Annual Report 2019
FOR THE YEAR ENDED 30 JUNE 2019
01
MOQ LIMITED
AND ITS CONTROLLED ENTITIES
ABN: 94 050 240 330
MOQ ANNUAL REPORTXXXXXXXXXXFor personal use only CONTENTS
Corporate Directory
Directors’ Report
Statement of Corporate Governance
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Auditor independence declaration
Independent Auditor’s Report
ASX Additional Information
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18
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02
MOQ ANNUAL REPORT
For personal use only CORPORATE DIRECTORY
Board of Directors
Mr David Shein
Mr Joe D’Addio
Non Executive Chairman
Executive Director and Chief Executive Officer
Mr Scott McPherson
Executive Director and Chief Operating Officer
Mr Joey Fridman
Mr Michael Pollak
Non Executive Director
Non Executive Director
Mr Alexander White
Non Executive Director (Appointed 1st June 2019)
Company Secretary
Brad Cohen
Auditors
Stantons International Audit and Consulting Pty Ltd
Level 2, 22 Pitt Street
Sydney NSW 2000
Solicitors
Thomson Geer
Level 25, 1 O’Connell Street
Sydney NSW 2000
Bankers
Westpac Banking Corporation
94 Church Street
Middle Brighton VIC 3186
St George Bank
Locked Bag 1
Kogarah NSW 1485
Registered Office
Suite 1, Ground Floor
3-5 West Street
North Sydney NSW 2060
Share Registry
Link Market Services Limited
Level 4 Central Park 152 St Georges Terrace
PERTH WA 6000
Investor Enquiries:
Facsimile:
1300 554 474
+61 2 9287 0303
Stock Exchange Listing
Securities of MOQ Limited are listed on the Australian Securities Exchange (ASX).
ASX Code: MOQ
Website
www.MOQ.com.au
03
MOQ ANNUAL REPORTFor personal use only DIRECTORS’ REPORT
Your directors present their report on the consolidated entity (referred to herein as the “Group” or “Company”) consisting of
MOQ Limited and its controlled entities for the financial year ended 30 June 2019. The information in the proceeding operating and
financial review forms part of this directors’ report for the financial year ended 30 June 2019 and is to be read in conjunction with
the following information.
General Information
Officers and Directors
The names and particulars of the Directors during or since the end of the financial year are:
Name
Particulars
Mr David Shein
Mr Joe D’Addio
Mr Scott McPherson
Mr Joey Fridman
Mr Michael Pollak
Mr Alexander White
Non Executive Chairman
Executive Director and Chief Executive Officer
Executive Director and Chief Operating Officer
Non Executive Director
Non Executive Director
Non Executive Director (Appointed 1st June 2019)
The above named Directors held office during and since the financial year, except as otherwise indicated.
Particulars of each director’s experience and qualifications are set out later in this report.
Meetings of Directors
During the financial year, 13 meetings of directors (including committees of directors) were held:
Director
Board Member
Since
Attended
Eligible
Board
Meetings
Eligible
Audit
and Risk
Meetings
Attended
Eligible
Remuneration
Meeting
Attended
Mr David Shein
17 February 2014
Mr Joe D'Addio
29 May 2015
Mr Scott McPherson
29 May 2015
Mr Joey Fridman
17 February 2014
Mr Michael Pollak
17 February 2014
Mr Alexander White
1 June 2019
11
11
11
11
11
2
10
11
10
11
11
2
2
2
2
-
2
2
2
-
-
-
-
-
-
-
-
-
-
-
-
-
Information Relating to Directors and Company Secretary
David Shein (Non Executive Chairman)
In June 1987, David, having recently migrated from South Africa, founded Com Tech Communications as a specialist supplier of
networking and communications products. 14 years later, Com Tech was sold to Dimension Data at an enterprise value of over
$1billion. At the time of sale, Com Tech employed over 1,400 people, had offices Australia wide and achieved revenues of $700 million
with no external debt. David prides himself on the recognition Com Tech achieved being regularly recognised as one of the leading
companies to work for in Australia. Since then, David has been actively involved in mentoring young management teams. David firmly
believes while products and technologies come and go, what remains constant is the requirement for any company to build a company
that is fanatical about providing legendary customer service and creating an environment that enables an organisation to attract and
retain the best team of people. David has been an investor and mentor to a number of start-ups, many of which have been successfully
exited. These include Zipmoney, CalReply, Latam Autos, RangeMe, Pocketbook, Centric Wealth, MacromatiX and Holly Connects.
David is also Co-Founder of Our Innovation Fund, a $50million early stage venture capital fund that invests in exciting Australian start-
ups as well as a founding partner in the Israeli venture capital enterprise, OurCrowd, the first Global Equity Based Crowd Funding
Platform.
04
MOQ ANNUAL REPORTFor personal use only
DIRECTORS’ REPORT (cont.)
Interests in shares and options:
4,083,335 fully paid ordinary shares
Other current directorships:
Former Directorships in last three years:
None
None
Special responsibilities:
Chair of Remuneration Committee
Michael Pollak (Non-Executive Director)
Michael holds a Bachelor of Commerce, is a Chartered Accountant and has an MBA in strategy from the Australian Graduate School
of Management. Michael commenced his career at PricewaterhouseCoopers approximately 20 years ago. Michael has gained valuable
experience in both Sydney and London in general management, audit, insolvency, corporate advisory and strategy across a wide
range of industries, including financial services, professional services, retail, mining and manufacturing. Michael has been involved in the
restructuring, recapitalisation and relisting of a number of ASX listed entities.
Interests in shares and options:
2,130,000 fully paid ordinary shares
Other current directorships:
Big Star Energy Limited (ASX: BNL) (Non-executive director)
Former Directorships in last three years:
UCW Limited (ASX: UCW) (Non-executive director)
Janison Education Group Limited (ASX: JAN) (Non-executive director)
Special responsibilities:
Chair of Audit and Risk Committee
Joey Fridman (Non-Executive Director)
Joey is the co-founder and Chief Executive Officer of Monash Private Capital Pty Limited, a Sydney-based independent financial
services firm investing across various asset classes as principal and through its managed funds. Joey is a director of various Monash
related companies, including Maia Financial and Credabl. Prior to establishing Monash Private Capital, Joey was Chief Financial Officer
of Investec Bank (Australia) Limited, and prior to his role as CFO, Joey was one of the founding members of the Bank’s investment
banking division. Joey is a Chartered Accountant and has an M.B.A. from the Australian Graduate School of Management.
Interests in shares and options:
18,328,334 fully paid ordinary shares
Other current directorships:
Former Directorships in last three years:
Special responsibilities:
None
None
None
Alexander White (Non-Executive Director) (Appointed 1 June 2019)
Alex is an experienced investment manager, having undertaken a number of roles across financial markets prior to joining Viburnum
Funds in 2014 to open a Melbourne office and establish an Australian Equities strategy. Prior to joining Viburnum Funds Alex worked
at Cooper Investors and as a Strategy Analyst at Fletcher Building (ASX:FBU).
