration Report 14 | P a g e  JCurve Solutions Limited DIRECTORS’ REPORT (continued) Directors’ Meetings The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows: Directors’ Meetings (Eligible to attend) Directors’ Meetings (Attended) Audit & Risk Management Committee Attended/(Eligible) Remuneration Committee Number of meetings held: Number of meetings attended: B Hatchman M Jobling G Baillie J Bond C Gabriel D Franks N Gupta Proceedings on behalf of the company 13 7 3 13 6 2 11 0 2 1 (1) 0 (0) 1 (1) 1 (1) 1 (1) 1 (1) n/a 0 0 0 0 n/a n/a 0 n/a 7 3 11 6 2 11 0 No person has applied for leave of the Court to bring proceedings on behalf of the Company or 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 any part of those proceedings. The Company was not a party to any such proceedings during the year. Auditor Independence and Non-Audit Services Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 16 and forms part of this Directors’ Report for the year ended 30 June 2015. Non-Audit Services There were no non-audit related activities carried out by the Company’s auditors during the year ended 30 June 2015. Corporate Governance Statement In fulfilling its obligations and responsibilities to its various stakeholders, the Board is a strong advocate of corporate governance. The Board supports a system of corporate governance to ensure that the management of JCurve is conducted to maximise shareholder wealth in a proper and ethical manner. The Corporate Governance Statement which outlines the principal corporate governance procedures of JCurve Solutions Limited (JCurve) can be found on the company’s website at: http://www.jcurvesolutions.com/media/headline/file/3/0/300615_corporategovernancestatement.pdf . Signed in accordance with a resolution of the directors. B Hatchman Chairman Dated at Sydney this 18th day of August 2015 15 | P a g e AUDITORS INDEPENDENCE DECLARATION JCurve Solutions Limited AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of JCurve Solutions Limited for the year ended 30 June 2015, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. Perth, Western Australia 18 August 2015 N G Neill Partner HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. 16 | P a g e STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 JCurve Solutions Limited Notes 2 Consolidated ($) 2015 11,343,889 (2,502,466) 8,841,423 (6,372,768) (836,192) (189,833) (408,920) 2014 11,637,193 (3,936,476) 7,700,717 (4,380,889) (609,718) (114,612) (336,737) (1,001,397) (1,172,714) (384,054) (52,330) (188,297) 12 (5,167,008) (487) (15,899) - (473,527) (6,249,289) 626,396 (5,622,893) - (400,275) (52,439) (113,236) (487,604) (61,677) (940,234) (6,015) (342,122) (1,317,555) (107,241) (1,424,796) - Revenue Cost of goods sold Gross profit Employee benefits expense Other employee related expense Communications expense Advertising and marketing Professional fees Occupation expense Listing expense Depreciation and amortisation expense Impairment expense Finance expense Product development expense Loss on disposal of fixed asset Other expenses Loss before income tax Income tax benefit/(expense) Net loss for the period Other comprehensive income Total comprehensive result for the year Basic loss per share (cents per share) Basic loss per share from continuing operations (cents per share) Diluted loss per share (cents per share) Diluted loss per share from continuing operations (cents per share) The accompanying notes form part of these financial statements. 3 5 5 5 5 (5,622,893) (1,424,796) (1.72) (1.72) (1.72) (1.72) (0.60) (0.60) (0.60) (0.60) 17 | P a g e STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 JCurve Solutions Limited Assets Current Assets Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets Non-Current Assets Property, plant and equipment Intangible assets Other financial assets Deferred tax asset Total Non-Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Provisions Current tax liabilities Total Current Liabilities Non-Current Liabilities Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Share capital Reserves Accumulated losses Total Equity The accompanying notes form part of these financial statements. Notes 2015 2014 Consolidated ($) 6 7 8 10 11 9 3 13 14 14 15 15 2,049,069 1,405,712 1,060,375 4,515,156 91,418 5,286,746 19,078 245,009 5,642,251 10,157,407 4,442,500 - 93,562 4,536,062 107,689 107,689 4,643,751 5,513,656 17,588,248 1,723,014 (13,797,606) 5,513,656 2,765,265 2,719,797 628,071 6,113,133 115,694 10,570,897 31,856 217,612 10,936,059 17,049,192 5,677,604 41,781 21,237 5,740,622 172,021 172,021 5,912,643 11,136,549 17,588,248 1,723,014 (8,174,713) 11,136,549 18 | P a g e STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Income tax received Net cash used in operating activities Cash flows (used in)/from investing activities Purchase of non-current assets (Payment)/proceeds for other investments Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Share issue costs paid Net cash provided by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 July 2014 Cash and cash equivalents at 30 June 2015 The accompanying notes form part of these financial statements. JCurve Solutions Limited Consolidated ($) Inflows / (Outflows) Notes 2015 2014 6 23 12,321,905 (13,350,925) 22,182 (487) 338,007 (669,318) (46,878) - (46,878) - - - (716,196) 2,765,265 2,049,069 11,878,637 (12,315,856) 68,881 (61,677) 80,389 (349,626) (60,040) (2,753,760) (2,813,800) 2,508,601 (186,637) 2,321,964 (841,462) 3,606,727 2,765,265 19 | P a g e STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 JCurve Solutions Limited Accumulated Losses Equity Benefits Reserve Consolidated As at 1 July 2013 Loss for the year Income tax expense Recognition of equity based payment Shares issued Deferred consideration (unissued shares) Share issue costs Balance at 30 June 2014 As at 1 July 2014 Loss for the year Income tax benefit Share Capital $ 10,879,285 - - - $ (6,749,917) (1,317,555) (107,241) - 10,879,285 (8,174,713) 6,635,386 205,357 (131,780) 17,588,248 17,588,248 - - - - - (8,174,713) (8,174,713) (6,249,289) 626,396 $ 150,870 - - 1,572,144 1,723,014 - - - 1,723,014 1,723,014 - - Balance at 30 June 2015 17,588,248 (13,797,606) 1,723,014 The accompanying notes form part of these financial statements. Total $ 4,280,238 (1,317,555) (107,241) 1,572,144 4,427,586 6,635,386 205,357 (131,780) 11,136,549 11,136,549 (6,249,289) 626,396 5,513,656 20 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Interpretations and complies with other requirements of the law. The accounting policies detailed below have been consistently applied to all years unless otherwise stated. The financial statements are for the consolidated entity consisting of JCurve Solutions Limited and its subsidiaries. The financial report has also been prepared on a historical cost basis. The financial report is presented in Australian dollars and all values are rounded to the nearest dollar. The company is a listed public company, incorporated in Australia and also operating in South Africa. (b) Adoption of new and revised standards In the year ended 30 June 2015, the directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting period. The Directors have also reviewed all new Standards and Interpretations that have been issued but not yet effective for the year ended 30 June 2015. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Group and, therefore, no change is necessary to Group accounting policies. (c) Statement of Compliance The financial report was authorised for issue on 18th August 2015. