ANNUAL REPORT 2006
www.empired.com
EMPIRED Ltd.
ABN 81 090 503 843
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PRINCIPLE PLACE OF BUSINESS
Perth
469 Murray Street
PERTH WA 6000
Telephone No: +618 9321 9401
Fax No: +618 9321 9402
Melbourne
470 Colins Street
MELBOURNE VIC 3000
Telephone No: +613 8610 0700
Fax No: +613 8610 0701
Sydney
3 Spring Street
SYDNEY NSW 2000
Telephone No: +612 9256 0200
Fax No: +612 9256 0201
WEB SITE ADDRESS
www.empired.com
CORPORATE DIRECTORY
DIRECTORS
Mel Ashton (Chairman)
David Taylor (Non – executive Director)
Russell Baskerville (Managing Director & CEO)
COMPANY SECRETARY
Craig J Ferrier
REGISTERED OFFICE
469 Murray Street
PERTH WA 6000
Telephone No: +618 9321 9401
Fax No: +618 9321 9402
COMPANY NUMBER
A.C.N: 090 503 843
LEGAL ADVISERS
McKenzie Moncrieff Lawyers
Level 5, 37 St Georges Tce
Perth WA 6000
AUDITORS
Ernst & Young
The Ernst & Young Building
11 Mounts Bay Road
PERTH WA 6000
COMPANY DOMICILE AND LEGAL FORM
Empired Limited is the parent entity and an
Australian Company limited by shares
COUNTRY OF INCORPORATION
Australia
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ANNUAL
REPORT
2006
Page
2
6
CONTENTS
Section
KEY ACHIEVEMENTS & RESULTS
CHAIRMAN & CEO REVIEW
1
2
3
4
5
6
OPERATIONAL REVIEW: EMPIRED’S IT SERVICES BUSINESS
10
OPERATIONAL REVIEW: BIGREDSKY
DIRECTORS’ REPORT
FINANCE REPORT
Income Statement
Balance sheet
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
DIRECTORS’ DECLARATION
AUDIT REPORT
AUDITORS’ INDEPENDENCE DECLARATION
14
18
24
25
26
27
28
30
69
70
72
KEY ACHIEVEMENTS
“... Plan ...
... Develop ...
... Deliver …”
KEY ACHIEVEMENTS
Corporate
• Restored focus on the development of our core businesses
• Developed a clear vision and a plan for growth
• Full restructure of management team and group operations
• Group revenue Growth of 33%
It ServICeS
• Implemented new management structure and business model
• Focus on annuity revenue services
• Developed national growth plan and expanded into Victoria
• Revenue growth of 77%
BIgredSky
• Developed new business model and sales plan
• 100% Annuity based revenue
• Developed national sales team in Perth, Melbourne and Sydney
• Improved product functionality and competitiveness
• Reduced maintenance costs
• Increased Scalability
ANNUAL
REPORT
2006
1
RESulTS
“Last year was a year of
investment and development,
laying a solid foundation for
the ongoing growth and success
of Empired”
1
RESulTS
ANNUAL
REPORT
2006
Revenue $4,992,125
EBITDA $530,789
NPAT
$198,399
1
2
1
CHAIRMAN & CEO REVIEw
“Working together to develop
a clear business strategy
with thorough execution, in
doing so, driving growth and
shareholder value.”
CHAIRMAN & CEO REVIEw
Chairman and CEO Review
Dear fellow shareholders
We are pleased to present to you the Empired Limited 2006 Annual Report. Throughout the year we
have overseen many changes within the business and our growth initiatives are well underway with
positive signs emerging after just twelve months of execution. Last year was a year of investment
and development, laying sound foundation for the ongoing growth and success of Empired. Whilst
we focused on the development of our business model and plan we continued to deliver a profitable
result of $198,399 NPAT with EBITDA of $530,789 and experienced revenue growth across the group
to $4.99 Million up 32% on the previous year. With our forward momentum strong and the ongoing
development of our initiatives in train, we expect continued growth for some time to come.
To drive growth across our organisation we have developed three clear strategies:
• Diversify our revenue and business model through a balanced investment in both our Talent
Management business BigRedSky and our IT Services business
• Focus on building annuity revenue and drive organic growth throughout our chosen regions
• Develop deep long term relationships with our customers through the provision of high quality and
valued services
To reflect the new focus in 2006 a number of initiatives were undertaken:
• An organisational re-structure with the appointment of a predominately new and experienced
General Management team to focus on the core areas within our respective businesses
• An expansion into Sydney, New South Wales and the securing of customers in every state of
Australia
• An investment in R&D that has increased the competitiveness and capacity of the BigRedSky
service
• An investment in our Services Business increasing our lines of service and improving the quality of
our offering
ANNUAL
REPORT
2006
2
CHAIRMAN & CEO REVIEw
At the operational level we experienced success in a number of areas within both our core
businesses.
The investment and development of the BigRedSky business achieved a number of encouraging
results:
• A new product version was released that provides increased functionality and competitiveness,
reduced maintenance costs and greater scalability
• A national sales team was established with a presence in WA, Vic and NSW
• Sixteen new customers were secured in under 5 months with a 100% annuity based revenue model,
significantly many of these customers were members of the top 50 ASX/SFE listed companies
Whilst these early development stage successes have been gratifying there is still much to be done. We
now have a proven business model that is starting to deliver returns, we need to further develop and
drive this model through organic growth in Australia, expand the regions in which we operate and
diversify the services BigRedSky provides to its customers. In so doing, we will position BigRedSky as an
industry leader in the provision of talent management services.
Our IT services business continued to provide strong results and with a renewed focus on the growth of
this business we expect solid returns to continue. Highlights within the 2006 financial year included:
• Delivering 77% revenue growth
• Securing an IT Outsourcing contract with multi billion dollar resources company Oxiana Limited
• Implementing a new management structure to provide a focus on strategic initiatives and drive
growth
• Developing a plan to expand the services business nationally
The IT Services business is established as a sound performer in the deliver of IT projects in WA, our
challenge is to increase our service offerings, grow our customer base and expand into regions
that present a larger market opportunity. This will provide strong, continued growth and customer
satisfaction.
With the expected growth in revenue from both the BigRedSky and IT Services business the company
is well poised to establish a strong diversified revenue base over the coming twelve months. This
diversified income stream will represent annuity revenue from a broad range of industry sectors
including financial services, mining and resources, government and health, all where strong demand
levels are being experienced.
2
ANNUAL
REPORT
2006
CHAIRMAN & CEO REVIEw
With the expected growth in revenue from both the BigRedSky and IT Services business the company
is well poised to establish a strong diversified revenue base over the coming twelve months. This
diversified income stream will represent annuity revenue from a broad range of industry sectors
including financial services, mining and resources, government and health, all where strong demand
levels are being experienced.
2
At heart, we are a services based company and our people drive our success. We recognise the
importance they play in our ongoing development and we invest in our human resources to foster a
great working environment. We provide professional development and training to ensure we are at
the forefront in technical and professional excellence. Our leadership in this area ensures we attract
and retain the best in quality experienced professionals, proven through our excellence in customer
service.
As a diversified technology provider we are continually assessing the opportunities that are presented
to us, these are broad and varied in nature. With growth will come greater opportunities that will
improve in quality, constantly improving the companies outlook and potential. We apply a range of
management methodologies to assess these opportunities, however employ a common clear goal to
focus on developing and growing tangible value in your investment.
Goals
We are a business of great potential, with sound
assets and a proven ability to provide results.
Our challenge
is harnessing this potential,
developing it and driving it to become a great
business and in turn delivering real commercial
results. In achieving this challenge we will create
quantifiable, tangible value.
In summary we have
Be a leader in our chosen technology fields
Build diversified sustainable long term revenue
Drive revenue and earnings growth over the
following three years
Create tangible, liquid shareholder value
• Restored focus on the development and growth of our core businesses
• Set a clear vision and direction
• Proven the foundations of our business model
• And developed a sound, achievable plan for growth
Before us lies an exciting year that holds much promise, we look forward to delivering on our goals
and providing sound progress in the growth and development of our core businesses.
On behalf of the board of directors I would like to thank all our staff for their dedication and commitment
to our ongoing success and to you for your confidence, patience and continued support.
russell Baskerville
Chief Executive Officer
Mel ashton
Chairman
3
10
OpERATIONAl REVIEw: EMpIREd’S IT SERVICES buSINESS
“Continuing to drive solid
growth, providing sound profits
with strong cash flow”
ANNUAL
REPORT
2006
OpERATIONAl REVIEw: EMpIREd’S IT SERVICES buSINESS
2006 proved a stellar year for Empired’s IT Services business with revenue growth of 77% on 2005 and
gross margin’s improving to an average of 38%. This growth was driven through a clear strategy to
deepen our customer relationships, provide a broader more clearly defined range of services and focus
on new business development. As a result not only have we improved revenue and profit from existing
customer engagements, we have also substantially improved new business acquisition.
3
OuR SERVICES MODEL
Empired’s IT Services business provides a turn key IT infrastructure solution for its clients. Our clients
want more than an organisation to simply build a solution, we are meeting these customer challenges
through building deep client relationships at a business level, working to identify how technology can
improve and add value to our customers businesses. We work closely with our customers to design
thorough solutions, implementing them in line with best practice and providing ongoing management
and support of these business critical assets.
11
OpERATIONAl REVIEw: EMpIREd’S IT SERVICES buSINESS
MAjOR PROjECTS
Throughout the year we delivered a number of major IT projects to some of Australia’s leading
corporations and government departments.
We worked with unisys West to develop a national infrastructure platform for BankWest. Providing
a team of up to 25 engineers working across Australia to develop a state of the art, secure, robust
and functional solution allowing the Bank to meet stringent HBOS infrastructure requirements and
underpin a national expansion plan.
Leading resources company Oxiana Limited called on Empired’s services business to assist in the
development of an infrastructure platform that allowed them to pursue an aggressive growth
strategy. Oxiana now leverage Empired’s expertise in the ongoing management and support of there
IT infrastructure assets across the globe. This contract sees Empired providing services throughout
Australia and to locations in South East Asia including Laos, Vientiane and China. Oxiana are a top 50
ASX listed company.
3
1
OpERATIONAl REVIEw: EMpIREd’S IT SERVICES buSINESS
NATIONAL EXPANSION
A solid track record of delivery in Western Australia and the ongoing improvement in the quality and
breadth of our services provides a strong platform to launch our services business into the two largest
IT Services markets in Australia.
Victoria will be established early in the 2007 financial year and is expected to provide contribution
in the same year. Our model will be largely based on the successful model operated in WA. Through
a number of clients we are already delivering many services in Victoria and this strategic move will
position Empired’s services business to capitalise on the current strong market conditions and continue
to drive substantial revenue growth.
OuTLOOk
A proven experienced management team, a sound business model, excellent market conditions and a
detailed national growth strategy will position Empired’s IT Services business for controlled effective
growth through the 2007 financial year.
ANNUAL
REPORT
2006
3
1
OpERATIONAl REVIEw: bIgREdSKY
“Positioning to capitalise on a
strong HR market and provide
an exciting growth engine.”
4
1
ANNUAL
REPORT
2006
OpERATIONAl REVIEw: bIgREdSKY
BigRedSky has experienced a year of change and development in its underlying business model. We are
confident with the investment made over the previous 12 months that BigRedSky is now positioned
to become an Australian market leader in the provision of online talent management services and is
poised to experience sound growth.