Interests in shares and options:
21,571,214 fully paid ordinary shares*
Other current directorships:
Former Directorships in last three years:
Special responsibilities:
None
None
None
*Shares owned by Viburnum Funds for which Mr White has an indirect interest as a Portfolio Manager.
Joe D’Addio (Executive Director and Chief Executive Officer)
Joe was a co-founder and Director of Tech Effect. Joe has over 35 years’ experience in the IT industry, with a particular focus on areas
of professional services, system and network engineering and technology consulting. Over the last 20 years, he has held a number of
key management and director positions, building and leading businesses in the IT industry, specifically with Com Tech Communications
and Dimension Data
Interests in shares and options:
17,655,978 fully paid ordinary shares
Other current directorships:
Former Directorships in last three years:
None
None
Special responsibilities:
Chief Executive Officer, Member of Audit and Risk Committee
05
MOQ ANNUAL REPORTFor personal use only DIRECTORS’ REPORT (cont.)
Scott McPherson (Executive Director and Chief Operating Officer)
Scott was a co-founder and Director of Tech Effect. Since forming the company in 2005, Tech Effect grew from providing Infrastructure
related Integration Services, to offering Consulting and Managed Services to assist their clients to overcome both business and
technical ICT related challenges.
Scott previously held the position of Solutions Director drawing upon more than two and a half decades of industry experience where
he has worked for iconic market leaders Com Tech Communications and Dimension Data. During this time, Scott has honed his
engineering, management and people skills to create a customer-centric organisation that develops solutions that solve real business
problems. These traits contributed to building Tech Effect into the successful, highly respected organisation. As the business grew,
Scott’s responsibilities evolved to focus on managing the Integration Services Practice, along with setting the vision and go to market
strategy for the ‘Cloud World’. Scott’s technology career started at Queensland University of Technology where he studied for his
Bachelor of Business degree in Information Management.
More recently, Scott took on the position of Chief Operating Officer within MOQdigital, working with the CEO to ensure that efficient
operations of the business. Scott’s experience has been trapped to help ensure that the business is in a position of predictability,
scalability and profitability, while making sure of the quality of the services delivered.
Interests in shares and options:
17,943,478 fully paid ordinary shares
Other current directorships:
Former Directorships in last three years:
None
None
Special responsibilities:
Executive Director
Brad Cohen (Company Secretary) (appointed 7 August 2015)
Brad also acts as the Chief Executive Officer of Skoolbag.
Prior to joining MOQ Limited, Brad worked at OurCrowd LLC where he was an investment professional focusing on Venture Capital
investments. Previously, Brad worked in commercial transaction roles and began his career as a management consultant at KPMG.
Brad is a qualified Chartered Accountant and holds a Bachelor of Commerce-Accounting and a Bachelor of Laws from Macquarie
University, Sydney.
Principal Activities
The Group’s principal activities are the provision of group ownership, strategy and oversight over a number of software and service
enterprises.
Operating and Financial Review
Through FY19, MOQ has continued to drive its strategy to develop, build and acquire complementary Cloud focused technology
businesses.
The focus has been on balancing the following range of short, medium and long-term priorities:
1. A continuation of the organic growth trajectory of the previous two financial years.
2.
Increasing Recurring Services income streams in volume and also as a proportion of contribution to the Group
3. To identify and lock down a high value acquisition for completion in early FY20.
4. Maintain the investment cycle for key strategic imperatives – our NSW operation, the Skoolbag platform refresh, the Managed
Services business and key vendor partner alliances.
5. For the MOQdigital business, successfully executing on major contract wins from FY18.
6. Ensure ongoing sustainable financial achievement – Operational Expense control, EBITDA and Cash position.
Key achievements for the period include:
1. Continuation of Organic Growth:
a. Overall revenue from ordinary activities grew $8.74M being a 14.6% increase on FY18
b. The Services Business grew by 6.3% to $31.34M
c. Technology Sales Revenue was up 23% to $36.5M, reflecting increased market demand in H1 of FY19..
06
MOQ ANNUAL REPORTFor personal use only DIRECTORS’ REPORT (cont.)
2. Recurring Services Growth
a. Recurring Services revenues grew by 19.3% to $13.5M.
b. This now represents 43% of all services sold and delivered
c.
This was achieved despite delays experienced in expected increased revenue from our largest contract win from FY18 not
becoming fully available until March 2019.
3. Merger and Acquisition Success
a.
In early August 2019 the Wardy IT Solutions acquisition was announced and it is on schedule for completion on 30 August
2019. (See ASX Announcement dated 12 August 2019)
b. MOQ will commence realising financial benefit from this transaction from 1 September 2019.
c. There is an ongoing program to identify businesses that are suitable M&A partners for MOQ Limited.
4. Ongoing Investments – these are covered for MOQdigital and Skoolbag Overview sections below
5. Major Recurring Service Engagements
a.
b.
MOQdigital has onboarded 6 new major clients during FY19. Five of these have been successfully transitioned and are in a
healthy Business As Usual mode.
There were significant transition delays for our largest new contracted managed services client, which have now been resolved.
These primarily arose out of unforeseen complexities of the client’s previous ICT environment. This complexity has resulted in
higher than expected work effort and rework by MOQdigital and the Prime Contractor to migrate and transition the client’s
applications and data. The resultant impact being:
i. MOQdigital incurred significant and unexpected labour costs in its Professional Services business through H2 of FY19.
ii. This also resulted in an opportunity cost, as staff were not able to engage on other client opportunities, some of which
were subsequently lost.
iii. The Managed service did not become fully activated until 1 March 2019, delayed from 1 October 2018, so Recurring
Service revenue streams were partially delayed.
iv. Whilst MOQdigital has incurred substantial expenses, as this is a $12M contract value with potential for $15M plus over
the 5 to 8 year contract term, we have taken a long term view of the transaction and are in discussions with the Prime
Contractor for adjustments to both transition and ongoing fees
v. We have taken a provision of $200,000 in the FY19 accounts and have decided to incur all one off costs in FY19.
c. This table quantifies the opportunity costs of the delay and extra work effort that was required during the FY19 financial year
to transition the client. As can be seen below, given the cost has been borne by MOQ, the financial impact in FY19 of the delay
and extra work has been calculated to be in excess of $1M to MOQ’s revenue, gross profit and EBITDA in H2 FY19.