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). (d) Basis of Consolidation The consolidated financial statements comprise the financial statements of JCurve Solutions Limited and its subsidiaries as at 30 June each year (the Group). The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The acquisition of subsidiaries has been accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Accordingly, the consolidated financial statements include the results of subsidiaries for the period from their acquisition. (e) Significant accounting judgments, estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: (i) Impairment of goodwill and intangibles with indefinite useful lives: The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with indefinite useful lives are discussed in Note 12. 21 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (e) Significant accounting judgments, estimates and assumptions (continued) (ii) Share-based payment transactions: The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black - Scholes model, using the assumptions as detailed in the notes. (iii) Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that sufficient future tax profits will be available to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits over future years together with future tax planning strategies. (iv) Identification of intangible assets on acquisition The definition of an intangible asset requires an intangible asset to be identifiable to distinguish it from goodwill. Goodwill recognised in a business combination is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. The future economic benefits may result from synergy between the identifiable assets acquired or from assets that, individually, do not qualify for recognition in the financial statements. An asset is identifiable if it either: • • is separable, i.e. is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so; or arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations. (f) 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, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of JCurve Solutions Limited. (g) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Sale of goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to the customer. (ii) Subscription revenue Subscription revenue comprises the recurring monthly fee from customers who subscribe to JCurve software services. Customers are invoiced annually in advance, with a 12 month contractual term. Revenue is recognised as the services are provided to the customer. Revenues that are not yet recognised at year end are recognised in the Statements of Financial Position as unearned income and included within current liabilities. (iii) Rendering of services Revenue from the rendering of services is recognised upon delivery of the service to the customer. (iv) Interest income Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. 22 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (h) Borrowing Costs Borrowing costs are recognised as an expense when incurred except those that relate to the acquisition, construction or production of qualifying assets where the borrowing cost is added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. (i) Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially recognised at their fair value or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the Statement of Financial Position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the general policy on borrowing costs - refer Note 1 (h). Finance leased assets are depreciated on a straight line basis over the estimated useful life of the asset. Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. (j) Cash and cash equivalents Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (k) Trade and other receivables Trade receivables, which generally have 30-60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. (l) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date. Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or 23 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (l) Income tax (continued) • when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Tax Consolidation Legislation JCurve Solutions and its 100% owned Australian resident subsidiaries have implemented the tax consolidation legislation. Current and deferred tax amounts are accounted for in each individual entity as if each entity continued to act as a taxpayer on its own. JCurve Solutions Limited recognises its own current and deferred tax amounts and those current tax liabilities, current tax assets and deferred tax assets arising from unused tax credits and unused tax losses which it has assumed from its controlled entities within the tax consolidated Group. Assets or Liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts payable or receivable from or payable to other entities in the Group. Any difference between the amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) controlled entities in the tax consolidated Group. (m) Other taxes Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. • The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. 24 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Business Combinations The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or business under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expenses as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition- date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified as either equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. (o) Property, plant & equipment and depreciation & amortisation Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Depreciation is calculated on a straight line basis over the estimated useful life of the assets. Leasehold improvements are amortised over the period of the lease or the estimated useful life, whichever is the shorter, using the straight-line method. The following estimated useful lives are used in the calculation of depreciation and amortisation: Plant and equipment Leasehold improvements 2 – 14 years 1 – 6 years The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. (i) Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash- generating unit to which the asset belongs, unless the asset's value in use can be estimated to be close to its fair value. An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. For plant and equipment, impairment losses are recognised in the Statement of Comprehensive Income in the cost of sales line item. However, because land and buildings are measured at revalued amounts, impairment losses on land and buildings are treated as a revaluation decrement. (ii) De-recognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. 25 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (p) Investments in associates and joint ventures JCurve Solutions Limited An associate is an entity over which the group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is an arrangement where the parties have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results and assets and liabilities of associates and joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with AASB 5. Under the equity method, an investment in an associate or a joint venture is initially recognised on the consolidated statement of financial position and adjusted thereafter to recognised the Groups’ share of the profit or loss in other comprehensive income of the associate if joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture which includes any long-term interests that, in substance, form part of the Group’s net investment in associate or joint venture, the Group discontinues to recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in associate or joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. The requirements of AASB 139 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in associate or joint venture. When necessary, the entire carrying amount if the investment (including goodwill) is tested for impairment in accordance with AASB 136 ‘Impairment of Assets’ as a single asset by comparing its recoverable amount (higher of value in use less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceased to be an associate or a joint venture, or when the investment is classified as held for sale. When the group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with AASB 139. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised I other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities., the Group reclassified the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassified to profit and loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. 26 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (q) Interests in joint operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interests a joint operation: • • • • • Its assets, including its share of any assets held jointly; Its liabilities, including its share of any liabilities incurred jointly; Its revenue from the sale of its share of the output arising from the joint operation; Its share of the revenue from the sale of the output by the joint operation; and Its expenses, including its share of any expenses incurred jointly. The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with AASBs applicable to the particular assets, liabilities, revenues and expenses. When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent of other parties’ interests in the joint operation. When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party. (r) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated: • • represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with AASB 8 Operating Segments. Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Impairment losses recognised for goodwill are not subsequently reversed. (s) Intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. 27 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (s) Intangible assets (continued) Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. (t) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months. (u) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement. Provisions are measured at the present value or management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense. (v) Employee benefits (i) Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date, They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and period of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. 28 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (w) Share-based transactions (i) Equity settled transactions: The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using the Black- Scholes model, further details of which are given in Note 16. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of JCurve Solutions Limited (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The Statement of Comprehensive Income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see Note 5). (x) Issued Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase consideration. (y) Loss per share Basic loss per share is calculated as net profit/loss attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted loss per share is calculated as net profit/loss attributable to members of the parent, adjusted for: • • • costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. 29 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (z) Foreign currency translation Both the functional and presentation currency of JCurve Solutions Limited and its Australian subsidiaries is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date. NOTE 2: REVENUES AND EXPENSES FROM CONTINUING OPERATIONS (a) Revenue Telecommunications expense management South African telco Training IBM software licences – new sales IBM software licences & maintenance renewals Computer services & subscriptions JCurve cloud software & solutions Gain on sale of Resources System Interest income Other income (b) Expenses Interest expense Depreciation of non-current assets Operating lease rental expense: minimum lease payments Amortisation of intangibles Directors’ Fees (includes superannuation) Consultancy Fees Consolidated ($) 2015 2014 5,664,618 704,165 - - 405,343 372,170 4,137,078 36,027 22,182 2,306 4,926,884 1,423,839 4,970 229,244 1,938,101 843,398 2,193,400 - 68,881 8,476 11,343,889 11,637,193 487 71,154 308,345 117,143 363,969 389,115 61,677 63,236 302,635 50,000 558,586 396,729 30 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 3: INCOME TAX Income tax recognised in profit or loss The major components of tax expense are: Current tax benefit Origination and reversal of temporary differences Under/(over) provision from prior years - current tax Total tax (benefit)/expense Attributable to: Continuing operations JCurve Solutions Limited Consolidated ($) 2015 2014 (507,793) (243,321) 124,718 (626,396) - 107,241 - 107,241 (626,396) 107,241 The prima facie income tax (benefit)/expense on pre-tax accounting (loss)/profit from continuing operations reconciles to the income tax (benefit)/expense in the financial statements as follows: Accounting loss before tax Income tax benefit calculated at 30% (6,249,289) (1,874,787) (1,317,555) (395,266) Deferred tax expense relating to the origination and reversal of temporary differences Permanent differences - non assessable income Impairment of goodwill and intangibles Non-deductible expenses Share issue expenses – deductible Research and development tax incentive - (10,438) 1,550,102 88,710 - (723,495) 218,794 124,718 439,386 - 146,281 25,610 (29,649) (79,121) - - reported in the Statement of (626,396) 107,241 Tax losses not brought to account Underprovision in prior years Income tax Comprehensive Income (benefit)/expense Net Deferred Tax Asset Analysis of deferred tax assets: Tax losses available to offset against future taxable income (i) Accruals and provisions Analysis of deferred tax liabilities: Capitalised research and development Prepayments - 245,009 245,009 - - - 5,922 211,690 217,612 - - - Net Deferred Tax Asset 245,009 217,612 (1) The balance of recouped tax losses that have not been recognised in the Financial Statements amount to $2,015,461 (2014: $1,969,334). The deductible temporary differences and tax losses do not expire under current legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future tax profits will be available against which the Group can utilise the benefits thereof. Tax Consolidation JCurve Solutions and its 100% owned Australian resident subsidiaries implemented the tax consolidation legislation from 1st January 2014. The accounting policy for the implementation of the tax consolidation legislation is set out in note 1 (l). 