4
OuR SOFTWARE AS A SERVICE OFFERING
Our investment in creating a competitive, best of bread solution over the previous 12 months has
been substantial. It is this investment that has underpinned the recent sales growth and will drive our
business to a leadership position over the coming twelve months.
Extensive market research was undertaken, incorporating what is happening around the world, what
our prospective customers are asking for and user groups to better understand what would vastly
improve our service offerings.
The outcome of this development lifecycle is the release of BigRedSky ASAP. A service that is quickly
established, cost effective and functionality rich.
We continue to invest in R&D ensuring we stay ahead of our competition and provide an ongoing
improvement in services to our customers. Our R&D program includes a product roadmap, user
feedback forums and customer based BETA testing teams. We are currently rolling out new services to
all of our customers on a 4 to 6 weekly basis. This level of customer service and product improvement
ensures long term strong customer relationships where real value is being demonstrated.
GROWING OuR MARkET PENETRATION
While investing heavily in our service offering, we also focused on developing a sound commercialisation
plan to take our new offering to market. BigRedSky now provides a 100% annuity based revenue model
for its service offering, that allows customers to scale up or down based on their requirements.
This model provides long term recurring revenue from the BigRedSky customer base and drives strong
customer relationships.
A focus was placed on developing a commercialisation model that could be scaled up quickly and
replicated easily at relatively low cost. We are now starting to bear fruit with the current expansion
across Australia.
1
OpERATIONAl REVIEw: bIgREdSKY
INCREASING OuR GEOGRAPHIC PRESENCE
On the back of proving our commercialisation plan in Victoria we expanded our sales and customer
service reach in Western Australia, Victoria and New South Wales. With a dedicated team of sales
executives and customer service representatives now operating out of these three states, BigRedSky is
addressing a far larger market with a focused plan and a dedicated team. It is expected that this will
drive organic sales growth through the 2007 financial year.
As the model becomes more successful within Australia, a plan is being developed to grow the regions
in which we operate.
DIVERSIFyING OuR SOFTWARE AS A SERVICE OFFERING
As the online recruitment market matures and BigRedSky’s customer base expands a significant
opportunity will exist to grow revenues through the provision of additional online talent management
services. BigRedSky is well positioned to take advantage of this through an established client base that
is already utilising online HR technology services from BigRedSky. R&D is currently being undertaken
to move toward a model to provide broader services as this evolves BigRedSky will become a full
service online Talent Management provider to the HR market.
4
1
OpERATIONAl REVIEw: bIgREdSKY
OuTLOOk
BigRedSky’s commercialisation plan is still in its infancy, however initial indicators are positive. With a
sound plan now in place, a rapid expansion program underway and strong increasing market demand,
we expect an impressive performance from this business.
ANNUAL
REPORT
2006
4
1
5
1
dIRECTORS’ REpORT
“A clear focus on creating
quantifiable tangible value.”
ANNUAL
REPORT
2006
dIRECTORS’ REpORT
The directors present their report together with the financial report of Empired Limited (“the
Company”) and the consolidated financial report of the consolidated entity, being the Company and
its controlled entities, for the year ended 30 june 2006 and the auditor’s report thereon.
5
Directors
Name
Mel Ashton
Chairman
Age
48
Experience and special responsibilities
Mel Ashton is a Chartered Accountant with over 25 years
experience. For a majority of that time he has specialised in
Corporate Reconstruction. Mel established his own practice in
Western Australia, which has grown to be a market leader.
Mel’s experience covers a wide range of industries and he consults
to a number of Executives and Entrepreneurs as a business
mentor.
Mel is a Fellow of the Australian Institute of Company Directors and
a Fellow of the Institute of Chartered Accountants in Australia.
Mel’s other appointments include:
• State Chairman of the WA Branch of Institute of Chartered
Accountants
• Director and Vice President of the Fremantle Football Club Ltd
• Chairman of Finance and Audit of the Fremantle Football Club
Ltd
• Chairman of PCT Engineers Pty Ltd
• Chairman of Gryphon Minerals Ltd
David has extensive commercial experience with a banking and
marketing background. During the nineties he held positions as
General Manager of the principal operating divisions of BankWest.
He was also Chairman of BankWest subsidiaries TrustWest and TW
Nominees during that period.
He currently holds the position of Chairman, Perth Market
Authority, and is a non-executive director of HBF Financial Services
and Forest Products Commission.
David is a Fellow of the Australian Institute of Company
Directors.
With extensive business experience and exposure to the IT industry
Russell brings a wealth of knowledge in both the strategic
growth and development of Technology businesses and a strong
understanding of the commercial benefits achieved through the
application of technology. Prior to Empired, Russell was founder
and Managing Director of an IT consultancy and services business.
Russell led this business through a successful acquisition in early
2001. In addition Russell was founder and Managing Director of
Procom Holdings Pty Ltd supplying EFTPOS service and support to
a number of tier one banks in Australia. Russell remains a non-
executive director and shareholder of this business.
David Taylor
Non-executive Director
64
Russell Baskerville
Managing Director
28
1
dIRECTORS’ REpORT
Principle Activity
5
The principal activities of the consolidated entity during the year have comprised:
The ongoing development of the BigRedSky online Talent Management System and sales and marketing
activities associated with commercialising this technology. In addition, the Company continued the
operation of its services business resulting in the provision of services covering software systems,
development, consulting and infrastructure deployment.
Other than as described above there were no significant changes in the nature of the activities carried
out during the year.
Significant changes in the state of affairs
Gavin Burnett removed himself for re-election as an executive director as per rule 13.2 of the company
constitution, resolution 2 in the Annual General Meeting held 29th of November 2005 and as a result
retired as a director of the company on that date. Gavin resigned from any position with the company
on the 31st of December 2005.
On the 19th of january 2006 Peter Leonhardt and Fraser Campbell resigned as Chairman and non-
executive director respectively. Mel Ashton and David Taylor were appointed to the board as Chairman
and Non-executive director respectively on the 21st of December 2005.
Events subsequent to reporting date
There has not arisen in the interval between the end of the financial year and the date of this report
any item, transaction or event of a material and unusual nature likely, in the opinion of the directors
of the Company, to affect significantly the operations of the consolidated entity, the results of those
operations, or the state of affairs of the consolidated entity, in future financial years other than as set
out below:
The company has completed its application for the research and Development (“R & D”) tax
concession. The expected value of the R & D tax offset is $332,893. This amount will be payable to
the Company following lodgement of its 2006 Income Tax Return. Refer note 5.
The company intends to issue a company wide Share Option plan to all employees. It is hoped that
the plan will align the interests
0
dIRECTORS’ REpORT
Environmental Regulation
The consolidated entity’s operations are not subject to any significant environmental regulations
under either Commonwealth or State Legislation. However, the Board believes that the consolidated
entity has adequate systems in place for the management of its environmental requirements as they
apply to the consolidated entity.
Dividends
The directors of Empired Limited do not recommend the payment of a dividend and no dividends have
been paid or declared since the commencement of the year.
SHARE OPTIONS
Share Options Granted to Directors and Officers
There were no other options granted to Directors and Officers of the company during or since the
end of the financial year. Russell Baskerville was granted 700,000 share options during the year as per
shareholder approval.
Unissued Shares
At the date of this report, there were 2,737,550 unissued ordinary shares under options (2,737,550 at
the reporting date). Refer to Note 12 of the financial statements for more detail. Option holders do
not have any right, by virtue of the option, to participate in any share issue of the company or any
related body corporate or in the interest issue of any other registered scheme.
Shares Issued as a result of the exercise of options
No share options have been exercised in the period, or to the date of this report.
ANNUAL
REPORT
2006
5
1
dIRECTORS’ REpORT
5
Auditor’s independence declaration to the directors of Empired Limited
The directors have received an Independence Declaration from Ernst & young the auditors of Empired
Limited and it is included in this Financial Report.
Non-Audit Services
Non-Audit services provided by the entity’s Auditor can be found at note 24. The Directors are satisfied
that the provision of non-audit services is compatible with the standard of independence for auditors
imposed by the Corporations Act. The nature and scope of each non-audit service provided means that
auditor independence was not compromised.
Indemnification of Officers and Directors
The Directors, Secretary and certain former directors of Empired Limited have been indemnified
by the company in respect of their potential liability to third parties. The Company does not have
a policy of insurance to provide for such liabilities in place at this stage. No such indemnity or
insurance exists in relation to the Auditors.
Directors
The following served as directors of the company during the year and since the end of the year:
Name of Director
No. of Meetings Held while a
Director
No. of Meetings Attended as a
Director during the year ended 30
june 2005
Peter Leonhard
Gavin Burnett
Fraser Campbell
Russell Baskerville
Mel Ashton
David Taylor
6
5
6
12
7
7
Gavin Burnett
Fraser Campbell
Peter Leonhardt
Mel Ashton
David Taylor
Retired 29th of November 2005
Resigned 21st of December 2005
Resigned 21st of December 2005
Appointed 21st of December 2005
Appointed 21st of December 2005
6
4
6
12
7
7
dIRECTORS’ REpORT
Director’s interests
The following table sets out each Directors (including their related parties) interest in shares and
options of the company as at the end of the financial year:
Director
Russell Baskerville
Mel Ashton
David Taylor
Ordinary Shares
4,220,841
-
-
Options
700,000(1)
-
-
(1) On 29 November 2005, 700,000 options were issued with a fair value of:
Options
233,333
233,333
233,334
700,000
Fair value per option
Exercise price per option
$0.05
$0.044
$0.038
$0.20
$0.25
$0.30
The names of the company’s directors in office during the year and until the date of this report are as
below. Directors were in office for this entire period unless otherwise stated.
Mel Ashton (Appointed 21st of December 2005)
David Taylor (Appointed 21st of December 2005)
Russell Baskerville
Signed in accordance with a resolution of directors.