ITEM
Cost of Resources
Opportunity Cost @ Gross Margin
Managed Service Delay Billing Shortfall
TOTAL COST OF EXTRA EFFORT REQUIRED - H2 FY19
6. Sustainable Financial Achievement
Adjustment
$497,450
$99,490
$478,035
$1,074,975
a. Normalised EBITDA in FY19 is $2,164,314, approximately equivalent to FY18. This excludes the ~$1m outlined in point 5
above as a result of the impact of the delay and extra work on transitioning a major managed services client to commence the
5 to 8 year contract
b. Profit after Tax for FY19 of $2,288,024, an increase of 103% on prior year which is attributable to income tax credits from
realisation of prior year losses.
c. Operating Cashflow improvement between FY18 and FY19 of 78.6% and Cash Balance growth by 32% to $5,230,606
d. The following one-off expenses and provisions have been incurred in FY19
i. M&A corporate advisory, due diligence and transaction fees of $280,661 – resulting in the successful acquisition of Wardy
IT Solutions;
ii. Taxation consulting fees of $349,462 – success-based tax advisory fee for obtaining a successful private binding ruling
regarding utilisation of past tax losses resulting in a material tax and cash benefit to the Company; and
iii. Additional Doubtful Debt Provision - $200,000
e. Operating expenses excluding depreciation and the one-off expenses and provision identified above was 15.3% of revenue in
FY19, an improvement on FY18 (16.2%).
07
MOQ ANNUAL REPORTFor personal use only DIRECTORS’ REPORT (cont.)
Normalised EBITDA
Adjustments
Implementation of Service Management System
Integration of Tetran acquisition
Restructure of Professional Services and Management
M&A consulting and due diligence fees
Taxation advisory fees
(successfully claiming $1.5m deferred tax assets)
Provision for doubtful debts
Reported EBITDA
Interest Income
Depreciation & Amortisation
Net Profit before Tax
Income Tax Credit / (Expense)
Statutory Net Profit after tax
MOQdigital
FY17
FY18
FY19
1,827,719
2,167,434
2,164,314
(469,000)
(278,000)
(323,000)
757,719
15,684
(519,007)
254,396
(153,420)
100,976
(280,661)
(349,462)
(200,000)
2,167,434
1,334,191
13,284
(611,779)
1,568,939
(439,758)
1,129,181
19,035
(724,612)
628,614
1,659,410
2,288,024
The MOQdigital business continues to provide a range of services and solutions to enable digital business transformation including
consulting, integration, and managed services across applications, data and infrastructure platforms.
For MOQdigital, some highlights for FY19 include:
1. Positioning to leverage the Digital Transformation trend – our strategic decision in FY19 to invest in both growing
MOQdigital’s capability as well as accelerate M&A effort in this space, which has resulted in the Wardy IT Solutions acquisition,
ensures that MOQ is well placed to capitalise in this high growth market. The combined market presence of MOQdigital and
Wardy IT Solutions will contribute in excess of $20M of Services to MOQ in FY20 in Digital Services market place.
2. Sales and Business Development Progress – whilst retaining great clients is critical, business growth cannot happen without
new clients. Over the last two years we have invested in our business development capability. This is reaping direct benefits. In
FY19, over 16% of revenue from our top 20 clients came from clients who are new to MOQdigital over the last two years.
3. Growing our Offering through leveraging the Colombo, Sri Lanka Service Centre – our investment in Colombo
business has resulted in an enhanced VTeams offering. This allows our clients, especially those with international presence and
staffing requirements to shape, build and house their own teams under MOQdigital’s guidance and oversight. A number of our
clients have taken up the opportunity and we are now in a position to accelerate this offering into market.
4. The Microsoft Opportunity – In the mid-tier enterprise business market segment, Microsoft is the clear leader for a range of
Cloud Services, including Platforms, Applications and Infrastructure. MOQdigital has further enhanced its position with Microsoft,
with the Wardy IT Solutions acquisition and is further investing in working closer in go to market efforts to capitalise on this
opportunity.
SkoolBag
The SkoolBag business operates and develops a market leading Software-as-a-Service (“SaaS”) communications platform, including
mobile apps, primarily for School and Education customers and also in the sports vertical.
For SkoolBag, some highlights for FY19 include:
1. Completed full release of new SkoolBag mobile app
2. SkoolBag’s new mobile app hit #1 in Top Charts on Apple App Store and Google Play Store in late 2018
3.
Implemented price increase across all school subscription renewals over FY19 with school contracts now on the higher $3 per
student per year pricing (previously $1 per student per year)
4. +79% YoY increase in Monthly Recurring Revenue (MRR) to $210,000 at the end of FY19 ($117,000 at the end of FY18)
5. Developed new electronic school newsletter feature. The ‘SkoolBag eNewsletter’ beta concluded in August and the new product
will be rolled out to all customers in September 2019
6. Consistently high Net Promotor Scores (NPS) and Customer Satisfaction Scores (CSAT). SkoolBag’s increased customer
engagement stems from implementation of improved pro-active customer success initiatives, including data analytics driven
outreach processes and automated user guides/walkthroughs.
08
MOQ ANNUAL REPORTFor personal use only DIRECTORS’ REPORT (cont.)
Summary
Despite some unexpected challenges during FY19, MOQ Limited continued to move its business forward, balancing short term returns
with key strategic decisions and actions to maintain momentum as it continues to develop MOQ Limited into a high value, market
leading publicly listed technology company geared around servicing the needs of enterprises seeking to drive digital transformation
initiatives.
In alignment with this strategy the Directors of the Company would like to emphasise that MOQ Limited is continuing to actively seek
strategic acquisitions through an ongoing program run by the MOQ Executive team and its advisors to identify and qualify suitable
M&A partners.
Significant Changes in State of Affairs
There are no significant changes in the state of affairs of the group.
Dividends Paid or Recommended
In respect of the current year, no dividends have been declared or paid and none are recommended (2018: $nil).
Significant Events after the Reporting Period
MOQ Limited completed the acquisition of Wardy IT Solutions Pty Ltd (Wardy IT) on 1st September 2019.
The acquisition was settled for an upfront consideration of $6.4m in cash and shares, after adjusting for $1.1m in net debt and working
capital.
The consideration was $2m funded out of existing MOQ cash reserves, and $4.4m issued in shares, equating to 16,142,939 MOQ
shares issued at 27.5c per share.
A further earn-out capped at $6m may become payable in October 2020 in relation to Wardy IT financial perfor-mance for the 12
months ending 31 August 2020, subject to achieving certain performance criteria.
Likely developments and expected results
Disclosure of information regarding likely developments in the operations of the Group in future financial years and the expected
results of those operations is likely to result in unreasonable prejudice to the Group. Accordingly, this information has not been
disclosed in this report.
Environmental Issues
There are no applicable environmental regulations that would have an effect on the Company.
Indemnifying Officers or Auditor
During the year, the Company paid a premium to insure officers of the Group. The officers of the Group covered by the insurance
policy include all directors. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that
may be brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred
by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach
of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or
someone else to cause detriment to the Group.