31 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 3: INCOME TAX (continued) The entities in the tax consolidated group have entered into a tax sharing agreement on adoption of the tax consolidation legislation which, in the opinion of the directors, limits the joint and several liability of the controlled entities in the case of a default by the head entity, JCurve Solutions. JCurve Solutions and its controlled entities have entered into a tax funding agreement under which the 100% owned Australian resident subsidiaries compensate JCurve Solutions for all current tax payable assumed and are compensated by JCurve Solutions for any current tax receivable and deferred tax assets which relate to unused tax credits or unused tax losses that, under the tax consolidation legislation, are transferred to JCurve Solutions. These amounts are determined by reference to the amounts which are recognised in the financial statements of each entity in the tax consolidated group. The amounts receivable/ payable under the tax funding agreement are due on receipt of the funding advice from JCurve Solutions, which is issued as soon as practicable after the financial year end. JCurve Solutions may also require payment of interim funding amounts to assist with obligations to pay tax instalments. These amounts are recognised as current intercompany receivables or payables. NOTE 4: SEGMENT REPORTING AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are reviewed by the chief operating decision maker in order to allocate resources to the segment and assess its performance. The Board of Directors of JCurve Solutions Limited reviews internal reports prepared as consolidated financial statements and strategic decisions of the Group are determined upon analysis of these internal reports. The Group operates predominantly in one business and geographical segment being the software development and software solutions industry providing services for corporate and government clientele predominately throughout Australia. Accordingly, under the ‘management approach’ outlined only one operating segment has been identified and no further disclosure is required in the notes to the consolidated financial statements. NOTE 5: LOSS PER SHARE Basic loss per share Basic loss per share from continuing operations Diluted loss per share Diluted loss per share from continuing operations Basic loss from operations Loss from continuing operations Consolidated, 2015 2014 Cents per share Cents per share (1.72) (1.72) (1.72) (1.72) (0.60) (0.60) (0.60) (0.60) $ $ (5,622,893) (5,622,893) (1,424,796) (1,424,796) No. No. Weighted average number of ordinary shares for the purposes of basic loss per share Weighted average number of ordinary shares for the purposes of diluted loss per share: 327,856,900 237,460,160 327,856,900 237,460,160 32 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 JCurve Solutions Limited Consolidated ($) 2015 2014 NOTE 6: CASH AND CASH EQUIVALENTS Cash at bank and on hand 2,049,069 2,765,265 Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates At 30 June 2015, the Group has no committed borrowing facilities. Reconciliation of (loss)/profit for the year after tax to net cash flows from operating activities (Loss)/profit for the year (5,622,893) (1,424,796) Non Cash flows in operating (loss)/profit: Depreciation and amortisation from continuing operations Impairment from continuing operations Loss on disposal of fixed assets Gain on sale of investment – Resources Systems (Increase)/decrease in assets: Current receivables Other current receivables Non-current receivables Other financial assets Deferred tax assets Increase/(decrease) in liabilities: Current payables Other payables Current tax provision Provisions Net cash used in operating activities NOTE 7: TRADE AND OTHER RECEIVABLES Current: Trade receivables (i) Allowance for doubtful debts Accrued revenue 188,297 5,167,008 - (36,027) 1,350,112 (432,304) 12,778 (27,397) (1,192,597) (36,262) 82,287 (122,320) (669,318) 113,236 487,604 6,015 - (318,870) - 81,850 175,133 458,221 - 11,229 60,752 (349,626) 1,531,139 (135,058) 9,631 1,405,712 2,625,764 (27,575) 121,608 2,719,797 (i) the average credit period on sales of goods and rendering of services is 30 days. An allowance has been made for estimated irrecoverable trade receivable amounts arising from the past sale of goods and rendering of services, determined by reference to past default experience. Refer to note 17 for ageing of receivables. 33 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 8: OTHER CURRENT ASSETS Prepayments Sundry debtors # # Sundry debtors relates to a Research and Development rebate received in July 2015 relating to the year ended 30 June 2015. NOTE 9: OTHER FINANCIAL ASSETS JCurve Solutions Limited Consolidated ($) 2015 2014 727,058 333,317 1,060,375 628,071 - 628,071 Security Deposits 19,078 31,856 NOTE 10: PLANT AND EQUIPMENT Plant and equipment, at cost Less accumulated depreciation Net carrying amount Leasehold improvements, at cost Less accumulated depreciation Net carrying amount 679,618 (589,033) 90,585 44,120 (43,287) 833 785,058 (681,482) 103,576 68,104 (55,986) 12,118 Total net carrying amount 91,418 115,694 Reconciliations: Consolidated Movements: Net carrying amounts as at 30 June 2013 Disposals Additions Depreciation charges Net carrying amounts as at 30 June 2014 Disposals Additions Depreciation write-back on disposals Depreciation charges Net carrying amounts as at 30 June 2015 Plant & Equipment Leasehold Improvements $ $ 79,954 (7,565) 85,696 (54,509) 103,576 (151,318) 45,878 151,311 (58,862) 90,585 11,664 - 9,181 (8,727) 12,118 (24,985) 1,000 24,986 (12,286) 833 Total $ 91,618 (7,565) 94,877 (63,236) 115,694 (176,303) 46,878 176,297 (71,148) 91,418 34 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) JCurve Solutions Limited FOR THE YEAR ENDED 30 JUNE 2015 NOTE 11: INTANGIBLE ASSETS Consolidated Licences & Other Intangibles Goodwill Total $ $ $ Year ended 30 June 2014 At 1 July 2013, net of accumulated amortisation and impairment Additions Impairment charge At 30 June 2014, net of accumulated amortisation and impairment - 3,603,396 (50,000) 3,553,396 875,000 6,630,105 (487,604) 875,000 10,233,501 (537,604) 7,017,501 10,570,897 Year ended 30 June 2015 At 1 July 2014, net of accumulated amortisation and impairment 3,553,396 7,017,501 10,570,897 Additions Amortisation Impairment charge - (117,143) - - - (117,143) (1,160,000) (4,007,008) (5,167,008) At 30 June 2015, net of accumulated amortisation and impairment 2,276,253 3,010,493 5,286,746 Goodwill is subject to annual impairment testing (see Note 12). An impairment loss of $5,167,008 (2014: $487,604) was recognised for continuing operations in the 2015 financial year. The impairment write off charge in 2015 was $ 4,007,008 for Goodwill on acquisition of JCurve Business Software, $ 797,143 asset write down of Netsuite licence and $ 362,857 asset write down of the JCurve Wizard. The impairment write off charge in 2014 was $387,604 for Phoneware Goodwill due to Phoneware’s continued migration plan to move customers to JTEL and $100,000 to write off the goodwill attached to the acquisition of FleetManager®. Further explanation of the factors that lead to the impairment charge are noted in Note 12. NOTE 12: IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES Goodwill acquired through business combinations has been allocated to 3 individual cash generating units (CGU) for impairment testing as follows: • Phoneware • JCurve Business Software • The Full Circle Group Phoneware The recoverable amount of the Phoneware unit has been determined based on a value in use calculation using cash flow projections covering a 5 year period. The discount rate applied to cash flow projections, including a factor for risk, is 12.00% (2013: 12.25%). Based on these value in use calculations, there is no impairment of Phoneware Goodwill for the year ended 30 June 2015 (2014: $387,604). 