Russell Baskerville
Managing Director
ANNUAL
REPORT
2006
5
fINANCE REpORT
5
ANNUAL
REPORT
2006
INCOME STATEMENT
For tHe year eNded 30 JUNe 2006
Notes
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
2005
$
5
Continuing operations
revenue
Rendering of services
Cost of Sales
gross profit
Other Income
Legal expenses
Marketing expenses
Occupancy expenses
Employee expenses
Amortisation expenses
Depreciation expenses
Other expenses
4
4
4,976,559
3,774,558
4,976,559
3,774,558
(3,112,809)
(1,785,546)
(3,112,809)
(1,858,116)
1,863,750
1,989,012
1,863,750
1,916,442
15,566
4,370
15,566
4,370
(4,772)
(30,431)
(18,426)
(21,220)
(4,772)
(30,431)
(128,441)
(85,650)
(128,441)
(18,426)
(21,220)
(85,650)
(851,445)
(614,934)
(851,445)
(624,291)
(539,912)
(400,874)
(539,912)
(400,874)
(77,306)
(61,930)
(71,790)
(53,488)
(345,165)
(341,099)
(350,679)
(267,614)
profit before income tax
(98,156)
449,249
(98,156)
449,249
Income tax expense
5
296,555
275,221
296,555
275,221
profit after tax from
continuing operations
198,399
724,470
198,399
724,470
bAlANCE SHEET
aS at 30 JUNe 2006
Notes
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
2005
$
aSSetS
Current assets
Trade and other receivables
Inventories
Prepayments
total Current assets
Non-Current assets
Other financial assets
Property, plant and equipment
Intangible assets & goodwill
total Non-current assets
totaL aSSetS
LIaBILItIeS
Current Liabilities
Bank overdraft
Trade and other payables
Interest-bearing loans
and borrowings
Income tax payable
Provisions
Unearned revenue
total Current Liabilities
Non-current Liabilities
Interest-bearing loans
and borrowings
total Non-current Liabilities
7
8
9
22
10
11
6
13
14
15
15
16
14
1,025,578
1,335,688
1,025,578
1,318,449
4,830
71,248
-
79,956
4,830
71,248
-
79,956
1,101,656
1,415,644
1,101,656
1,398,405
-
256,680
-
177,550
374,345
233,985
397,427
149,012
3,985,576
3,694,489
2,118,619
1,827,532
4,242,256
3,872,039
2,726,949
2,373,971
5,343,912
5,287,683
3,828,605
3,772,376
1,964
567,036
73,128
36,338
91,560
112,199
882,225
23,799
23,799
111,668
434,222
63,180
63,419
58,339
321,851
1,052,680
18,192
18,192
1,964
567,036
73,128
36,338
91,560
112,199
882,225
375,450
375,450
111,668
434,222
63,180
63,419
58,339
321,851
1,052,680
369,843
369,843
totaL LIaBILItIeS
906,024
1,070,872
1,257,675
1,422,523
Net aSSetS
eQUIty
Issued capital
Employee equity benefits reserve
Accumulated losses
totaL eQUIty
4,437,888
4,216,810
2,570,930
2,349,853
17
17
5,659,623
5,659,623
5,659,623
5,659,623
23,049
370
23,049
370
(1,244,784)
(1,443,182)
(3,111,742)
(3,310,140)
4,437,888
4,216,810
2,570,930
2,349,853
5
ANNUAL
REPORT
2006
CASH flOw STATEMENT
For tHe year eNded 30 JUNe 2006
Notes
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
2005
$
5
Cash flows from operating activities
Receipts from customers
4,960,703
3,761,363
4,960,703
3,761,363
Payments to suppliers and employees
(4,976,165)
(4,029,625)
(4,966,220)
(4,071,453)
Borrowing costs
Income tax rebate
Income tax paid
Receipt of government grants
Interest received
Net cash flows from/(used in)
operating activities
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment
Purchase of property, plant
and equipment
(11,727)
338,686
(63,130)
12,437
3,129
(4,934)
240,716
(26,733)
-
4,313
(11,727)
338,686
(63,130)
12,437
3,129
(4,934)
240,716
(26,733)
-
4,313
6(iii)
263,933
(54,900)
273,877
(96,729)
-
-
-
-
(159,201)
(55,582)
(159,201)
(55,582)
Purchase of other financial assets
(3,500)
-
(3,500)
-
Net cash flows from/(used in)
investing activities
Cash flows from financing activities
Payment of share issue and
capital raising costs
Payment of finance lease liabilities
Proceeds from borrowings
Repayment of loan from subsidiary
Net cash flows from/(used in)
financing activities
Net increase/(decrease) in cash
and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at
beginning of period
Cash and cash equivalents
at end of period
(162,701)
(55,582)
(162,701)
(55,582)
-
(50,974)
59,447
-
(40,000)
(24,086)
33,180
-
-
(50,974)
59,447
-
(40,000)
(24,086)
33,180
42,650
8,472
(30,906)
8,472
11,744
109,704
(141,388)
109,704
(140,568)
-
-
-
-
(111,668)
29,720
(111,668)
28,899
6
(1,964)
(111,668)
(1,964)
(111,668)
STATEMENT Of CHANgES IN EQuITY
For tHe year eNded 30 JUNe 2006
5
Attributable to equity holders
of the parent
Total
equity
CoNSoLIdated
at 1 July 2004
Profit for the year
Exercise of options
Cost of share-based payments
Issued
capital
$
Retained
earnings
$
5,659,623
(2,167,652)
-
-
-
724,470
-
-
at 30 June 2005
5,659,623
(1,443,182)
Total income and expense for the year
recognised directly in equity
Profit for the year
Issue of share capital
Exercise of options
Cost of share-based payments
-
-
-
-
-
-
198,399
-
-
-
at 30 JUNe 2006
5,659,623
(1,244,784)
Equity
Benefits
Reserve
$
-
-
-
370
370
-
-
-
-
22,679
23,049
$
3,491,971
724,470
-
370
4,216,810
-
198,399
-
-
22,679
4,437,888
ANNUAL
REPORT
2006
STATEMENT Of CHANgES IN EQuITY (c’td)
For tHe year eNded 30 JUNe 2006
Attributable to equity
holders of the parent
Total
equity
5
pareNt
at 1 July 2004
Profit for the year
Exercise of options
Cost of share-based payments
at 30 June 2005
Total income and expense for the year recognised
directly in equity
Profit for the year
Issue of share capital
Exercise of options
Cost of share-based payments
at 30 June 2006
Issued
capital
$
Retained
earnings
$
Employee
Benefits
Reserve
$
5,659,623
(4,034,901)
-
-
-
724,760
-
-
5,659,623
(3,310,141)
-
-
-
-
-
-
198,399
-
-
-
$
1,624,722
724,760
-
370
2,349,852
-
198,399
-
-
-
-
370
370
-
-
-
-
22,679
22,679
5,659,623
(3,111,742)
23,049
2,570,930
NOTES TO THE fINANCIAl STATEMENTS
For tHe year eNded 30 JUNe 2006
5
1 Corporate INForMatIoN
The financial report of Empired Ltd for the year ended 30 june 2006 was authorised for issue in
accordance with a resolution of the directors on 20 October 2006.
Empired Limited is a company limited by shares incorporated in Australia.
The nature of the operation and principal activities of the Group are described in note 3.
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS
2
(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 2001and applicable Australian Accounting
Standards. The financial report has also been prepared on a historical cost basis, except for
investment properties, land and buildings, derivative financial instruments and available-for-sale
financial assets that have been measured at fair value.
The financial report is presented in Australian dollars and all values are rounded to the nearest
thousand unless otherwise stated.
(b) Statement of compliance
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’).
This is the first financial report prepared based on AIFRS and comparatives for the year ended
30 june 2005 have been restated accordingly. Reconciliations of AIFRS equity and profit for 30
june 2005 to the balances reported in the 30 june 2005 financial report are detailed in Note 2 (ac)
below.
Australian Accounting Standards that have recently been issued or amended but not yet effective
have not been adopted for the annual reporting period ended 30 june 2006.
0
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(b) Statement of compliance (c’td)
5
Nature of change to
accounting policy
Application
date of
standard
Application
date for
the Group
No change to accounting
policy required. Therefore no
impact.
No change to accounting
policy required. Therefore no
impact.
No change to accounting
policy required. Therefore no
impact.
No change to accounting
policy required. Therefore no
impact.
1 January
2006
1 January
2006
1 January
2006
1 January
2006
1 July 2006
1 July 2006
1 July 2006
1 July 2006
No change to accounting
policy required. Therefore no
impact.
1 January
2007
1 July 2007
AASB
Amendment
2005-1
2005-5
Affected Standard
AASB 139: Financial Instruments:
Recognition and Measurement
AASB 1: First time adoption of AIFRS
AASB 139: Financial Instruments:
Recognition and Measurement
2005-6
AASB 3: Business Combination
2005-9
2005-10
AASB 4: Insurance Contracts, AASB
1023: General Insurance Contracts, AASB
139: Financial Instruments: Recognition
and Measurement, AASB 132: Financial
Instruments: Disclosure and Presentation.
AASB 132:Financial Instruments:
Disclosure and Presentation, AASB 101:
Presentation of Financial Statements,
AASB 114: Segment Reporting, AASB
117: Leases, AASB 133: Earning per
Share, AASB 139: Financial Instruments:
Recognition and Measurement, AASB
1: First time adoption of AIFRS, AASB 4:
Insurance Contracts, AASB 1023: General
Insurance Contracts and AASB 1038: Life
Insurance Contracts.
2006-1
AASB 121: The Tax Effects of Changes in
Foreign Exchange Rates
New Standard
AASB 7: Financial Instruments
UIG 4
UIG 8
Determining whether an arrangement
contains a lease
Scope of AASB 2
UIG 9
Reassessment of Embedded Derivatives
No change to accounting
policy required. Therefore no
impact.
No change to accounting
policy required. Therefore no
impact.
No change to accounting
policy required. Therefore no
impact.
No change to accounting
policy required. Therefore no
impact
No change to accounting
policy required. Therefore no
impact
1 January
2007
1 January
2007
1 January
2006
1 March
2006
1 July 2007
1 July 2007
1 July 2006
1 July 2006
1 June 2006
1 July 2006
1
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Empired Limited and
its subsidiaries as at 30 june each year (‘the Group’).
The financial statements of subsidiaries are prepared for the same reporting period as the parent
company, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group
transactions, have been eliminated in full. unrealised losses are eliminated unless costs cannot be
recovered.
Subsidiaries are 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.
Where there is loss of control of a subsidiary, the consolidated financial statements include the
results for the part of the reporting period during which Empired Limited has control.
Tusk Technologies Pty Ltd has been included in the consolidated financial statements using the
purchase method of accounting, which measures the acquiree’s assets and liabilities at their fair
value at acquisition date. Accordingly, the consolidated financial statements include the results
of Tusk Technologies Pty Ltd for the full financial year. The purchase consideration has been
allocated to the assets and liabilities on the basis of the fair value at the date of acquisition.
(d) Investment in associate
The Group’s investment in its associate is accounted for under the equity method of accounting
in the consolidated financial statements. This is an entity in which the Group has significant
influence and which is neither a subsidiary nor a joint venture.
The financial statements of the associate are used by the Group to apply the equity method. The
reporting dates of the associate and the Group are identical and both use consistent accounting
policies.
The investment in the associate is carried in the consolidated balance at cost plus post-acquisition
changes in the Group’s share of net assets of the associate, less any impairment in value. The
consolidated income statement reflects the Group’s share of the results of operations of the
associate.
Where there has been a change recognised directly in the associate’s equity, the Group recognises
its share of any changes and discloses this, when applicable in the consolidated statement of
changes in equity.
(e) property, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any impairment in
value.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as
follows:
Plant and equipment - over 5 to 15 years
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(e) property, plant and equipment (c’td)
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes
in circumstances indicate the carrying value may not be recoverable.
For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
If any such indication exists and where the carrying values exceed the estimated recoverable
amount, the assets or cash-generating units are written down to their recoverable amount.
The recoverable amount of plant and equipment is the greater 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.
Impairment losses are recognised in the income statement in the cost of sales line item.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued used of the asset.
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 item) is included in the income statement in
the period the item is derecognised.
(f) Borrowing costs
Borrowing costs are recognised as an expense when incurred.
(g) goodwill
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business
combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment
losses.
Goodwill is not amortised.
Goodwill is reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units
expected to benefit from the combination’s synergies.
Impairment is determined by assessing the recoverable amount of the cash-generating unit to
which the goodwill relates.
Where the recoverable amount of the cash-generating unit is less than the carrying amount, an
impairment loss is recognised.
ANNUAL
REPORT
2006
5
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(g) goodwill (c’td)
Where goodwill forms part of a cash-generating unit and part of the 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 circumstance is measured on the basis of the relative values of the
operation disposed of and the portion of the cash-generating unit retained.