Details of the amount of the premium paid in respect of the insurance policies is not disclosed as such disclosure is prohibited under
the terms of the contract.
The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or
agreed to indemnify any current or former officer or auditor of the Group against a liability incurred as such by an officer or auditor.
Proceeding on Behalf of Company
No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any proceedings to which the
company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.
Auditor
Stantons International Audit and Consulting Pty Limited are the appointed auditors of the Company. The auditor has not been
indemnified under any circumstance.
09
MOQ ANNUAL REPORTFor personal use only DIRECTORS’ REPORT (cont.)
Non-audit Services
There have been no non-audit services provided during the year.
The board of directors considers that there have been no independence issues imposed by the Corporations Act 2001.
Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2019 can be found on page 50 of the financial report.
Options
At the date of this report, the unissued ordinary shares of MOQ Limited under option are as follows:
Grant Date
Balance at the date of this report
Exercise price
01/09/2016
01/07/2018
TOTAL
3,690,901
4,036,358
7,727,259
$0.275
$0.255
Expiry
01/09/2020
01/07/2022
Option holders do not have any rights to participate in any issues of shares or other interests of the company or any other entity. For
details of options issued to directors and executives as remuneration, refer to the remuneration report.
No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other
body corporate.
010
MOQ ANNUAL REPORTFor personal use only REMUNERATION REPORT (AUDITED)
Remuneration Policy
The remuneration policy of MOQ Limited has been designed to align key management personnel (KMP) objectives with shareholder
and business objectives by providing a fixed remuneration component and offering performance incentives based on key performance
areas affecting the consolidated group’s financial results. The Board of MOQ Limited believes the remuneration policy to be appropriate
and effective in its ability to attract and retain high quality KMP to run and manage the consolidated group, as well as create goal
congruence between directors, executives and shareholders.
The Board’s policy for determining the nature and amount of remuneration for KMP of the consolidated group is to have the
remuneration policy developed by the Board after professional advice is sought where appropriate from independent external
consultants. No external advice was sought for the current financial year.
• All KMP receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits
and performance incentives.
• Performance incentives are generally only paid once predetermined key performance indicators (KPIs) have been met.
• The Board reviews KMP packages annually by reference to the consolidated group’s performance, executive performance and
comparable information from industry sectors.
•
Incentives paid in the form of options or rights are intended to align the interests of the KMP and the Group with those of the
shareholders. In this regard, KMP are prohibited from limiting risk attached to those instruments by use of derivatives or other
means.
The performance of KMP is measured against criteria agreed biannually with each executive and is based predominantly on the forecast
growth of the consolidated group’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined
performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options.
KMP receive at a minimum, a superannuation guarantee contribution required by the government, which for the year ending 30 June
2019 was 9.50% (2018: 9.5%) of the individual’s average weekly ordinary time earnings. KMP do not receive any retirement benefits.
All remuneration paid to KMP is valued at the cost to the company and expensed.
The Board’s policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Board
determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and
accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to
non-executive directors is subject to approval by shareholders. Currently, the maximum aggregate remuneration of non-executive
directors is $500,000.
Performance-based Remuneration:
The KPIs are set annually, in consultation with KMP. The KPIs target areas the Board believes hold greater potential for group
expansion and profit, covering financial and non-financial as well as short and long-term goals. The level set for each KPI is based on
budgeted figures for the Group and respective industry standards.
Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on the number and deemed difficulty
of the KPIs achieved. Following the assessment, the KPIs are reviewed by the remuneration committee in light of the desired and actual
outcomes, and their efficiency is assessed in relation to the Group’s goals and shareholder wealth, before the KPIs are set for the
following year. In determining whether or not a KPI has been achieved, the Board bases the assessment on the Company’s performance
using audited figures.
011
MOQ ANNUAL REPORTFor personal use only REMUNERATION REPORT (AUDITED)
Remuneration Expense Details:
The following table of benefits and payments represents the components of the current year and comparative year remuneration
expenses for each member of KMP of the consolidated group:
Short-term benefits
Post-
employment
benefits
Salary &
fees
Cash
Bonus
Other
payments
Superannua-
tion
Year
Share
based
payments
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
200,000
200,000
-
-
200,000
36,000
200,000
36,000
-
13,699
54,795
54,795
60,000
60,000
-
20,000
54,795
54,795
4,566
-
-
-
-
-
-
-
-
-
-
2019*
240,000
35,000
2018
2019
2018
2019
2018
200,000
36,000
200,000
200,000
196,000
192,231
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000
-
-
-
-
-
-
-
-
19,000
19,000
20,531
20,049
-
1,301
5,205
5,205
-
-
-
-
5,205
5,205
434
-
20,531
20,049
19,000
19,000
18,620
18,262
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,238
7,919
Total
219,000
219,000
256,531
256,049
-
15,000
60,000
60,000
60,000
60,000
-
20,000
70,000
60,000
5,000
-
295,531
256,049
219,000
219,000
223,858
218,412
1,210,155
71,000
10,000
108,528
9,238 1,408,921
1,195,520
72,000
-
108,071
7,919 1,383,510
Personnel
Executive Directors
Mr Joe D’Addio
Mr Scott McPherson
Mr Don Nanayakkara
(resigned 5th July 2017)
Non-executive
Directors
Mr David Shein
Mr Joey Fridman
Mr Jonathan Pager
(resigned 31st July 2017)
Mr Michael Pollak
Mr Alexander White
(appointed 1st June
2019)
Key Management
Mr Matthew Goggin
(Director Sales)
Mr Chad Lurie
(GM Services)
Mr (Danny) Wan Yee
Loh (GM Finance)
2019 Total
2018 Total
* New executive agreement of $280,000 per annum from 1 January 2019
Performance
based
percentage of
remuneration
-
-
15%
14%
-
-
-
-
-
-
-
-
-
-
-
12%
14%
-
-
4%
4%
-
-
012
MOQ ANNUAL REPORTFor personal use only
REMUNERATION REPORT (AUDITED) (cont)
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Personnel
Fixed Remuneration
At Risk – Short Term
Incentives
At Risk - Options
Executive Directors
Mr Joe D’Addio
Mr Scott McPherson
Other Key Management Personnel
Mr Matthew Goggin
Mr Chad Lurie
Mr (Danny) Wan Yee Loh
Service agreements (audited):
100%
85%
88%
100%
96%
-
15%
12%
-
-
-
-
-
-
4%
The directors serve until they resign, are removed, cease to be a director or are prohibited from being a director under the provisions
of the Corporations Act 2001, or are not re-elected to office.
The directors entered into service agreements on the following terms:
• Mr Shein, Mr Fridman, and Mr Pollak - Base salary (including director’s fees) of $60,000 per annum (including superannuation or
similar contributions). They may receive additional payments as approved by the board.