35 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 12: IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLES WITH INDEFINITE LIVES (continued) JCurve Business Software The net assets include $7.6 million for Goodwill and identifiable assets associated with the acquisition of JCurve Business Software. This was made up of Goodwill $4,007,008, Netsuite reseller agreement $3,100,000 and a software installation wizard of $500,000. The recoverable amount of the JCurve Business Software Goodwill has been determined based on a value in use calculation using cash flow projections covering a 5 year period. The discount rate applied to cash flow projections, including a factor for risk, is 12.00%. Based on these value in use calculations, there is an impairment of $5,167,008 for the year ended 30 June 2015, which has been applied to Goodwill $4,007,008, the Netsuite Licence $797,142 and the implementation wizard $362,858. As a result, the Goodwill and implementation wizard are now fully amortised/impaired, and the Netsuite License has been written down to $2,276,253. The Full Circle Group Goodwill of $2,623,097 was recorded on the acquisition of the Full Circle Group which occurred on 17 June 2014. The recoverable amount of The Full Circle Group Goodwill has been determined based on a value in use calculation using cash flow projections covering a 5 year period. The discount rate applied to cash flow projections, including a factor for risk, is 12.00%. Based on these value in use calculations, there is no impairment of The Full Circle Group Goodwill as at 30 June 2015 (2014: $nil). Carrying amount of intangibles allocated to each of the cash generating units At 30 June 2015 Carrying amount of goodwill Carrying amount of licences & other intangibles Total At 30 June 2014 Carrying amount of goodwill Carrying amount of licences & other intangibles Total Consolidated ($) Phoneware Full Circle JCurve Business Software Total 387,396 2,623,097 - 3,010,493 - 3,396 2,272,857 2,276,253 387,396 2,626,493 2,272,857 5,286,746 387,396 2,623,097 4,007,008 7,017,501 - 3,396 3,550,000 3,553,396 387,396 2,626,493 7,557,008 10,570,897 Key assumptions used in value calculations for 30 June 2015 and 30 June 2014 The following describes each key assumption on which management has based its cash flow projections when determining the value in use of all the cash generating units. Budgeted gross margins The basis used to determine the value assigned to the budgeted gross margins is the average gross margins achieved in the year immediately before the budgeted year, increased for expected efficiency improvements. Thus, values assigned to gross margins reflect past experience, except for efficiency improvements. Cash rate Risk factor a base rate of 2.50% (2014: 4.25%) has been used. an additional amount of 9.5% has been factored for general business risk. 36 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 13: TRADE AND OTHER PAYABLES Current: Trade payables (i) Other payables Annual leave Accrued expenses Unearned Income JCurve Solutions Limited Consolidated ($) 2015 2014 364,097 483,213 195,876 638,230 2,761,084 4,442,500 1,331,321 424,806 212,083 750,291 2,959,103 5,677,604 (i) Trade payables are non-interest bearing and are normally settled on 30-day terms. Information regarding the effective interest rate and credit risk of current payables is set out in Note 17. NOTE 14: PROVISIONS Current: Provision for long service leave Non-current: Provision for long service leave NOTE 15: SHARE CAPITAL AND RESERVES Ordinary shares issued and fully paid (i) Unissued shares (ii) - 41,781 107,689 107,689 172,021 213,802 17,382,891 205,357 17,588,248 17,382,891 205,357 17,588,248 (i) Fully paid ordinary shares carry one vote per share and carry the right to dividends. Movement in ordinary shares on issue At 1 July 2013 Shares issued Share issue costs Related income tax At 30 June 2014 Shares issued At 30 June 2015 (ii) Movement in unissued shares At 1 July 2014 Deferred consideration At 30 June 2015 No. 191,077,728 136,779,172 - - 327,856,900 - $ 10,879,285 6,635,386 (186,637) 54,857 17,382,891 - 327,856,900 17,382,891 - 4,464,285 4,464,285 - 205,357 205,357 37 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 15: SHARE CAPITAL AND RESERVES (continued) Share options JCurve Solutions Limited issued 35,714,284 options (valued at $1,572,144) as part consideration for the acquisition of JCurve Solutions Pty Ltd by its’ subsidiary JCurve Business Software Pty Ltd. Refer Note 23. Reserves Balance at the start of the year Equity benefits reserve – options issued to director Balance at the end of the year Nature and purpose of reserves Employee Equity benefits reserve 2015 $ 1,723,014 - 1,723,014 2014 $ 150,870 1,572,144 1,723,014 This reserve is used to record the value of equity benefits provided to employees as part of their remuneration. Refer to Note 16 for further details of the plan. NOTE 16: SHARE BASED PAYMENT PLANS Employee Share Option Plan JCurve Solutions Limited issued 35,714,284 options (valued at $1,572,144) as part consideration for the acquisition of JCurve Solutions Pty Ltd by its subsidiary JCurve Business Software Pty Ltd. Refer Note 23. The contractual life of each option granted is between 3 and 5 years. There are no cash settlement alternatives. The expense recognised in the statement of comprehensive income in relation to share-based payments is disclosed in Note 23. The following table illustrates the number (No.) and weighted average exercise prices of and movements in share options issued during the year: 2015 2014 Weighted average exercise price Weighted average exercise price No. No. Outstanding at the beginning of the year Expired during the year Granted during the year Outstanding at the end of the year Exercisable at the end of the year 35,714,284 35,714,284 35,714,284 $0.000001 800,000 - - - - $0.000001 (800,000) 35,714,284 35,714,284 35,714,284 $0.11 $0.11 $0.000001 $0.000001 The weighted average remaining contractual life for the share options outstanding as at 30 June 2015 is between 2 and 5 years (2014: 3 and 5 years). The range of exercise prices for options outstanding at the end of the year was $0.000001 (2014: $0.000001) No options expired during the year. 38 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 16: SHARE BASED PAYMENT PLANS (continued) Employee Share Option Plan (continued) The outstanding balance of share options as at 30 June 2015 is represented by: • • • • 8,928,571 options which automatically vest when the share price reaches 7.5c for a period of 10 consecutive trading days, exercisable on or before 31 March 2016; 8,928,571 options which automatically vest when the share price reaches 10.0c for a period of 10 consecutive trading days, exercisable on or before 31 March 2017; 8,928,571 options which automatically vest when the share price reaches 12.5c for a period of 10 consecutive trading days, exercisable on or before 31 March 2018; 8,928,571 options which automatically vest when the share price reaches 15.0c for a period of 10 consecutive trading days, exercisable on or before 31 March 2019 NOTE 17: FINANCIAL INSTRUMENTS (a) Capital risk management Capital risk is managed and monitored by liaising with banks and communicating with shareholders. JCurve considers new government legislation and monitors the market place by canvassing information from stockbrokers and investors. When managing capital, management's objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Management adjust the capital structure as necessary to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. (b) Categories of financial instruments Financial assets Receivables Cash and cash equivalents Other financial assets Financial liabilities Payables Consolidated ($) 2015 2014 1,405,712 2,049,069 19,078 2,719,797 2,765,265 31,856 4,442,500 5,677,604 The Group has no derivative instruments in designated hedging relationships. (c) Financial Risk Management Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements. The Group’s principal financial liabilities are trade payables and unearned income. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets such as trade receivables and cash and short- term deposits, which arise directly from its operations. It is, and has been throughout 2014 and 2015, the Group’s policy that no trading in derivatives shall be undertaken. The main risks arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk, and credit risk. The Board of Directors reviews and agrees on policies for managing each of these risks which are summarised in following pages. 39 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 17: FINANCIAL INSTRUMENTS (continued) (d) Price Risk – Equity and Commodity The Group's exposure to commodity and equity securities price risk is minimal. (e) Foreign Currency Risk The Group has minimal exposure to foreign currency risk as the Group trades mainly within Australia. The Joint Venture contract for in South Africa stipulates that the service revenue will be billed in Australian dollars. (f) Interest Rate Risk The following table sets out the carrying amount, by maturity, of the Group’s financial instruments including those exposed to interest rate risk: Consolidated Within 1year 1 to 5 years Total Weighted average effective interest rate $ $ $ % Year ended 30 June 2015 Financial assets Trade and other receivables Floating rate: Cash Assets Financial liabilities Payables Other payables Year ended 30 June 2014 Financial assets Trade and other receivables Floating rate: Cash Assets Financial liabilities Payables Other payables 1,405,712 1,405,712 2,049,069 2,049,069 3,454,781 4,442,500 - 4,442,500 2,719,797 2,719,797 2,765,265 2,765,265 5,485,062 5,677,604 - 5,677,604 - - - - - - - - - - - - - - - - 1,405,712 1,405,712 2,049,069 2,049,069 3,454,781 4,442,500 - 4,442,500 2,719,797 2,719,797 2,765,265 2,765,265 5,485,062 5,677,604 - 5,677,604 2.33 - - 2.53 - - For all financial instruments, the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised forms. Interest on financial instruments classified as floating rate is fixed at intervals of less than one year. The other financial instruments of the Group that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk. 40 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 17: FINANCIAL INSTRUMENTS (continued) Interest rate risk sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the change in interest rates. At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s net loss before tax would increase by $4,757 and decrease by $4,757 respectively (2014: $13,613). This is mainly attributable to the Group’s exposure to interest rates on its variable rate cash deposits. (g) Credit Risk Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables. The Group's exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note. The Group does not hold any credit derivatives to offset its credit exposure. The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group's policy to securitise its trade and other receivables. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer in accordance with parameters set by the board. These risk limits are regularly monitored. Receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. Accounts Receivable and Provision Trade Receivables – Past Due Not Impaired At 30 June 2015, the ageing analysis of trade receivables is as follows: Consolidated Total 1,531,139 2,625,764 0-30 days 31-60 days 61-90 days PDNI* 61-90 Days CI* +91 days PDNI* +91 days CI* 765,893 2,341,786 273,253 114,545 136,259 85,288 - - 220,677 135,057 56,571 27,574 2015 2014 * PDNI - Past due not impaired CI - Considered impaired Receivables past due but not considered impaired are: Consolidated $356,936 (2014: $141,859). Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due. 41 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2014 NOTE 17: FINANCIAL INSTRUMENTS (continued) (h) Liquidity Risk Management Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. NOTE 18: COMMITMENTS AND CONTINGENCIES Remuneration Commitments There are no commitments for the payment of salaries and other remuneration under long-term employment contracts in existence at the reporting date. Operating Lease Commitments The Group had the following operating lease commitments at balance date: Within one year After one year but not more than five years Contingent Liabilities The company does not have any contingent liabilities. NOTE 19: EVENTS AFTER BALANCE DATE Consolidated ($) 2015 53,457 79,239 2014 72,029 17,111 On 29 July 2015, the Group entered into an operating lease agreement to rent office space in Chatswood. The operations of JCurve Solutions Ltd, JCurve Business Software Pty Ltd, and Phoneware Pty Ltd will therefore relocate from St.Leonards to the new premises in Chatswood in October 2015. The operating lease commitment associated with the new offices is as follows: Within one year After one year but not more than five years NOTE 20: AUDITOR’S REMUNERATION The auditor of JCurve Solutions Limited is HLB Mann Judd. Consolidated ($) 2015 275,981 1,316,582 2014 - - Consolidated ($) 2015 2014 Amounts received or due and receivable by HLB Mann Judd for: An audit or review of the financial report of the entity and any other entity in the consolidated group 82,500 68,700 42 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 21: INTEREST IN JOINT VENTURE The Group has a 50% interest in the Webhouse Software joint venture, which is involved in providing telecommunications expense management solutions in South Africa. The share of the assets, liabilities, revenue and expenses of the jointly controlled operation, which are included in the consolidated financial statements, are as follows: JCurve Solutions Limited Current assets Trade and other receivables Total current assets Non-current assets Total Non-current assets Current liabilities Trade and other payables Total current liabilities Non-current liabilities Total Non-current liabilities Operating Revenue Interest Revenue Administrative expenses Communications expenses Consultancy expenses Travel expenses Profit before income tax Income tax expense Net Profit Consolidated ($) 2015 2014 89,567 89,567 481,343 481,343 - - - - 704,165 809 (1,713) - (19,491) - - 296,053 296,053 - 1,423,839 222 (1,244) (13,967) (36,589) (7,049) 683,770 1,365,212 - - 683,770 1,365,212 There were no capital commitments and guarantees. There were no impairment losses in the jointly controlled operation. NOTE 22: DISPOSAL OF SUBSIDIARY Resource Systems Pty Limited (JConnects) The entity Resource Systems Pty Limited and its associated businesses were sold on 1st June 2015. The entity was deconsolidated as at 31 May 2015 and shares in the business were sold for consideration of $36,027. 