Any expenditure carried forward is amortised over the period of expected future sales from the
related project.
The carrying value of development costs is reviewed for impairment annually when the asset is not
yet in use or more frequently when an indicator of impairment arises during the reporting year
indicating that the carrying value may not be recoverable.
(h) Intangible assets
Acquired both separately and from a business combination
Intangible assets acquired separately are capitalised at cost. Following initial recognition, the cost
model is applied to the class of intangible assets.
Where amortisation is charged on assets with finite lives, this expense is taken to the income
statement through the ‘amortisation expenses’ line item.
Intangible assets, excluding development costs, created within the business are not capitalised
and expenditure is charged against profits in the period in which the expenditure is incurred.
Intangible assets are tested for impairment where an indicator of impairment exists and in the
case of indefinite lived intangibles annually, either individually or at the cash generating unit
level. useful lives are also examined on an annual basis and adjustments, where applicable, are
made on a prospective basis.
Research and development costs
Research costs are expensed as incurred.
Development expenditure incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured.
Following the initial recognition of the development expenditure, the cost model is applied
requiring the asset to be carried at cost less any accumulated amortisation and accumulated
impairment losses.
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(h) Intangible assets (c’td)
A summary of the policies applied to the Group’s intangible assets is as follows:
5
Useful lives
Method used
Internally generated /
Acquired
Impairment test /
Recoverable amount
testing
Patents and Licences
Development Costs
Indefinite
Finite
Not depreciated or revalued
6 years- Straight line
Acquired
Internally generated
Annually and where an
indicator of impairment exists
Amortisation methods reviewed
at each financial year-end;
Reviewed annually for indicator
of impairment
Gains or losses arising from derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised on
the income statement when the asset is derecognised.
(i) recoverable amount of assets
At each reporting date, the Group assesses whether there is any indication that an asset may
be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of
recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the
asset is considered impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined
for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair
value less costs to sell and it does not generate cash inflows that are largely independent of those
from other assets or groups of assets, in which case, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
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.
(j)
Investments
All investments are initially recognised at cost, being the fair value of the consideration given and
including acquisition charges associated with the investment.
After initial recognition, investments, which are classified as held for trading and available-for-
sale, are measured as fair value. Gains or losses on investments held for trading are recognised in
the income statement.
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(k) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as
follows:
Raw materials - purchase cost on a first-in, first-out basis; and
Finished goods and work-in-progress - cost of direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and the estimated costs necessary to make the sale.
(l) trade and other receivables
Trade receivables, which generally have 30-45 day terms, are recognised and carried at original
invoice amount less an allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable.
Bad debts are written off when identified.
(m) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-
term deposits with an original maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
(n) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration
received net of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost using the effective interest method. Amortised cost is calculated by taking into
account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised and
as well as through the amortisation process.
(o) 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.
Where 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
income statement net of any reimbursement.
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(o) provisions (c’td)
If the effect of the time value of money is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability.
5
Where discounting is used, the increase in the provision due to the passage of time is recognised
as a finance cost.
(p) Share-based payment transactions
The Group provides to employees (including directors) of the Group in the form of share-based
payment transactions, whereby employees render services in exchange for shares or rights over
shares (‘equity-settled transactions’).
There are currently two plans in place to provide these benefits:
(i) The Empired Employee Share Option Plan (ESOP), which provides to all employees excluding
directors, and
(ii) The BRS Employee Share Option Plan (ESOP), which provides benefits to directors and senior
executives.
The cost of these equity-settled transactions with employees is measured by reference to the fair
value at the date at which they are granted. The fair value is determined using a binomial model
further details are given in note 12.
In valuing equity-settled transactions, no account is taken of any performance conditions, other
than conditions linked to the price if the shares of Empired Ltd (‘market conditions’).
The cost of equity-settled transactions is recognised, together with a corresponding increase in
equity, over the period in which the performance conditions are fulfilled, ending on the date on
which the relevant employees become fully entitled to the award (‘vesting date’).
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 number
of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion
is formed based on the best available information at balance date. 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.
Where 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 increase in the
value of the transaction as a result of the modification, as measured at the date of modification.
Where 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.
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(p) Share-based payment transactions (c’td)
The Group has applied the requirements of AASB 1 ‘First-time Adoption of Australian Equivalents
to International Financial Reporting Standards’ in respect of equity-settled awards and has applied
AASB 2 ‘Share-based Payments’ only to equity instruments granted after 7 November 2002 that
had not vested on or before 1 january 2005.
(q) Leases
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to
ownership of the leased item, are capitalised at the inception of the lease at the fair value of the
leased property or, if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance
charges are charged directly against income.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset
or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset
are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are
added to the carrying amount of the leased asset and recognised over the lease term on the same
bases as the lease income.
Operating lease payments are recognised as an expense in the income statement on a straight-line
basis over the lease term.
(r) revenue
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:
Licence sales
Revenue from licence sales is recognised when the economic entity has passed control of the
goods to the buyer
Rendering of services
Revenue from the provision of services is recognised when the service has been provided.
Maintenance, Hosting and Support fees
Revenue from maintenance, hosting and support is recognised and bought to account over the
time it is earned. unexpired revenue is recorded as unearned income.
Interest received
Revenue is recognised as the interest accrues (using the effective interest method, which is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial
instrument) to the net carrying amount of the financial asset.
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(s) government grants
Government grants are recognised at their fair value where there is reasonable assurance that the
grant will be received and all attaching conditions will be complied with.
5
When the grant relates to an expense item, it is recognised as income over the periods necessary
to match the grant on a systematic basis to the costs that it is intended to compensate.
Where the grant relates to an asset, the fair value is credited to a deferred income amount and
is released to the income statement over the expected useful life of the relevant asset by equal
annual instalments.
(t)
Income tax
Deferred income tax is provided on all temporary differences at the balance sheet date between
the tax bases of assets and liabilities and their carrying amounts for the financial reporting
purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
•
•
•
•
except where the deferred income tax liability 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; and
in respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, except where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences
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 assets and unused tax losses can be utilised:
except where the deferred income tax asset relating to the deductible temporary differences 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;
and
in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred tax assets are only recognised to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet 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.
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 sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the
income statement.
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(u) other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• where 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 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 balance sheet.
Cash flows are included in the Cash Flow statement 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.
(v) Impact of adoption of aIFrS
The impacts of adopting AIFRS on the total equity and profit after tax as reported under previous
Australian Generally Accepted Accounting Principles (“AGAAP”) are illustrated below.
(i) reconciliation of total equity as presented under previous agaap to that under aIFrS
CONSOLIDATED
PARENT
30-Jun-05
$
1-Jul-04
$
30-Jun-05
$
1-Jul-04
$
Total equity under AGAAP
3,953,924
3,434,048
2,329,166
1,567,089
Adjustments to retained earnings
(net of tax):
Change in Provisions (A)
Changes to Goodwill (B)
20,686
242,200
57,923
-
20,686
-
57,633
-
Total equity under AIFRS
4,216,810
3,491,971
2,349,853
1,624,722
(A) A doubtful debts provision was recognised under previous AGAAP, but does not qualify for
recognition as a liability under AASB 137 ‘Provisions, Contingent Liabilities and Contingent
Assets’. This has resulted in an increase to total equity
(B) Goodwill is not amortised under AASB 3 ‘Business Combinations’, but was amortised under
previous AGAAP. This caused a retrospective increase to the carrying value of Goodwill.
0
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
SUMMary oF SIgNIFICaNt aCCoUNtINg poLICIeS (c’td)
2
(v) Impact of adoption of aIFrS (c’td)
(ii) reconciliation of profit before tax under previous agaap to that under aIFrS
5
Prior year profit before tax as previously
reported
Share-based payment expense (A)
Change in doubtful debts (B)
Amortisation of goodwill (C)
Prior year profit before tax under AIFRS
CONSOLIDATED
30-Jun-05
$
244,365
(370)
(36,946)
242,200
449,249
PARENT
30-Jun-05
$
486,565
(370)
(36,946)
-
449,249
(A) Share-based payment costs are charged to the income statement under AASB 2 ‘Share-based
Payment’, but not under previous AGAAP. This has caused a decrease in profit for the year.
(B) A doubtful debts expense was recognised under previous AGAAP, but does not qualify for
recognition as a liability under AASB 137 ‘Provisions, Contingent Liabilities and Contingent
Assets’. This has resulted in an decrease in profit for the year.
(C) Goodwill is not amortised under AASB 3 ‘Business Combinations’, but was amortised under
previous AGAAP. This caused an increase in profit for the year.
(iii) explanation of material adjustments to the cashflow statements
There are no material differences between the cash flow statement presented under AIFRS and
the cash flow statement presented under previous AGAAP.
1
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
3
SegMeNt INForMatIoN
The Group’s primary reporting format is business segments.
The operating businesses are organised and managed separately according to the nature of the
products and services provided, with each segment representing a strategic business unit that
offers different products and serves different markets.
The company operates in the software contract service industry within Australia. The company
operates in the following 2 segments:
Services
Software
Designs, builds and implements software and hardware
infrastructure for large corporate companies.
Development and implementation of BigRedSky, an online
recruitment program for the corporate, academic and
government sectors.
Segment accounting policies are the same as the company’s accounting policies described in note
1. No intersegment sales or transfers have occurred.
Business segments
The following tables present revenue and profit information and certain asset and liability
information regarding business segments for the years ended 30 june 2006 and 2005.