• Mr D’Addio and Mr McPherson - Base salary (including director’s fees) of $200,000 per annum (plus superannuation or similar
contributions).
o Annual incentive payment of up to $81,217 each based on pre-determined key metrics.
o The Company may also, in its absolute discretion, provide a bonus, the value of which, the conditions attached to and the
frequency of such a bonus, remain matters over which the Company exercises sole discretion.
o
If the Company terminates the agreement with reason (such as gross misconduct, conviction of a major criminal offence
or misuse of price sensitive information), the Company will provide the Director with no notice and will be summarily
dismissed. If the Company terminates the agreement without reason (notwithstanding any other provision of the agreement),
the Company will provide the Director with 3 months’ written notice or make a payment of 3 months’ salary in lieu of the
notice period.
o The Director may terminate the agreement at his or her sole discretion and at any time, and in doing so is entitled to payment
of a fee equivalent to 3 months of their base fees.
o After the termination of their employment with the Company and MOQdigital, the Director will be subject to a contractual
restraint which may apply for 6 months after the termination and cover up to all of Australia.
Key Management Personnel entered into service agreements on the following terms:
• Mr Goggin - Base salary of $280,000 per annum (plus superannuation or similar contributions).
• Mr Loh -Base salary of $196,000 per annum (plus superannuation or similar contributions).
o The Company may also, in its absolute discretion, provide a bonus, the value of which, the conditions attached to and the
frequency of such a bonus, remain matters over which the Company exercises sole discretion.
o
If the Company terminates the agreement with reason (such as gross misconduct, conviction of a major criminal offence or
misuse of price sensitive information), the Company will provide the KMP with no notice and will be summarily dismissed. If
the Company terminates the agreement without reason (notwithstanding any other provision of the agreement), the Company
will provide the KMP with up to 3 months’ written notice or make a payment of up to 3 months’ salary in lieu of the notice
period.
o The KMP may terminate the agreement at his or her sole discretion and at any time, and in doing so is entitled to payment of
a fee equivalent to 3 months of their base fees.
o After the termination of their employment with the Company and MOQdigital, the KMP will be subject to a contractual
restraint which may apply for 6 months after the termination and cover up to all of Australia.
013
MOQ ANNUAL REPORTFor personal use only REMUNERATION REPORT (AUDITED) (cont)
Service agreements (audited): (cont)
• Mr Lurie – Base salary of $200,000 per annum (plus superannuation or similar contributions).
o The Company may also, in its absolute discretion, provide a bonus, the value of which, the conditions attached to and the
frequency of such a bonus, remain matters over which the Company exercises sole discretion.
o
If the Company terminates the agreement with reason (such as gross misconduct, conviction of a major criminal offence or
misuse of price sensitive information), the Company will provide the Director with no notice and will be summarily dismissed.
If the Company terminates the agreement without reason (notwithstanding any other provision of the agreement) within
12 months of commencement, the Company will provide the Director with 6 months’ written notice, and thereafter with 2
months’ written notice.
Shareholding and option holding of directors and other key management personnel (audited)
Options held by Directors and Key Management Personnel
The number of options in the Company during the 2019 reporting period held by each of the Group’s Directors and Key Management
Personnel, including their related parties, is set out below:
Personnel
Mr Joe D’Addio
Mr Scott McPherson
Mr David Shein
Mr Joey Fridman
Mr Michael Pollak
Mr Alexander White
Mr Matthew Goggin
Mr Chad Lurie
Mr Danny Loh
Year ended 30 June 2019
Balance at the
start of the year
Options acquired
Received as part of
remuneration
Options exercised
/ disposed
Held at the end
of the year
-
-
-
-
-
-
-
-
181,818
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
181,818
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
363,636
Options held by Directors and Key Management Personnel (continued)
Year ended 30 June 2018
Balance at the
start of the year
Options acquired
Received as part of
remuneration
Options exercised
/ disposed
Held at the end
of the year
-
-
-
-
-
-
-
-
181,818
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
181,818
Personnel
Mr Joe D’Addio
Mr Scott McPherson
Mr David Shein
Mr Joey Fridman
Mr Michael Pollak
Mr Alexander White
Mr Matthew Goggin
Mr Chad Lurie
Mr Danny Loh
014
MOQ ANNUAL REPORTFor personal use only REMUNERATION REPORT (AUDITED) (cont)
Name
Grant Date
Held at 1
July 2018
Granted as
remuneration
Net
change
other
Held at
30 June
2019
Vested
during
the year
and as at
30 June
2019
Total
unvested
at 30
June
2019
Value
per
option
at grant
date
Total value
of options
at grant
date
Exercise
price per
option
Vesting
Date Expiry Date
Wan Yee
(Danny)
Loh
05-Sep-2016
90,909
05-Sep-2016
90,909
01-Jul-2018
01-Jul-2018
-
-
-
-
90,909
90,909
-
-
-
-
90,909
90,909
- 01-Sep-2018 01-Sep-2020
$0.1045
$9,500.00
$0.275
90,909
90,909
90,909
-
-
-
90,909 01-Sep-2019 01-Sep-2020
$0.1045
$9,500.00
$0.275
90,909
01-Jul-2020
01-Jul-2022
$0.0697
$6,336.36
$0.255
90,909
01-Jul-2021
01-Jul-2022
$0.0697
$6,336.36
$0.255
*No other Key Management Personnel were granted remuneration options during the year.
Shares held by Directors and Key Management Personnel
The number of ordinary shares in the Company during the 2019 reporting period held by each of the Group’s Key Management
Personnel, including their related parties, is set out below:
Personnel
Balance at the
start of the
year
Mr Joe D’Addio
17,655,978
Mr Scott McPherson
17,943,478
Mr David Shein
Mr Joey Fridman
Mr Michael Pollak
Mr Alexander White*
Mr Matthew Goggin
Mr Chad Lurie
Mr Danny Loh
4,083,335
18,328,334
2,130,000
-
8,827,989
4,110,457
-
Year ended 30 June 2019
Received
as part of
remuneration Other changes
Acquired
Disposal
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,571,214
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Held at the end
of reporting
period
17,655,978
17,943,478
4,083,335
18,328,334
2,130,000
21,571,214
8,827,989
4,110,457
-
* Mr Alexander White was appointed 1 June 2019. 21,571,214 shares were held at appointment per initial directors notice on 1 June
2019. Shares owned by Viburnum Funds for which Mr White has an indirect interest as a Portfolio Manager.
015
MOQ ANNUAL REPORTFor personal use only REMUNERATION REPORT (AUDITED) (cont)
Shares held by Directors and Key Management Personnel (continued)
Year ended 30 June 2018
Personnel
Balance at the
start of the
year
Received
as part of
remuneration
Other
changes
Acquired
Disposal
Held at the end
of reporting
period
Mr Joe D’Addio
17,655,978
Mr Scott McPherson
17,708,478
Mr David Shein
Mr Joey Fridman
Mr Michael Pollak
Mr Matthew Goggin
Mr Chad Lurie
Mr Danny Loh
4,083,335
18,328,334
2,130,000
8,827,989
4,110,457
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
235,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,655,978
17,943,478
4,083,335
18,328,334
2,130,000
8,827,989
4,110,457
-
Other Equity-related KMP Transactions
There were no equity-related KMP transactions during the year.