43 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 23: BUSINESS COMBINATIONS Acquisition of JCurve Business Software On 31 October 2013, JCurve Business Software Pty Ltd, a subsidiary of JCurve Solutions Limited acquired the assets and liabilities of JCurve Solutions Pty Ltd, a leading cloud-based accounting and ERP software provider which exclusively promotes and sells the small business version of business software from Netsuite Inc of USA (Netsuite) in the Australia and New Zealand region. The total cost of the combination was $6,000,714 and comprised an issue of equity instruments, cash and options. The Company issued 71,428,571 ordinary shares with a fair value of $0.048 each, based on the quoted price of the shares of JCurve Solutions Limited at the date of control and 35,714,284 options (valued at $1,572,143). The incentive options were issued with the following milestones all with an exercise price of $0.000001: - - - - 8,928,571 options which automatically vest when the share price reaches 7.5c for a period of 10 consecutive trading days, exercisable on or before 31 March 2016; 8,928,571 options which automatically vest when the share price reaches 10.0c for a period of 10 consecutive trading days, exercisable on or before 31 March 2017; 8,928,571 options which automatically vest when the share price reaches 12.5c for a period of 10 consecutive trading days, exercisable on or before 31 March 2018; 8,928,571 options which automatically vest when the share price reaches 15.0c for a period of 10 consecutive trading days, exercisable on or before 31 March 2019. Consideration transferred Acquisition date fair value of the consideration transferred: Cash Options issued Shares issued at fair value Total consideration 30 June 2014 $ 1,000,000 1,572,143 3,428,571 6,000,714 Acquisition related costs of $195,655 are included in professional fees and other expenses in the statement of comprehensive income for the year ended 30 June 2014. Directly attributable costs of raising equity have been included as a deduction from equity. Assets acquired and liabilities assumed at the date of acquisition The Group has recognised the fair values of the identifiable assets and liabilities of JCurve Solutions Pty Ltd at the date of acquisition as follows: Trade receivables Bonds Property, plant and equipment Netsuite licence agreement Intangible assets – JCurve wizard Prepayments Deferred tax assets Trade and other payables Provisional fair value of identifiable net assets Goodwill arising on acquisition Total consideration Fair value at acquisition date $ 133,631 9,700 20,595 3,100,000 500,000 545,416 14,161 (2,329,797) 1,993,706 4,007,008 6,000,714 44 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 23: BUSINESS COMBINATIONS (continued) Acquisition of JCurve Business Software (continued) Impact of acquisition on the results of the Group The acquisition of the assets and liabilities of JCurve Solutions Pty Ltd affected the consolidated result as follows: Revenue Less: expenses Gross loss before tax 30 June 2014 $ 2,197,229 (2,650,200) (452,971) If the combination had taken place at the beginning of the year ended 30 June 2014, the loss before tax of the Group would have been $1,576,749 and revenue from continuing operations would have been $12,743,520 for the year ended 30 June 2014 In determining the pro-forma revenue and profit of the Group had JCurve Solutions Pty Ltd been acquired at the beginning of the prior reporting period, the Directors have: - - calculated depreciation and amortisation of plant and equipment acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the pre-acquisition financial statements; and based borrowing costs on the funding levels, credit ratings and debt/equity position of the Group after the business combination. Acquisition of The Full Circle Group Pty Ltd On 17 June 2014 JCurve Solutions Limited acquired the shares of The Full Circle Group Pty Ltd, a leading cloud-based telecommunications management company, to be integrated into business operations effective 1 July 2014. The total cost of the combination was $2,703,571 and comprised an issue of equity instruments and cash. The Company issued 15,178,571 ordinary shares with a fair value of $0.046 each, based on the quoted price of the shares of JCurve Solutions Limited at the date of control. A further 4,464,285 ordinary shares with a fair value of $0.046 each, based on the quoted price of the shares of JCurve Solutions Limited at the date of control, will be issued on an incentive basis on the achievement of financial and product targets as agreed in the purchase of Full Circle. Consideration transferred Acquisition date fair value of the consideration transferred: Cash Shares issued at fair value Deferred consideration Total consideration 30 June 2014 $ 1,800,000 698,214 205,357 2,703,571 Acquisition related costs of $122,548 are included in professional fees and other expenses in the statement of comprehensive income for the year ended 30 June 2014. Directly attributable costs of raising equity have been included as a deduction from equity. 45 | P a g e  JCurve Solutions Limited NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 23: BUSINESS COMBINATIONS (continued) Acquisition of The Full Circle Group Pty Ltd (continued) Assets acquired and liabilities assumed at the date of acquisition The Group has recognised the fair values of the identifiable assets and liabilities of The Full Circle Group Pty Ltd at the date of acquisition as follows: Cash Trade receivables Bonds Property, plant and equipment Patents & trademarks Deferred tax assets Trade and other payables Provisions Provisional fair value of identifiable net assets Goodwill arising on acquisition Total consideration Fair value at acquisition date $ 46,241 187,385 4,883 12,692 3,396 - (153,298) (20,825) 80,474 2,623,097 2,703,571 Impact of acquisition of The Full Circle Group on the results of the Group The acquisition of the assets and liabilities of The Full Circle Group Pty Ltd affected the consolidated result as follows: Revenue Less: expenses Gross loss before tax 30 June 2014 $ - - - If the combination had taken place at the beginning of the year ended 30 June 2014, the loss before tax of the Group would have been $1,396,301 and revenue from continuing operations would have been $13,205,214 for the year ended 30 June 2014. In determining the pro-forma revenue and profit of the Group had The Full Circle Group Pty Ltd been acquired at the beginning of the prior reporting period, the Directors have: - - calculated depreciation and amortisation of plant and equipment acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the pre-acquisition financial statements; and based borrowing costs on the funding levels, credit ratings and debt/equity position of the Group after the business combination. 46 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 23: BUSINESS COMBINATIONS (continued) Net cash outflow arising on acquisitions: The cash outflow arising on acquisitions was as follows: Acquisition of JCurve Solutions Pty Limited Cash paid Less: net cash acquired with the subsidiary Net cash outflow for JCurve Solutions Acquisition of The Full Circle Group Pty Limited Cash paid Less: net cash acquired with the subsidiary Net cash outflow for The Full Circle Group Net cash outflow in respect of acquisitions during the year NOTE 24: RELATED PARTY DISCLOSURE JCurve Solutions Limited 30 June 2015 30 June 2014 $ $ - - - - - - - 1,000,000 - 1,000,000 1,800,000 (46,240) 1,753,760 2,753,760 The consolidated financial statements include the financial statements of JCurve Solutions Limited and the subsidiaries listed in the following table. Name Incorporation 2015 Country of % Equity Interest JCurve Services Pty Ltd JCurve Business Software Pty Ltd Mobile Fleet Pty Ltd Phoneware Pty Ltd Resource Systems Pty Ltd Interfleet Pty Ltd The Full Circle Group Pty Ltd Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 - 100 100 2014 100 100 100 100 100 100 100 JCurve Solutions Limited is an Australian entity and ultimate parent of the Group. JCurve Services Pty Ltd, Phoneware Pty Ltd, Resource Systems Pty Ltd, Interfleet Pty Ltd and The Full Circle Group Pty Ltd are all incorporated in Australia. Resource Systems Pty Ltd was sold on 1st June 2015. JCurve Services Pty Ltd and Mobile Fleet Pty Ltd are no longer trading entities. The Group has applied to have JCurve Services Pty Ltd and Mobile Fleet Pty Ltd struck off. In the absence of any objection being received, this process will