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
3
SegMeNt INForMatIoN (c’td)
ANNUAL
REPORT
2006
5
2006 Business Segment Information
Services
2006
$
Software
2006
$
eliminations
2006
$
Consolidated
2006
$
Business Segments
Revenue
Segment revenue
External revenue
Inter segment revenue
Total segment revenue
Unallocated revenue
Total consolidated revenue
Results
Segment result
Unallocated expenses
Consolidated entity profit(loss) from ordinary
activities before income tax revenue
Income tax revenue
Consolidated entity profit/(loss) from ordinary
activities after income tax revenue
Assets
Segment assets
Unallocated assets
Total assets
Liabilities
4,470,118
506,441
4,470,118
506,441
1,335,729
45,603
614,186
348,158
Segment liabilities
347,740
209,343
Unallocated liabilities
Total liabilities
Other Segment Information
Acquisition of segment plant & equipment
Depreciation
Amortisation
143,281
69,573
-
15,920
7,733
539,912
4,976,559
4,976,559
15,566
4,992,125
1,381,332
(1,479,489)
(98,157)
296,555
198,398
962,343
4,381,569
5,343,912
557,083
348,942
906,025
159,201
77,306
539,912
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
3
SegMeNt INForMatIoN (c’td)
2005 Business Segment Information
Services
2005
$
Software
2005
$
eliminations
2005
$
Consolidated
2005
$
Business Segments
Revenue
Segment revenue
External revenue
Inter segment revenue
Total segment revenue
Unallocated revenue
Total consolidated revenue
Results
Segment result
Unallocated expenses
Consolidated entity profit(loss) from ordinary
activities before income tax revenue
Income tax revenue
Consolidated entity profit/(loss) from ordinary
activities after income tax revenue
Assets
Segment assets
Unallocated assets
Total assets
Liabilities
2,647,630
1,126,928
2,647,630
1,126,928
895,102
664,928
476,759
485,557
Segment liabilities
251,651
418,358
Unallocated liabilities
Total liabilities
Other Segment Information
Acquisition of segment plant & equipment
Depreciation
Amortisation
38,908
43,351
-
16,675
18,579
400,874
3,774,558
3,774,558
4,370
3,778,928
1,560,030
(1,110,781)
449,249
275,221
724,470
962,316
4,325,367
5,287,683
670,009
400,863
1,070,872
55,583
61,930
400,874
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
4 reveNUeS
Sales Revenue
Services
Software
Other Revenue
Interest
Government grants
Other
5
INCoMe taX
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
2005
$
5
4,470,118
506,441
4,976,559
2,647,630
1,126,928
3,774,558
4,470,118
506,441
4,976,559
2,647,630
1,126,928
3,774,558
3,129
12,437
-
15,566
4,313
57
4,370
3,129
12,437
-
15,566
4,313
57
4,370
4,992,125
3,778,928
4,992,125
3,778,928
Major components of income tax expense for the years ended 30 june 2006 and 2005 are:
Income Statement
Current income
Current income tax charge
Research & Development Rebate Receivable
Deferred income tax
Relating to origination and reversal of temporary
differences
36,338
(332,893)
63,465
(338,686)
36,338
(332,893)
63,465
(338,686)
Income tax expense reported in income statement
(296,555)
(275,221)
(296,555)
(275,221)
Statement of changes in equity
A reconciliation of income tax expense applicable to accounting profit before income tax at the
statutory income tax rate to income tax expense at the Group’s effective income tax rate for the
years ended 30 june 2006 and 2005 is as follows:
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
5
INCoMe taX (c’td)
Prima facie tax on operating profit
calculated at 30%
Add tax effect of:
Non-deductible expenses
Amortisation of trademark
Development expenditure
Entertainment
Timing differences not bought to account
Prior year tax losses utilised
Research and Development offset
Income tax revenue attributable to ordinary activities
Deferred tax assets and liabilities
Deferred Tax Assets
Deferred Tax Liabilities
Current tax receivable
Income tax losses
Deferred tax asset arising from tax losses of the parent
company has not been recognised at reporting date.
Revenue losses
Capital losses
tax consolidation
CONSOLIDATED
2005
2006
$
$
PARENT
2006
$
2005
$
(29,447)
134,775
(29,447)
134,775
(29,447)
134,775
(29,447)
134,775
13,731
356
61,750
4,409
40,046
(54,507)
(332,893)
461
356
-
2,321
20,248
(94,696)
(338,686)
13,731
356
61,750
4,409
40,046
(54,507)
(332,893)
461
356
-
2,321
20,248
(94,696)
(338,686)
(296,555)
(275,221)
(296,555)
(275,221)
(296,555)
(275,221)
(296,555)
(275,221)
283,466
(59,992)
333,528
(138,497)
273,231
(59,992)
313,293
(138,497)
296,556
275,221
296,556
275,221
260,876
10,235
315,807
10,235
260,876
-
315,807
-
Effective 1 july 2002, for the purposes of income taxation, Empired Limited and its 100%
subsidiaries formed a tax consolidated group. The head entity of the consolidated group is
Empired Limited.
Empired Limited formally notified the Australian Taxation Office of its adoption of the tax
consolidation regime upon lodgement of its 30 june 2003 consolidated tax return.
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
6 CaSH aNd CaSH eQUIvaLeNtS
(i) Reconciliation of Cash
5
For the purposes of the statement of cash flows, cash includes cash on hand and cash in banks.
Cash at the end of the year as shown in the statement of cash flows is reconciled to the related
items in the statement of financial position as follows:
Consolidated
Parent
Cash assets
Bank Overdraft
(ii) Financing facilities available
2006
($)
152
(2,116)
(1,964)
2005
($)
-
(111,668)
(111,668)
2006
($)
152
(2,116)
(1,964)
2005
($)
-
(111,668)
(111,668)
At reporting date the following facilities were available but not used:
Bank Overdraft
247,884
138,182
247,884
138,182
The Bank Overdraft facility has a total limit of $250,000.
(iii) Reconciliation of net cash flows from operating activities to operating profit (loss) after income
tax
Operating profit\(loss) after income tax
Depreciation
Amortisation
Write down\(up) of investment in subsidiary
Option Plan Expense
Loss on disposal of assets
Changes in assets and liabilities net of effects of
purchases and disposals of controlled entities:
(Increase)/decrease in net trade debtors
(Increase)/decrease in other receivables
(Increase)/decrease in other assets
(Increase)/decrease in prepayments
(Increase)/decrease in unbilled income
(increase)/decrease in deferred R & D
Increase/(decrease) in trade creditors
Increase/(decrease) in audit fees
Increase/(decrease) in other creditors
Increase/(decrease) in unexpired interest
Increase/(decrease) in accrued liabilities
Increase/(decrease) in unearned income
Increase/(decrease) in income tax
Increase/(decrease) in provision for employee
entitlements
198,399
77,306
539,914
-
22,679
2,765
193,333
19,531
(10,090)
8,708
97,242
(831,000)
64,994
2,500
108,257
(3,550)
(23,832)
(209,651)
(26,792)
724,470
61,930
400,874
-
370
-
(61,345)
(60,668)
(2,149)
(3,726)
(77,069)
(837,509)
(292,447)
1,000
15,313
(154)
176
37,973
36,331
198,399
71,790
539,914
23,081
22,679
2,438
193,333
2,293
(146)
8,708
97,242
(831,000)
64,994
2,500
108,257
(3,550)
(23,832)
(209,651)
(26,792)
724,470
53,488
400,874
(73,221)
370
-
(61,345)
(60,668)
(2,149)
(3,726)
(77,069)
(837,509)
(261,970)
1,000
15,313
(154)
176
37,973
36,331
33,221
1,730
33,221
11,087
Net cash used in operating activities
263,934
(54,900)
273,878
(96,729)
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
7
trade aNd otHer reCeIvaBLeS (CUrreNt)
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
2005
$
686,997
-
686,997
3,500
2,187
-
332,893
897,833
(17,500)
880,333
-
99,430
17,238
338,686
686,997
-
686,997
3,500
2,187
-
332,893
897,833
(17,500)
880,333
-
99,430
-
338,686
1,025,578
1,335,688
1,025,578
1,318,449
Trade receivables
Provision for doubtful debts
Term Deposit Receivable
Unbilled Income
Loans
Research & Development Rebate receivable
Trade receivables are non-interest bearing
and are generally on 30-day terms.
8
INveNtorIeS
Online Job Ads held for Sale (at cost)
Total inventories at lower of cost and net
realisable value
4,830
4,830
-
-
4830
4,830
-
-
9 otHer aSSetS
Current
Prepayments
71,248
79,956
71,248
79,956
Total current other assets
71,248
79,956
71,248
79,956
10 property, pLaNt aNd eQUIpMeNt
Plant and Equipment
At cost
Accumulated depreciation
Net carrying amount of plant and
equipment
Plant and Equipment
Movements during the year:
Beginning of year
Additions
Disposals
Depreciation expense
End of year
Consolidated
Parent
2006
($)
2005
($)
2006
($)
2005
($)
639,692
(383,012)
495,067
(317,517)
533,919
(299,934)
386,990
(237,978)
256,680
177,550
233,985
149,012
177,550
159,201
(2,768)
(77,303)
256,680
183,897
55,583
-
(61,930)
149,012
159,201
(2,438)
(71,790)
146,918
55,582
-
(53,488)
177,550
233,985
149,012
5
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
11
INtaNgIBLe aSSetS & goodWILL
For the year ended 30 June 2006, development costs are capitalised at cost. This intangible asset has been assessed as
having a finite life and is amortised using the straight line method over a period of 6 years.
5
This asset is tested for impairment where an indicator of impairment arises.
Goodwill represent intangible assets purchased through the effect of a business combination.
The useful lives of these intangible assets were estimated as indefinite and the cost method was utilised for their
measurement.
As at 30 June 2006, these assets were tested for impairment (see note 21).
The patent acquired has been granted for a minimum of fifty years by the relevant government agency with the option
of renewal at the end of this period based on whether the entity meets certain predetermined targets.
No impairment loss was charged for continuing operations in the 2006 financial year.
Year ended 30 June 2006
At 1 July 2005,
net of accumulated amortisation
Additions
Impairment
Amortisation
At 30 June 2006,
net of accumulated amortisation
CONSOLIDATED
Patents
and
licenses
$
Good
Will
$
Development
costs
$
PARENT
Total
$
Total
$
1,824,002
831,000
-
(538,726)
3,528
-
-
(1,186)
1,866,958
-
-
-
3,694,488
831,000
-
(539,912)
1,827,531
831,000
-
(539,912)
2,116,276
2,342
1,866,958
3,985,576
2,118,619
At 1 July 2005
Cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount
At 30 June 2006
Cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount
3,024,037
(1,200,035)
1,824,002
3,855,037
(1,738,761)
2,116,276
13,389
(9,861)
1,866,958
-
4,904,384
(1,209,896)
3,037,427
(1,209,896)
3,528
1,866,958
3,694,488
1,827,531
13,389
(11,047)
1,866,958
-
5,735,384
(1,749,808)
3,868,427
(1,749,808)
2,342
1,866,958
3,985,576
2,118,619
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
11
INtaNgIBLe aSSetS & goodWILL (c’td)
Year ended 30 June 2005
CONSOLIDATED
Patents
and
PARENT
licenses Goodwill2
$
$
Total
$
Total
$
Development
costs1
$
At 1 July 2004,
net of accumulated amortisation
Additions
Amortisation
At 30 June 2005,
net of accumulated amortisation
1,386,179
837,509
(399,686)
4,717
-
(1,188)
1,866,958
-
-
3,257,854
837,509
(400,874)
1,390,896
837,509
(400,874)
1,824,002
3,528
1,866,958
3,694,489
1,827,532
At 1 July 2004
Cost (gross carrying amount)
Accumulated amortisation and impairment
2,186,528
(800,349)
13,389
(8,672)
1,866,958
-
4,066,875
(809,021)
2,199,917
(809,021)
Net carrying amount
1,386,179
4,717
1,866,958
3,257,854
1,390,896
At 30 June 2005
Cost (gross carrying amount)
Accumulated amortisation and impairment
3,024,037
(1,200,035)
13,389
(9,861)
1,866,958
-
4,904,384
(1,209,896)
3,037,427
(1,209,896)
Net carrying amount
1,824,002
3,528
1,866,958
3,694,488
1,827,531
1 Internally generated
2 Purchased as part of business combinations
12 eMpLoyee BeNeFItS
(a) empired employee share option plan
The Group has an employee share options plan (ESOP) for the granting of non-transferable
options to employees and senior executives.
Options issued under the ESOP will vest on the sooner of one of the following conditions have
been met:
(i)
(ii)
(iii)
(iv)
on the second anniversary one third of the grant of the options;
on the third anniversary two thirds of the grant of the options
on the fourth anniversary all of the grant of the options or
if a takeover offer or bid in respect of Empired shares is made in accordance with the
Corporations Act and the Board recommends that shareholders accept the offer.
Other relevant terms and conditions applicable to options granted under the ESOP include:
- any vested options that are unexercised on the fifth anniversary of their grant date will expire;
and
- upon exercise, these options will be settled in ordinary shares of Empired Limited.