Loans to KMP
No loans have been made to KMP during, or since, the year ended 30 June 2019 (2018: $Nil).
Other transactions with KMP or their related parties
MOQdigital provided product sales of $7,418 to the Maia Group (formerly Alleasing Group), a company that is controlled by Monash
Private Capital. Monash Private Capital is an entity associated with Joey Fridman and Da-vid Shein. No amounts related to these
services were outstanding as at 30 June 2019.
During the year, Monash Private Capital was engaged at an arm’s length basis to consult on various acquisition opportunities. Consulting
fees were paid to Monash of $193,826. No amounts related to these services were out-standing as at 30 June 2019.
This directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors.
Non-Executive Chairman
19 September 2019
016
MOQ ANNUAL REPORTFor personal use only
STATEMENT OF CORPORATE GOVERNANCE
STATEMENT OF CORPORATE GOVERNANCE
The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, MOQ Limited and
its Group have adopted the third edition of the Corporate Governance Principles and Recommendations which was released by the
ASX Corporate Governance Council on 27 March 2014 and became effective for financial years beginning on or after 1 July 2014.
The Group’s current Corporate Governance Statement for this reporting period is available on MOQ Limited’s website at
www.moq.com.au/corporate-governance/
017
MOQ ANNUAL REPORTFor personal use only CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Revenue
Revenue
Other income
Total Revenue
Cost of sales
Gross Profit
Expenses
Share based payments
Depreciation & amortisation expenses
Amortisation expenses
Employee costs
Legal costs
ASX and registry related expenses
Marketing expense
Occupancy expenses
Professional fees
Telecommunication carrier expenses
Other expenses
Total expenses
Profit before income tax expense
Income tax benefit / (expense)
Profit after income tax
Other comprehensive (loss) / profit for the year
Exchange differences on translating foreign subsidiaries
Total comprehensive profit for the year
Profit is attributable to
MOQ Limited
Total comprehensive profit is attributable to
MOQ Limited
Earnings per share attributable to
equity holders of the parent entity
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes
2019
$
2018
$
6
6
7
7
7
7
7
7
8
27
27
67,870,016
59,646
67,929,662
59,133,415
139,767
59,273,182
(55,337,023)
(47,525,863)
12,592,639
11,747,319
(197,566)
(400,378)
(324,234)
(6,357,526)
(101,575)
(50,861)
(559,305)
(1,165,982)
(932,732)
(277,559)
(1,596,308)
(11,964,026)
(160,750)
(367,566)
(244,213)
(5,815,013)
(81,153)
(48,667)
(609,643)
(1,080,323)
(319,494)
(340,293)
(1,111,265)
(10,178,380)
628,613
1,568,939
1,659,410
2,288,023
(439,758)
1,129,181
(54,055)
2,233,968
7,779
1,136,960
2,288,023
2,288,023
2,233,968
2,233,968
1.42
1.35
1,129,181
1,129,181
1,136,960
1,136,960
0.70
0.68
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
018
MOQ ANNUAL REPORTFor personal use only
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Current Assets
Cash and cash equivalents
Trade and other receivables
Work In Progress
Tax Receivable
Other assets
Non Current Assets
Other Assets
Deferred tax assets
Property plant and equipment
Intangibles
Total assets
Current Liabilities
Trade and other payables
Deferred revenue
Provisions
Current tax payable
Non - Current Liabilities
Provisions
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total Equity
Notes
2019
$
2018
$
9
10
11
8
12
12
8
13
14
15
16
17
8
17
18
19
20
5,230,606
9,824,238
223,380
81,860
749,317
16,109,401
1,069,524
2,055,485
883,354
15,016,255
19,024,618
3,963,738
9,999,166
455,590
-
1,318,706
15,737,200
422,219
660,367
892,399
14,482,355
16,457,340
35,134,019
32,194,540
8,963,037
2,891,056
1,771,733
56,019
13,681,845
8,325,577
3,021,008
1,705,113
172,893
13,224,591
159,224
108,533
13,841,069
13,333,124
21,292,950
18,861,416
49,615,752
285,277
(28,608,079)
21,292,950
49,615,752
141,766
(30,896,102)
18,861,416
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
019
MOQ ANNUAL REPORTFor personal use only CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Issued Capital
$
Reserves
$
Accumulated Losses
$
Total Equity
$
Balance as at 1 July 2018
49,615,752
141,766
(30,896,102)
18,861,416
Net profit for the year
Other comprehensive loss
Total comprehensive
income for the year
Transactions with owners
in their capacity as owners
Issue of share capital
Option Premium Reserve
Balance as at 30 June 2019
-
-
-
-
-
-
-
2,288,023
(54,055)
-
2,288,023
(54,055)
(54,055)
2,288,023
2,233,968
-
-
197,566
-
-
-
-
-
197,566
49,615,752
285,277
(28,608,079)
21,292,950
Issued Capital
$
Reserves
$
Accumulated Losses
$
Total Equity
$
Balance as at 1 July 2017
49,615,752
(26,763)
(32,025,283)
17,563,706
Net profit for the year
Other comprehensive Profit
Total comprehensive
income for the year
Transactions with owners
in their capacity as owners
Issue of share capital
Option Premium Reserve
Balance as at 30 June 2018
-
-
-
-
-
-
-
7,779
1,129,181
-
1,129,181
7,779
7,779
1,129,181
1,136,960
-
-
160,750
-
-
-
-
-
160,750
49,615,752
141,766
(30,896,102)
18,861,416
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
020
MOQ ANNUAL REPORTFor personal use only CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Income taxes received / paid
Net cash provided by operating activities
Cash flow from investing activities
Payment for property plant and equipment
Payments for intellectual property
Payment for deposits
Payments for other assets
Notes
2019
$
2018
$
74,877,278
64,524,345
(71,586,095)
(62,509,429)
19,035
63,063
3,373,281
13,284
(139,447)
1,888,753
(353,049)
(858,134)
(126,707)
(768,523)
(556,299)
(563,178)
(71,397)
-
30
14
15
Net cash (used in) investing activities
(2,106,413)
(1,190,874)
Cash flow from financing activities
Proceeds from issue of shares
Share issued costs
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
9
-
-
-
-
-
-
1,266,868
3,963,738
5,230,606
697,879
3,265,859
3,963,738
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
021
MOQ ANNUAL REPORTFor personal use only NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements cover MOQ Limited (“Company or “parent entity”) and its controlled entity as a consolidated
entity (also referred to as “the Group”). MOQ Limited is a company limited by shares, incorporated and domiciled in Australia. The
Group is a for-profit entity and is primarily involved in the information technology industry being the field of software and services.