be completed early in the new financial year. 47 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 25: PARENT ENTITY DISCLOSURES Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Accumulated losses Reserves Share-based payments Total equity Financial performance JCurve Solutions Limited 30 June 2015 $ 30 June 2014 $ 2,331,247 2,863,480 5,194,727 1,182,421 89,267 1,271,688 3,213,517 2,962,886 6,176,403 1,670,955 134,998 1,805,953 17,588,248 (15,388,223) 17,588,248 (14,940,812) 1,723,014 3,923,039 1,723,014 4,370,450 Year ended 30 June 2015 $ Year ended 30 June 2014 $ Net loss for the year (447,411) (7,451,817) 48 | P a g e NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2015 NOTE 26: DIRECTORS AND EXECUTIVE DISCLOSURES The aggregate compensation made to directors and other key management personnel of the Group is set out below: JCurve Solutions Limited Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments Total Compensation NOTE 27: GOING CONCERN 30 June 2015 $ 1,388,055 101,832 - - - 30 June 2014 $ 1,097,498 77,860 - - - 1,489,887 1,175,358 The Group incurred a loss after tax of $5,622,893 (2014: $1,424,796), which included an impairment charge of $5,167,008 (2014: $487,604). At balance date, the Group has cash assets of $2,049,069 (2014: $2,765,265) and a negative working capital position of $20,906 (2014: positive working capital position of $372,511). The working capital of negative $20,906 includes unearned revenue of $2,761,084 (2014: $2,959,103). Whilst the recognition of Unearned Revenue acknowledges there are future obligations in terms of services to be provided this does not represent a future cash outlay. The Group has prepared cashflow forecasts based on expected future cash inflows and expected future cash outlays and, on the basis of these cash forecasts, and with reference to the cashflow statement incorporated into these Financial Statements, in the opinion of the Directors, the Group will be able to pay its debts as and when they fall due. 49 | P a g e  JCurve Solutions Limited DIRECTORS’ DECLARATION 1. In the opinion of the directors: a. the accompanying financial statements and notes are in accordance with the Corporations Act 2001 including: i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year then ended; and ii. complying with Accounting Standards and Corporations Regulations 2001. b. c. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2015. This declaration is signed in accordance with a resolution of the Board of Directors. B Hatchman Chairman Dated this 18th day of August 2015 50 | P a g e INDEPENDENT AUDITORS REPORT JCurve Solutions Limited INDEPENDENT AUDITOR’S REPORT To the members of JCurve Solutions Limited Report on the Financial Report We have audited the accompanying financial report of JCurve Solutions Limited (“the company”), which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration for the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1(c), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of JCurve Solutions Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(c). HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. 51 | P a g e INDEPENDENT AUDITORS REPORT JCurve Solutions Limited Report on the Remuneration Report We have audited the remuneration report included in the directors’ report for the year ended 30 June 2015. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion In our opinion the remuneration report of JCurve Solutions Limited for the year ended 30 June 2015 complies with section 300A of the Corporations Act 2001. HLB Mann Judd Chartered Accountants Perth, Western Australia 18 August 2015 N G Neill Partner 52 | P a g e  JCurve Solutions Limited ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES Shareholder information (a) Distribution of shareholder and listed option holder numbers Category Ordinary 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over 51 9 47 219 245 571 Units 1889 30,010 412,436 11,411,494 316,001,071 327,856,900 % of Issued Capital 0.00 0.01 0.13 3.48 96.38 100 There are 165 shareholders that hold less than a marketable parcel as at 7th August 2015. (b) Substantial shareholders The names of the substantial shareholders listed in the company’s register as at 30 June 2015 and 7 August 2015 are: Shareholder Gramell Investments Pty Limited Mr Mark Jobling Two Tops Pty Ltd (c) Voting rights Number of ordinary shares held % held of ordinary share capital 83,124,215 51,204,301 31,198,481 25.35 15.62 9.52 At members’ meetings, each eligible voter (i.e. eligible member, proxy, attorney or representative of an eligible member) has one vote on a show of hands; and one vote on a poll (except where a share has not been fully paid, that share will only confer that fraction of one vote which has been paid, and if the total number of votes does not constitute a whole number, the fractional part of that total will be disregarded). This is subject to the following: Where any calls due and payable have not been paid; Where there is a breach of a restriction agreement; Where a member and their proxy or attorney are both present at the meeting, or if more than one proxy or attorney is present; Where a vote on a particular resolution is prohibited by the Corporations Act 2001, Listing Rules, ASIC or order of a Court. (d) Company secretary The name of the company secretary is David Franks. (e) Registered office The address of the principal registered office in Australia is: Level 4, 22 Atchison St St Leonards NSW 2062 (f) Register of securities The registers of securities are held at the following address: Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 Ph. (08) 9323 2000 53 | P a g e ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES (continued) JCurve Solutions Limited (g) Top 20 Registered Holders – Ordinary Shares as of 7th August 2015 Name Number of Ordinary Shares 1 GRAMELL INVESTMENTS PTY LIMITED POTENTATE INVESTMENTS PTY LIMITED LTL CAPITAL PTY LTD 7 MR TONY MICHAEL SIMMONS 8 MS XIAN XIA ZENG 9 AUSTRALIAN EXECUTOR TRUSTEES LIMITED 10 ALET INVESTMENTS PTY LTD 11 MR MICHAEL STARR 12 MR MARK JAMES STEMMER 13 14 PATEL FAMILY SUPERANNUATION PTY LTD MR PETER GRAHAM DORAN + MRS BARBARA LINDA DORAN 15 MR STEPHEN CANNING 16 CORNELA PTY LTD 17 MRS GLENYS KAYE DOUGHTY 18 FUTURE SUPER PTY LTD 19 LAKE PACIFIC PTY LTD 20 TWENTY TEN ENTERPRISE LTD 83,124,215 47,899,564 31,198,481 6,667,012 6,330,943 6,000,000 5,917,443 5,798,000 3,250,000 3,007,783 3,000,000 2,768,964 2,619,091 2,271,973 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 % of Ordinary Shares Held 25.35 14.61 9.52 2.03 1.93 1.83 1.80 1.77 0.99 0.92 0.92 0.84 0.80 0.69 0.61 0.61 0.61 0.61 0.61 0.61 TOTAL HELD BY TOP 20 HOLDERS TOTAL HELD BY REMAINING SHAREHOLDERS 221,853,469 106,003,431 67.67 32.33 (h) Stock exchange listing– ordinary shares (as of 30 June 2015) Quotation has been granted for all the ordinary shares of the Company on the Australian Securities Exchange. (i) Restricted securities As at 30 June 2015 and 7 August 2015 there are no restricted security classes recorded in the Company’s share register. (j) Unquoted securities The unquoted securities of the Company as at 7 August 2014 are 35,714,284 Options are outlined below Number of Options Exercise Price Expiry Date Number of Holders 8,928,571 8,928,571 8,928,571 8,928,571 $0.000001 $0.000001 $0.000001 $0.000001 31 March 2016 31 March 2017 31 March 2018 31 March 2019 1 1 1 1 (k) Listing Rule 3.13.1 and 14.3 Further to Listing Rule 3.13.1 and Listing Rule 14.3, the Annual General Meeting of Jcurve is scheduled for 17 November 2015. 54 | P a g e 

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