0
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
12 eMpLoyee BeNeFItS (c’td)
(a) empired employee share option plan (c’td)
On 1 August 2005, 308,070 options with a fair value of:
Options
104,740
101,665
101,665
308,070
Fair value per option
$0.05
$0.043
$0.038
Exercise price per option
$0.30
$0.35
$0.40
were granted over ordinary shares exercisable upon meeting the above vesting conditions and
until 31 july 2010.
The fair value of the options are estimated at the date of grant using the binomial model. The
following table gives the assumptions made in determining the fair value of the options granted
in the year to 30 june 2006.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Option exercise price ($)
Share price at grant date ($) (Net Asset
Backing)
2006
-
60%
5.24%
5 years
$0.30, $0.35, $0.40
$0.12
The expected life of the options is based on historical data and is not necessarily indicative of
exercise patterns that may occur.
The expected volatility reflects the assumption that the historical volatility is indicative of future
trends, which may also not necessarily be the actual outcome.
No other features of options granted were incorporated into the measurement of fair value.
During the year ended 30 june 2006, no options were exercised over ordinary shares.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of
share options issued under the ESOP.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2006
No.
-
308,070
(30,520)
-
-
277,550
-
2006
WAEP
-
$0.35
$0.35
-
-
$0.35
-
The outstanding balance as at 30 june 2006 is represented by 277,550 options over ordinary
shares with an average exercise price of $0.35 each, exercisable upon meeting the above
conditions and until 31 july 2010;
ANNUAL
REPORT
2006
5
1
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
12 eMpLoyee BeNeFItS (c’td)
(a) empired employee share option plan (c’td)
The weighted average contractual life for the share options outstanding as at 30 june 2006 is 4
years.
Share options issued under the ESOP and outstanding at the end of the year have the following
exercise prices:
Expiry Date
31-Jul-2010
31-Jul-2010
31-Jul-2010
Total
Exercise
price
2006
No.
$0.30
$0.35
$0.40
94,364
91,593
91,593
277,550
(b) BrS employee share option plan (1)
The Group has an employee share options plan (ESOP) for the granting of non-transferable
options to certain directors and senior executives.
Options issued under the ESOP will vest on the sooner of one of the following conditions have
been met:
(i)
(ii)
on the second anniversary the grant of the options;
if a takeover offer or bid in respect of Empired shares is made in accordance with the
Corporations Act and the Board recommends that shareholders accept the offer.
Other relevant terms and conditions applicable to options granted under the ESOP include:
- any vested options that are unexercised on the fifth anniversary of their grant date will expire;
and
- upon exercise, these options will be settled in ordinary shares of Empired Limited.
On 29 November 2005, 700,000 options with a fair value of:
Options
233,333
233,333
233,334
Fair value per option
$0.05
$0.044
$0.038
Exercise price per option
$0.20
$0.25
$0.30
700,000
were granted over ordinary shares exercisable upon meeting the above vesting conditions and
until 28 November 2010.
On 23 March 2006, 1,100,000 options with a fair value of:
Options
366,666
366,667
366,667
Fair value per option
$0.05
$0.044
$0.038
Exercise price per option
$0.20
$0.25
$0.30
1,100,000
were granted over ordinary shares exercisable upon meeting the above vesting conditions and
until 23 March 2011.
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
12 eMpLoyee BeNeFItS (c’td)
(b) BrS employee share option plan (1) (c’td)
The fair value of the options are estimated at the date of grant using the binomial model. The
following table gives the assumptions made in determining the fair value of the options granted
in the year to 30 june 2006.
5
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
(29 November 2005)
Risk-free interest rate (%)
(23 March 2006)
Expected life of option (years)
Option exercise price ($)
Share price at grant date ($) (Net Asset Backing)
2006
-
60%
5.35%
5.32%
5 years
$0.20, $0.25, $0.30
$0.12
The expected life of the options is based on historical data and is not necessarily indicative of
exercise patterns that may occur.
The expected volatility reflects the assumption that the historical volatility is indicative of future
trends, which may also not necessarily be the actual outcome.
No other features of options granted were incorporated into the measurement of fair value.
During the year ended 30 june 2006, no options were exercised over ordinary shares.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of
share options issued under the ESOP.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
2006
No.
2006
WAEP
2005
No.
2005
WAEP
235,000
1,800,000
-
-
-
2,035,000
$0.25
$0.25
$0.25
1,100,000
100,000
-
-
965,000
235,000
$0.25
$0.25
$0.25
$0.25
Exercisable at the end of the year
235,000
$0.25
135,000
$0.25
The outstanding balance as at 30 june 2006 is represented by:
•
2,035,000 options over ordinary shares with an average exercise price of $0.25 each,
exercisable upon meeting the above conditions and until:
135,000
100,000
700,000
1,100,000
2,035,000
26 November 2007
23 November 2009
28 November 2010
23 March 2011
The weighted average contractual life for the share options outstanding as at 30 june 2006 is
between 1 and 5 years (2005: 2 and 4 years).
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
12 eMpLoyee BeNeFItS (c’td)
(b) BrS employee share option plan (1) (c’td)
Share options issued under the ESOP and outstanding at the end of the year have the following
average exercise prices:
Expiry Date
26 November 2007
23 November 2009
28 November 2010
23 March 2011
Total
Exercise
price
2006
No.
2005
No.
$0.25
$0.25
$0.25
$0.25
135,000
100,000
700,000
1,100,000
2,035,000
135,000
100,000
-
-
235,000
13 trade aNd otHer payaBLeS (CUrreNt)
Trade payables
Audit fees payable
Superannuation payable
GST payable
PAYG payable
Accrued liabilities
Credit cards payable
Included in the above are aggregate
amounts payable to the following related
parties:
Due to directors and director related
entities
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
228,041
163,047
228,041
16,500
58,977
78,280
65,664
94,639
24,936
14,000
37,182
65,115
36,408
118,471
-
16,500
58,977
78,280
65,664
94,639
24,936
567,036
434,223
567,036
2005
$
163,047
14,000
37,182
65,115
36,408
118,471
-
434,223
-
127,700
-
127,700
Trade payables are non-interest bearing and are normally settled on 30-day terms.
For terms and conditions relating to related parties refer to note 22).
The net of GST payable and GST receivable, PAyG payable and Superannuation payable and is
remitted to the appropriate body on a quarterly basis.
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
14
INtereSt-BearINg LoaNS aNd BorroWINgS
Effective
interest
rate %
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
2005
$
Current
Obligations under finance leases and hire purchase
contracts (note 19)
Obligations under premium funding contracts
Non-current
Obligations under finance leases and hire purchase
contracts (note 19)
Loan from Employee
Loan from Subsidiary
34,272
38,856
31,955
31,225
34,272
38,856
31,955
31,225
73,128
63,180
73,128
63,180
20,299
3,500
18,192
-
20,299
3,500
18,192
-
-
-
351,651
351,651
23,799
18,192
375,450
369,843
Hire Purchase Contracts
Hire purchase contract maturity ranges from November 2006 to September 2008.
Finance facilities available
At reporting date, the following financing facilities
had been negotiated and were available:
Total facilities:
- Bank overdraft
Facilities used at reporting date
- Bank overdraft
Facilities unused at reporting date
- Bank overdraft
CONSOLIDATED
2005
$
2006
$
PARENT
2006
$
2005
$
250,000
250,000
250,000
250,000
(2,116)
(111,818)
(2,116)
(111,818)
247,884
138,182
247,884
138,182
Bank overdrafts
The bank overdrafts are secured by a floating charge over assets of the Group.
15 provISIoNS
Current
Employee entitlements
Tax payable
Movements in Employee Entitlements
Opening Balance
Movements
Closing Balance
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
2005
$
91,560
36,338
127,898
58,339
33,221
91,560
58,339
63,419
91,560
36,338
121,758
127,898
56,609
1,730
58,339
58,339
33,221
91,560
58,339
63,419
121,758
56,609
1,730
58,339
ANNUAL
REPORT
2006
5
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
16 UNearNed reveNUe
Current
Unearned Revenue
17
ISSUed CapItaL aNd reServeS
CONSOLIDATED
2006
$
2005
$
112,199
112,199
321,851
321,851
PARENT
2006
$
112,199
112,199
2005
$
321,851
321,851
Ordinary Shares
Issued and fully paid
Movement in ordinary shares on the
issue
At 1 July 2004
At 1 July 2005
At 30 June 2006
CONSOLIDATED
PARENT
2006
$
2005
$
2006
$
2005
$
5,659,623
5,659,623
5,659,623
5,659,623
No.
$
No.
$
34,210,648
34,210,648
34,210,648
5,659,623
5,659,623
5,659,623
34,210,648
34,210,648
34,210,648
5,659,623
5,659,623
5,659,623
The company has two share option schemes under which options to subscribe for the company’s
shares have been granted to certain executives and employees (refer note 12)
Other Reserves
CoNSoLIdated pareNt
Employee
equity
benefits
reserve
$
Asset
revaluation
reserve
$
Total
$
Asset
revaluation
reserve
$
Net
unrealised
gains
reserve
$
Employee
equity
benefits
reserve
$
-
-
-
-
-
-
-
-
-
-
-
370
370
22,679
23,049
At 1 July 2004
Share based
payment
At 30 June 2005
Share based
payment
As at 30 June 2006
Foreign
currency
translation Total
$
$
-
370
370
-
-
-
-
370
370
22,679
22,679
-
23,049
23,049
-
-
-
-
-
-
370
370
22,679
23,049
Nature and purpose of reserves
Employee equity benefits reserve
The employee share option and share plan reserve is used to record the value of equity benefits
provided to employees and directors as part of their remuneration. Refer to note 12 for further
details of these plans.
18 FINaNCIaL rISk MaNageMeNt oBJeCtIveS aNd poLICIeS
The Group’s principal financial instruments comprise bank loans and hire purchase contracts,
cash and short-term deposits.
The main purpose of these financial instruments is to raise finance for the Group’s operations.
The Group has various other financial instruments such as trade debtors and trade creditors,
which arise directly from its operations.
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
18 FINaNCIaL rISk MaNageMeNt oBJeCtIveS aNd poLICIeS (c’td)
It is, and has been throughout the period under review, the Group’s policy that no trading in
financial instruments shall be undertaken.
5
The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk,
credit risk. The board reviews and agrees policies for managing each of these risks and they are
summarised below.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s
long-term debt obligations.
The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt.
At 30 june 2006, approximately 98% of the Group’s borrowings are at a fixed rate of interest.
Foreign currency risk
The Group’s exposure to foreign currency risk is minimal.
Commodity price risk
The Group’s exposure to price risk is minimal.
Credit risk
The Group trades only with recognised, creditworthy third parties.
It is the Group policy that all customers who wish to trade on credit terms are subject to credit
verification procedures.
In addition, receivable balances are monitored on an ongoing basis with the result that the
Group’s exposure to bad debts is not significant.
For transactions that are not denominated in the measurement currency of the relevant
operating unit, the Group does not offer credit terms without the specific approval of the Head
of Credit Control.
Due to unforeseen circumstances, one exposure has arisen in the year as a result of the
liquidation of a customer.
At the balance sheet date the loss on this contract was $17,040, and has been charged to the
income statement.
In light of the above exposure, the directors have reassessed the Group’s strategies for managing
credit exposure, but are of the continued view that they remain appropriate for the Group’s
circumstances.