The separate financial statements of the parent entity, MOQ Limited, have not been presented within this financial report as permitted
by the Corporations Act 2001.
The consolidated financial statements were authorised for issue by the Board of Directors on 19 September 2019.
The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation and presentation
of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
(a) Basis of preparation of the financial report
Statement of Compliance
These financial statements are general purpose financial statements which have been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law where
applicable.
Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that
the financial statements and notes of the Company comply with International Financial Reporting Standards (‘IFRS’). It is
recommended that this financial report be read in conjunction with the public announcements made by MOQ Limited during
the year in accordance with the continuous disclosure requirements arising under the Corporations Act 2001.
The financial report has been prepared on the historical cost basis.
When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the
current year. When the Company applies an accounting policy retrospectively, makes a retrospective restatement or reclassifies
items in its financial statements, a statement of financial position as at the beginning of the earliest comparative period will be
disclosed.
(b) Business combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or
businesses under common control. The business combination will be accounted for from the date that control is attained,
whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised
(subject to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is
not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset
or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the
change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial
instrument, are recognised as expenses in profit or loss when incurred.
The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
(c) Goodwill
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of:
-
-
-
the consideration transferred;
any non-controlling interest (determined under either the full goodwill or proportionate interest method); and
the acquisition date fair value of any previously held equity interest over the acquisition date fair value of net identifiable
assets acquired.
The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of
any previously held equity interest shall form the cost of the investment in the separate financial statements.
Fair value re-measurements in any pre-existing equity holdings are recognised in profit or loss in the period in which they
arise. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such
amounts are recycled to profit or loss.
Goodwill on acquisition of subsidiaries is included in intangible assets.
022
MOQ ANNUAL REPORTFor personal use only
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)
(c) Goodwill (cont)
Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or groups of cash-generating
units, representing the lowest level at which goodwill is monitored being not larger than an operating segment. Determining
whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been
allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-
generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than
expected, a material impairment loss may arise.
(d) Critical accounting estimates
The preparation of the financial statements in conformity with IFRS requires the use of accounting estimates. It also requires
management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are
disclosed in Note 2.
(e) Principles of consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (MOQ Limited) and all
of the subsidiaries. Subsidiaries are entities that the parent controls. The parent controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. A list of the subsidiaries is provided in Note 32.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date
on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases.
Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated
on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure
uniformity of the accounting policies adopted by the Group.
(f) Fair Value of Assets and Liabilities
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on
the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or
would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing
market participants at the measurement date.
As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair
value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair
values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques.
These valuation techniques maximise, to the extent possible, the use of observable market data.
To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market
with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous
market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the
asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs).
For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its
highest and best use or to sell it to another market participant that would use the asset in its highest and best use.
These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required
to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based
on observable market data, the asset or liability is included in Level 3.
The Group would change the categorisation within the fair value hierarchy only in the following circumstances:
-
-
if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa;
if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa.
When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e.
transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred.
023
MOQ ANNUAL REPORTFor personal use only
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)
(g)
Income tax
The income tax expense/(income) for the year comprises current income tax expense/(income) and deferred tax expense/
(income).
Current income tax expense or revenue for the year is the tax payable on the current period’s taxable income based on the
notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
Deferred income tax is provided using the liability method on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates
that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases
of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax asset and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
(h) Tax Consolidation Legislation
The Company and its Australian wholly owned subsidiaries have formed an income tax consolidated group under the tax
consolidation legislation for the whole of the financial year. Each entity in the Group recognises its own current and deferred tax
liabilities, except for any deferred tax liabilities resulting from unused tax losses and tax credits, which are immediately assumed
by the parent entity. The Group notified the Australian tax Office it had formed an income tax consolidated group to apply from
1 June 2015. The tax consolidated group has entered a tax sharing agreement whereby each company in the Group contributes
to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group.
(i) Plant and equipment
Each class of plant and equipment is carried at cost less any applicable accumulated depreciation and any accumulated impairment
losses. Plant and equipment is measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by
directors to ensure it is not in excess of the recoverable amount from those assets.
The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets
employment and subsequent disposal. The expected net cash flows have been discounted to present values in determining
recoverable amounts.
The depreciated amount of all fixed assets including capitalised leased assets is depreciated on a straight line basis over their
useful lives commencing from the time the asset is held ready for use.
The expected useful life of plant and equipment ranges from 3 to 15 years.
The assets’ residual values and useful life are reviewed at the balances date. The asset’s carrying amount is written down
immediately to its recoverable amount if the asset’s carrying amount is greater that its estimated recoverable amount.
Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful
lives of the improvements.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included net in profit
or loss.
Depreciation
The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is
depreciated on a straightline basis over the asset’s useful life to the consolidated group commencing from the time the asset is
held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or
the estimated useful lives of the improvements.
024
MOQ ANNUAL REPORTFor personal use only
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset Depreciation Rate
Leasehold improvements
Term of lease
Plant and Equipment
33.33 - 66.67%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are
recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation
surplus relating to that asset are transferred to accumulated losses.
(j) Leases
At inception of an arrangement, the Group determines whether such an arrangement is, or contains, a lease. A specific asset is
the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys
the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset. At
inception, or upon reassessment of the arrangement, the Group separates payments and other consideration required by such
an arrangement into those for the lease and those for other elements on the basis of their relative fair values.
Leases reclassified at their inception as either operating or finance leases based on the economic substance of the arrangement
so as to reflect the risks and benefits incidental to ownership.
Lease of fixed assets where substantially all the risks and rewards incidental to the ownership of the asset, but not the legal
ownership, are transferred to the entity are classified as finance leases. Finance lease are capitalised by recording an asset and
a liability equal to the fair value of the leased property or the present value of the minimum lease payments including any
guaranteed residual values. The interest expense is calculated using the interest rate implicit in the lease and is included in
finance costs in the Statement of Profit or Loss and Other Comprehensive Income. Lease assets are depreciated on a straight
line basis over their estimated useful lives where it is likely that the entity will obtain ownership of the asset or over the term of
the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the year.
Lease payments for operating leases where substantially all the risks and benefits remain with the lessor are recognised as an
expense in the year in which they are incurred. Lease incentives received under operating leases are recognised as a liability and
amortised on a straight line basis over the life of the lease term.