With respect to credit risk arising from the other financial assets of the Group, which comprise
cash and cash equivalents, available-for-sale financial assets and certain derivative instruments,
the Group’s exposure to credit risk arises from default of the counter party, with a maximum
exposure equal to the carrying amount of these instruments.
There are no significant concentrations of credit risk within the Group.
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
18 FINaNCIaL rISk MaNageMeNt oBJeCtIveS aNd poLICIeS (c’td)
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility
through the use of bank overdrafts and hire purchase contracts.
19 FINaNCIaL INStrUMeNtS
a)
Terms, conditions and accounting policies
Accounting Policies
Terms & Conditions
Instruments
Financial assets
i)
Cash
All cash is carried at nominal
amounts. Interest is recognised
as revenue or expense as it
accrues.
receivables-trade
Trade receivables are carried at
nominal amounts.
receivables-loans
loans are recorded at
All
nominal value.
All cash is available ‘at call’.
The National Australia Bank
hold a first registered mortgage
debenture charge over Empired
Ltd.
Receivables are
in
accordance with company credit
terms of 30 to 45 days.
received
The loans are interest free and
unsecured. The loans are for
previous employees of Tusk
Technologies Pty Ltd who are
now employees of Empired
leave
Limited. When
Empired’s
the
loans become payable at the
discretion of management.
employment
they
ii)
Financial liabilities
accounts payable
Hire purchase
Liabilities are recognised for
amounts to be paid in the
future for goods and services,
whether or not billed to the
company.
Hire purchase interest is charged
or credited to the statement of
financial performance.
Short term loans
interest
is credited to
statement of financial
All
the
performance when expired.
Accounts payable are normally
settled on 30-day terms.
Hire purchase contracts are
typically for a period of 36
months. Computer equipment
on hire purchase is used as
security for the loan.
The contracts are for 10 months
and are not secured.
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
19 FINaNCIaL INStrUMeNtS (c’td)
b) Interest Rate Risk
5
Exposure to interest rate risks on financial assets and liabilities are summarised as follows:
2006
i)
ii)
Financial Assets
Cash
Receivables – term deposit
Receivables – trade
Receivables – loans
Receivables – other
Total financial assets
Financial liabilities
Bank Overdraft
Accounts payables
Hire purchase
Short term loans
Floating
interest
rate
Fixed
Interest
Rate
1 year
or less
2006
$
2006
$
Fixed
Interest
Rate
Over
1 to 5
years
2006
$
3,500
Non-
interest
bearing
2006
$
686,997
17,239
335,081
2,116
37,432
41,858
21,473
228,041
3,500
Total financial liabilities
2,116
79,290
21,473
231,541
Carrying
amount
as per
statement
of financial
position
2006
$
Weighted
average
effective
interest
rate
2006
$
3,500
686,997
17,239
335,081
2,116
228,041
58,905
45,358
334,420
1.25%
-
-
-
8.75%
-
8.70%
7.28%
3,500
1,022,078
1,025,578
2005
Floating
interest
rate
Fixed
Interest
Rate
1 year
or less
Fixed
Interest
Rate
Over 1 to
5 years
Non-
interest
bearing
2005
$
2005
$
2005
$
2005
$
Carrying
amount
as per
statement
of financial
position
2005
$
Weighted
average
effective
interest
rate
2005
$
iii) Financial Assets
Cash
Receivables – term deposit
Receivables – trade
Receivables - loans
Receivables - other
Total financial assets
iv) Financial liabilities
Bank Overdraft
Accounts payables
Hire purchase
Short term loans
111,668
Total financial liabilities
111,668
859,356
17,239
438,116
859,356
17,239
438,116
1,314,711
1,314,711
31,954
31,225
63,179
434,222
18,193
18,193
434,222
111,668
434,222
50,147
31,225
627,262
-
-
-
8.75%
-
8.70%
7.28%
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
20 CoMMItMeNtS aNd CoNtINgeNCIeS
No contingent assets or liabilities as at 30 june 2006
Commitments for expenditure
Hire purchase
The consolidated entity has various computer equipment on two hire
purchase arrangements. The lease is for a period of 35 months.
Not later than one year
Later than one year but not later than five years
Less: unexpired charges
Hire Purchase
Current (refer note 12)
Non Current (refer note 12)
Total Hire Purchase
Loan Repayments
The consolidated entity has borrowed the necessary funds from CGU to
finance insurance. The term of the loans are both for 10 months each.
Not later than one year
Later than one year but not later than five years
Less: unexpired charges
Loan Repayments
Current (refer note 14)
Non Current (refer note 14)
Total Loan Repayments
CONSOLIDATED
2005
2006
$
$
PARENT
2006
$
2005
$
37,432
21,473
(4,329)
35,149
18,783
(3,785)
37,432
21,473
(4,329)
35,149
18,783
(3,785)
54,576
50,147
54,576
50,147
34,272
20,304
31,954
18,192
34,272
20,304
31,954
18,192
54,576
50,146
54,576
50,147
41,858
-
(3,002)
33,693
-
(2,468)
41,858
-
(3,002)
33,693
-
(2,468)
38,856
31,225
38,856
31,225
38,856
-
31,225
-
38,856
-
31,225
-
38,856
31,225
38,856
31,225
Office premises are leased under non-cancellable operating leases for periods of 36 months and
37 months ending 30 june 2007. Their commitment can be seen below:
Operating Leases
Minimum lease payments under non-cancellable operating leases
according to the time expected to elapse to the expected date of
payment:
Not later than one year
Later than one year but not later than five years
113,102
-
76,969
48,236
113,102
-
76,969
48,236
113,102
125,205
113,102
125,205
0
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
21
IMpaIrMeNt teStINg oF INdeFINIte LIved goodWILL
Goodwill acquired through business combinations has been allocated to the individual cash
generating units for impairment testing.
The recoverable amount of the IT Infrastructure Services cash generating unit has been
determined based on a value in use calculation.
To calculate this, cash flow projections are based on financial budgets approved by senior
management covering a five-year period.
The discount rate applied to cash flow projections is 12.75% (2005: 12.75%) and cash flows
beyond the five- year period are extrapolated using a 12.7% growth rate (2005: 12.7%) that is
the same as the long-term average growth rate for the IT Infrastructure Services market sector.
Carrying amount of goodwill, patents and licences
CONSOLIDATED
PARENT
IT Infrastructure
Services Segment
Total
Total
2006
$
2005
$
2006
$
2005
$
2006
$
2005
$
Carrying amount of goodwill
1,886,958
1,886,958
1,886,958
1,886,958
-
-
key assumptions used in value in use calculation for 30 June 2006 and 30 June 2005
The following describes each key assumption on which management has based its cash flow
projections to undertake impairment testing of goodwill, patents and licences.
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. Bond rates - the yield on a five-year government
bond rate at the beginning of the budgeted year is utilised and the value assigned to the key
assumption is consistent with external information sources. Values assigned to key assumptions
reflect past experience, except for efficiency improvements which have been estimated at 3% per
annum.
Resources price inflation – the basis used to determine the value assigned to the resources price
inflation is the forecast price indices during the budget year for Australia. key assumptions are
consistent with external information sources.
ANNUAL
REPORT
2006
5
1
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
22 reLated party dISCLoSUre
Other Financial Assets
% Equity Interest
Investment ($)
Country of
Incorporation
Tusk Technologies Pty Ltd
Australia
2006
%
100
2005
%
100
2006
$
2005
$
374,345
397,427
374,345
397,427
The balance of the Tusk Technologies Pty Ltd loan as at 30 june 2006 is $351,651. This loan is
unsecured.
Other than this related party loan there are no other related party transactions requiring
disclosure.
23 eveNtS aFter tHe BaLaNCe SHeet date
There has not arisen in the interval between the end of the financial year and the date of this
report any item, transaction or event of a material and unusual nature likely, in the opinion of
the directors of the Company, to affect significantly the operations of the consolidated entity, the
results of those operations, or the state of affairs of the consolidated entity, in future financial
years other than as set out below:
1. The Company has completed its application for the Research and Development (“R & D”) tax
concession. The expected value of the R & D tax offset is $332,893. This amount will be payable to
the Company following lodgement of its 2006 Income Tax Return. Refer note 5.
2. The company will issue a company wide Employee Share Option plan to all employees. Details of
the plan are set out in the Directors Report.
24 aUdItorS’ reMUNeratIoN
CONSOLIDATED
2005
2006
$
$
PARENT
2006
$
2005
$
Amounts received or due and receivable by Ernst & Young
Australia for:
• an audit or review of the financial report of the entity and
any other entity in the consolidated entity
16,500
14,000
16,500
14,000
• other services in relation to the entity and any other entity in
the consolidated entity
* tax compliance
* assurance related
* special audits required by regulators
Amounts received or due and receivable by auditors other than
Ernst & Young Australia for:
• an audit or review of the financial report of subsidiary entities
21,200
-
-
37,700
31,903
-
-
44,903
21,200
-
-
37,700
31,903
-
-
44,903
690
38,390
-
44,903
690
38,390
-
44,903
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
25 dIreCtor aNd eXeCUtIve dISCLoSUreS
transactions with key management personnel
5
In addition to their salaries, the consolidated entity also provides non-cash benefits to key
management personnel.
Executive officers also participate in the consolidated entity’s share option plan (see note 12).
key management personnel compensation
CONSOLIDATED
2005
2006
$
$
PARENT
2006
$
2005
$
Aggregate of income paid or payable or otherwise
made available:
Short-term employee benefits
Termination benefits
Share-based payments
285,002
343,228
285,002
343,228
49,500
30,800
171,875
370
49,500
30,800
171,875
370
To all directors by the company or by any related party
365,302
515,473
365,302
515,473
Loans to key management personnel and other related parties
There are no loans to key management personnel or other related parties.
other key management personnel transactions with the company or its controlled entities
There have been no other key management personnel transactions with the company or its
controlled entities.
26 dIvIdeNdS
There were no Dividends paid or provided for during the year.
27 traNSItIoN to aIFrS
For all periods up to and including the year ending 30 june 2005, the group prepared its financial
statements in accordance with Australian Generally Accepted Accounting Practice (AGAAP). These
financial statements are the first the company has had to prepare in accordance with Australian
equivalents to International Financial Reporting Standards (AIFRS).
Accordingly, the Group has prepared financial statements that comply with AIFRS applicable for
periods beginning on or after 1 january 2005 and the significant accounting policies meeting
those requirements are described in note 2. In preparing these financial statements, the Group has
started from an opening balance sheet as at 1 july 2004, the Group’s date of transition to AIFRS,
and made those changes in accounting policies and other restatements required by AASB 1 First-
time adoption of AIFRS .
This note explains the principal adjustments made by the Group in restating its AGAAP balance
sheet as at 1 july 2004 and its previously published AGAAP financial statements for the year ended
30 june 2005.
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
27 traNSItIoN to aIFrS (c’td)
Exemptions Applied:
AASB 1 allows for certain exemptions from the general requirement to apply AIFRS
retrospectively.
The Group has taken the following exemptions:
• Comparative information for financial instruments is prepared in accordance with AGAAP and the
company and group have adopted AASB 132: Financial Instruments: Disclosure and Presentation
and AASB 139 Financial Instruments: Recognition and Measurement from 1 july 2005.
AASB 1 allows first-time adopters certain exemptions from the general requirement to apply
AIFRS restrospectivelyretrospectively.
• AASB 3 Business Combinations has not been applied to acquisitions of subsidiaries or of interests
in associates and joint ventures that occurred before 1 july 2004.
• Cumulative currency translation differences for all foreign operations are deemed to be zero as
at 1 july 2004.
• AASB 2 Share-based Payment has not been applied to any equity instruments that were granted
on or before 7 November 2002, nor has it been applied to equity instruments granted after 7
November 2002 that vested before 1 january 2005.
Explanation of material adjustments to the cash flow statement
There are no material differences between the cash flow statement presented under AIFRS and
the cash flow statement presented under previous AGAAP.
ANNUAL
REPORT
2006
dIRECTOR’S dEClARATION
For tHe year eNded 30 JUNe 2006
27 traNSItIoN to aIFrS (c’td)
Balance Sheet Reflecting Transition to AIFRS at 1 july 2004
5
Current Assets
Cash assets
Receivables
Other
AGAAP
($)
Consolidated
AIFRS
Impact
($)
AIFRS
AGAAP
($)
($)
Parent
AIFRS
Impact
($)
AIFRS
($)
29,720
1,078,393
36,230
-
57,923
-
29,720
1,136,316
36,230
28,899
1,061,155
36,230
-
57,633
-
28,899
1,118,788
36,230
Total Current Assets
1,144,343
57,923
1,202,356
1,126,284
57,633
1,183,917
Non-Current Assets
Investments
Plant and equipment
Intangible assets
Other
-
183,897
1,871,676
1,386,179
Total Non-Current Assets
3,441,752
-
-
-
-
-
-
183,897
1,871,676
1,386,179
324,205
146,918
4,718
1,386,179
3,441,752
1,862,020
-
-
-
-
-
324,205
146,918
4,718
1,386,179
1,862,020
Total Assets
4,586,095
57,923
4,644,018
2,988,304
57,633
3,045,937
Current Liabilities
Bank Overdraft
Payables
Provisions
Interest bearing liabilities
Other
710,180
83,408
49,864
283,878
Total Current Liabilities
1,127,330
Non-Current Liabilities
Interest bearing liabilities
Other financial liabilities
Total Non-Current Liabilities
24,717
-
24,717
Total Liabilities
1,152,047
-
-
-
-
-
-
-
-
-
710,180
83,408
49,864
283,878
679,704
74,051
49,864
283,878
1,127,330
1,087,497
24,717
-
24,717
309,001
24,717
333,718
1,152,047
1,421,215
-
-
-
-
-
-
-
-
-
679,704
74,051
49,864
283,878
1,087,497
24,717
309,001
333,718
1,421,215
Net Assets
3,434,048
57,923
3,491,971
1,567,089
57,633
1,624,722
Equity
Contributed equity
Accumulated losses
5,659,623
(2,225,575)
-
5,659,623
57,923 (2,167,652)
5,659,623
(4,092,534)
-
5,659,623
57,633 (4,034,901)
Total Equity
3,434,048
57,923
3,491,971
1,567,089
57,633
1,624,722
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
5
27 traNSItIoN to aIFrS (c’td)
Balance Sheet Reflecting Transition to AIFRS at 30 june 2005
Consolidated
AGAAP
($)
AIFRS
Impact
($)
AIFRS
AGAAP
($)
($)
Parent
AIFRS
Impact
($)
AIFRS
($)
-
1,314,711
79,956
-
20,686
-
-
1,335,397
79,956
-
1,297,472
79,956
-
20,686
-
-
1,318,158
79,956
Current Assets
Cash assets
Receivables
Other
Total Current Assets
1,394,667
20,686
1,415,353
1,377,428
20,686
1,398,114
Non-Current Assets
Investments
Plant and equipment
Intangible assets
Other
-
177,550
1,628,287
1,824,002
-
-
242,200
-
-
177,550
1,870,487
1,824,002
397,427
149,012
3,530
1,824,002
Total Non-Current Assets
3,629,839
242,200
3,872,039
2,373,971
-
-
-
-
-
397,427
149,012
3,530
1,824,002
2,373,971
Total Assets
5,024,506
262,886
5,287,392
3,751,399
20,686
3,772,085
Current Liabilities
Bank Overdraft
Payables
Provisions
Interest bearing liabilities
Other
111,668
434,222
121,469
63,180
321,851
Total Current Liabilities
1,052,390
Non-Current Liabilities
Interest bearing liabilities
Other financial liabilities
Total Non-Current Liabilities
18,192
-
18,192
Total Liabilities
1,070,582
-
-
-
-
-
-
-
-
-
-
111,668
434,222
121,469
63,180
321,851
111,668
434,222
121,469
63,180
321,851
1,052,390
1,052,390
18,192
-
18,192
351,651
18,192
369,843
1,070,582
1,422,233
-
-
-
-
-
-
-
-
-
-
111,668
434,222
121,469
63,180
321,851
1,052,390
18,192
351,651
369,843
1,422,233
Net Assets
Equity
Contributed equity
Employee Equity Benefits Reserve
Accumulated losses
3,953,924
262,886
4,216,810
2,329,166
20,686
2,349,852
5,659,623
(1,705,699)
-
370
5,659,623
370
262,516 (1,443,183)
5,659,623
(3,330,457)
-
370
5,659,623
370
20,316 (3,310,141)
Total Equity
3,953,924
262,886
4,216,810
2,329,166
20,686
2,349,852
ANNUAL
REPORT
2006
NOTES TO THE fINANCIAl STATEMENTS (c’td)
For tHe year eNded 30 JUNe 2006
27 traNSItIoN to aIFrS (c’td)
Income Statement for the year Ended 30 june 2005
5
Consolidated
AIFRS
Impact
($)
AGAAP
($)
AIFRS
AGAAP
($)
($)
Parent
AIFRS
Impact
($)
AIFRS
($)
Revenues from ordinary activities
3,778,928
- 3,778,928 3,778,928
- 3,778,928
Cost of sales
Gross Profit
(1,785,546)
- (1,785,546) (1,858,116)
- (1,858,116)
1,993,382
- 1,993,382 1,920,813
- 1,920,813
Legal expenses
Marketing expenses
Occupancy expenses
Salaries and employee expenses
Amortisation expense
Depreciation expense
Other expenses from ordinary activities
(18,426)
(21,220)
(85,650)
(614,564)
(643,074)
(61,930)
(304,153)
-
-
-
(370)
242,200
-
(36,946)
(18,426)
(21,220)
(85,650)
(614,934)
(400,874)
(61,930)
(341,099)
(18,426)
(21,220)
(85,650)
(623,921)
(400,874)
(53,488)
(230,668)
-
-
-
(370)
-
-
(36,947)
(18,426)
(21,220)
(85,650)
(624,291)
(400,874)
(53,488)
(267,615)
Profit\(Loss) from ordinary activities before
income tax
Income tax revenue relating to ordinary
activities
Profit\(Loss) from ordinary activities after
income tax
Net Profit\(Loss) attributable to members
of Empired
Total changes in equity other than those
resulting from transactions with owners as
owners
244,365
204,884
449,249
486,566
(37,317)
449,249
275,510
-
275,510
275,510
-
275,510
519,875
204,884
724,759
762,076
(37,317)
724,759
519,875
204,884
724,759
762,076
(37,317)
724,759
519,875
204,884
724,759
762,076
(37,317)
724,759
HEAdlINE
27 traNSItIoN to aIFrS (c’td)
(i) Accounting for Goodwill
On transitions to AIFRS Goodwill is no longer amortised but continues to be subject to an
annual assessment for impairment to ensure that the carrying value of goodwill is not greater
than the recoverable amount. As a result, the statement of financial performance will no
longer include an expense item reflecting the annual Goodwill Amortisation. No impairment
adjustment to opening Retained Earnings arises in respect of this issue. During the AIFRS
comparative financial year ended 30 june 2005, goodwill amortisation of $242,200 was
recognised under Australian GAAP. This amount will be reversed in the AIFRS comparative
statement of financial performance.
(ii) Income Tax
A “balance sheet” approach to tax-effect accounting is followed under AIFRS replacing the
current “statement of financial performance” approach. This approach recognises deferred
tax balances when there is a difference between the carrying value of an asset or liability and
its tax base.
(iii) Research & Development
Replacing AASB 1011 Accounting for Research and Development costs is AASB 138 intangibles.
under the prior standard research and development costs may be carried forward in relation
to a project if the costs are expected, beyond reasonable doubt, to be recoverable in the
future. under AASB 138 no intangible asset arising from the research phase of development is
permitted to be recognised. An intangible asset arising from development is still recognised on
satisfaction of certain criteria to do with future economic benefits. It is not expected that this
will have a significant impact on Empired as most cost relating to research and development
is development work as opposed to research.
(iv) Impairment of Assets
under AASB 136 Impairment of Assets, the recoverable amount of an asset is determined
as the higher of fair value less costs to sell, and value in use. In determining value in use,
projected future cash flows are discounted using a risk adjusted pre-tax discount rate and
impairment is assessed for the individual asset or at the ‘cash generating unit’ level. Empired
will have to test the Net Recruiter software and goodwill for impairment on an annual basis.
On testing the Net Recruiter software and goodwill for impairment there was no impairment
loss at 30 june 2005.
(v) Share Based Employee Payments
Empired does not currently recognise an expense for options issued to staff, under the
directors, or employee Share Option Plan. under AASB2 Share Based Payments, Empired will
recognise an expense for all share based remuneration over the relevant vesting periods. The
standard applies to all share-based payments issued after 7 November 2002 which have not
vested as at 1 january 2005. This will effectively create an expense to the income statement
and a subsequent increase in equity.
5
ANNUAL
REPORT
2006
dIRECTOR’S dEClARATION
In accordance with a resolution of the directors of Empired Limited, I state that:
In the opinion of the directors:
5
(a) the financial statements and notes of the company and of the consolidated entity are in
accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position
as at 30 june 2006 and of their performance for the year ended on that date; and
(ii)
complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable.
On behalf of the Board
Russell Baskerville
Managing Director
20th of October 2006
0
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PRINCIPLE PLACE OF BUSINESS
Perth
469 Murray Street
PERTH WA 6000
Telephone No: +618 9321 9401
Fax No: +618 9321 9402
Melbourne
470 Colins Street
MELBOURNE VIC 3000
Telephone No: +613 8610 0700
Fax No: +613 8610 0701
Sydney
3 Spring Street
SYDNEY NSW 2000
Telephone No: +612 9256 0200
Fax No: +612 9256 0201
WEB SITE ADDRESS
www.empired.com
CORPORATE DIRECTORY
DIRECTORS
Mel Ashton (Chairman)
David Taylor (Non – executive Director)
Russell Baskerville (Managing Director & CEO)
COMPANY SECRETARY
Craig J Ferrier
REGISTERED OFFICE
469 Murray Street
PERTH WA 6000
Telephone No: +618 9321 9401
Fax No: +618 9321 9402
COMPANY NUMBER
A.C.N: 090 503 843
LEGAL ADVISERS
McKenzie Moncrieff Lawyers
Level 5, 37 St Georges Tce
Perth WA 6000
AUDITORS
Ernst & Young
The Ernst & Young Building
11 Mounts Bay Road
PERTH WA 6000
COMPANY DOMICILE AND LEGAL FORM
Empired Limited is the parent entity and an
Australian Company limited by shares
COUNTRY OF INCORPORATION
Australia
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ANNUAL REPORT 2006
www.empired.com
EMPIRED Ltd.
ABN 81 090 503 843
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