(k) Financial instruments
The Group initially recognises financial assets on the trade date at which the Group becomes a party to a contractual provision
of the instrument.
Financial assets are initially measured at cost. If the financial asset is not subsequently measured at fair value through profit
or less, the initial measurement includes transaction costs that are directly attributed to the asset’s acquisition. The Group
subsequently measures financial assets at either amortised costs or fair value.
A financial asset is subsequently measured at amortised cost using the effective interest method and net of any impairment loss,
if:
- The asset is held with an objective to collect cash flows; and
- The contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets other than those classified as financial assets measured at amortised costs are subsequently measured at fair
value with all changes in fair value recognised in profit or loss.
All financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions
of the instrument. Non derivative financial liabilities are recognised at amortised cost, comprising original debt less principal
payment and amortisation.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. Financial assets
and financial liabilities are offset when the Group has a legal right to offset the amounts and intends either to settle on a net
basis or to realise the assets and settle the liability simultaneously.
025
MOQ ANNUAL REPORTFor personal use only
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)
(l)
Impairment of financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there
is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that
one or more events have occurred after the initial recognition of the asset and that the loss event has a negative effect on the
estimated future cash flows of that assets which can be estimated reliably.
The Group considers evidence of impairment for receivables at both a specific and collective level. All individually significant
receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but
not yet identified.
(m) Impairment of non-financial assets
Intangible assets are tested annually for impairment or more frequently if changes in circumstances indicate that they might be
impaired.
At each reporting date the Group assesses whether there is any indication that individual assets are impaired. Where impairment
indicators exist, recoverable amount is determined and impairment losses are recognised in profit or loss where the asset’s
carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use.
For the purpose of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current marked assessment of the time value of money and the risks specific to the asset.
(n)
Intangible assets
Customer contracts acquired as part of a business combination are recognised separately from goodwill. The customer
contracts are carried at fair value at the date of acquisition less accumulated amortisation and impairment losses. Fair value is
assessed based on the income streams generated from customer contracts after allowing for cost specific to the generation of
those income streams. In the assessment of the carrying value of the intangible assets costs not related to the generation of the
contract related income streams were excluded. These intangibles are separate from the business to which they relate and have
been assessed on this basis. Amortisation is calculated based on the timing of projected cash flows of the contracts over their
estimated useful lives, which at present are 1.5 years to 8 years.
Software acquired as part of a business combination is recognised separately from goodwill. The software is carried at fair value
at the date of acquisition less accumulated amortisation and impairment losses. Amortisation is calculated based on the timing
of projected cash flows of the contracts over their estimated useful lives, which at present are 4 years.
Software created internally is carried at fair value less accumulated amortisation and impairment losses. Amortisation is
calculated based on the timing of projected cash flows over their estimated useful lives, which at present are 5 years.
(o) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options
are recognised as a deduction from equity, net of any tax.
If the entity reacquires its own equity instruments, those instruments are deducted from equity and the associated shares are
cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable costs
net of any taxes is recognised directly in equity.
(p) Foreign currency transactions and balances
The functional currency of each entity in the consolidated entity is measured using the currency of the primary economic
environment in which that consolidated entity operates. The consolidated financial statements are presented in Australian
dollars which is the consolidated entity’s functional and presentation currency.
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated using the spot rate at the end of the financial year. Non monetary
items measured at historical cost continue to be carried at the date of the transaction. Non monetary items measured at fair
value are reported at the exchange rate at the date when the fair values were determined. Material exchange differences arising
on the translation of monetary items are recognised in profit or loss except where deferred in equity as a qualifying cash flow
or net investment hedge. Material exchange differences arising on the translation of non monetary items are recognised inequity
to the extent that the gain or loss is directly recognised in equity otherwise the exchange is recognised in profit or loss.
026
MOQ ANNUAL REPORTFor personal use only
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)
(q) Employee benefits
Wages and salaries and annual leave
Liabilities for wages and salaries, and annual leave, including non monetary benefits, expected to be settled within 12 months of
the reporting date are recognised in other payables, in respect of employees’ services up to the reporting date and are measured
at the amounts expected to be paid when the liabilities are settled, on an undiscounted basis.
Long service leave
The liability for long service leave and annual leave which is not expected to be settled within 12 months of the reporting date
are recognised in the provision for employee benefits and measured as the present value of expected future payments to be
made for services provided by employees up to the reporting date.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on national government bonds with terms
to maturity and currency that match as closely as possible the estimated future cash outflows.
Termination benefits
Termination benefits are payable when employments are terminated before the normal retirement date, or when the employee
accepts voluntary redundancy in exchange for these benefits.
The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of
current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a
result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after reporting date are
discounted to present value.
(r) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the Statement of Financial Position date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the liability.
(s) Cash and cash equivalents
Cash and cash equivalents include cash on hand and at banks, deposits held on call with banks, other short term highly liquid
investments with an original maturity date of three months or less held and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in Statement of Financial Position.
(t) Revenue
Revenue is measured at the fair value of the consideration received or receivable.
All revenue is stated net of the amount of goods and services tax (GST).
Please refer to note 1 (u) below for the new revenue accounting policy that has been adopted for FY19.
(u) New and revised accounting requirements applicable to the FY19 period
A new Standard, being AASB 15: Revenue from Contracts with Customers has been adopted for the FY19 reporting period. No
restatement has been required for previous financial statements.
The group has identified the following main categories by segment:
• Technology – sale of ICT hardware, software and licensing
•
Professional Services – Infrastructure, Cloud, Data & Analytics, Consulting Professional Services and SkoolBag application set
up, web hosting and online marketing services.
• Recurring Services – Managed Services, SkoolBag Mobile App services.
(i)
Rendering of Recurring Services – Managed Services
Managed Services & Mobile App revenues primarily derives from provision of IT service desk and outsourced IT services.
Where consideration is received in advance of performance, it is initially recorded as deferred revenue. Revenue is
recognised as the performance obligations are satisfied which is considered to be evenly over the contracted term.
No changes to revenue recognition were identified under AASB 15.
027
MOQ ANNUAL REPORTFor personal use only
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)
(u) New and revised accounting requirements applicable to the FY19 period (continued)
(ii) Rendering of Services – Professional Services
Revenue from professional services for Infrastructure, Cloud, Data & Analytics and Consulting are recognised over time
either by reference to the stage of completion of the contracts, or by the labour hours incurred to date if provided
for contractually. Stage of completion is measured by reference to labour hours incurred to date as a percentage of
total estimated labour hours for each contract. Where the outcome cannot be reasonably measured, revenue is only
recognised to the extent of the recoverable costs incurred to date of the performance obligation.
No changes to revenue recognition were identified under AASB 15
(iii) Rendering of Services – SkoolBag application set up
Application set up revenues consist of fees charged for the setting up of the mobile application for customers. Where the
Group has an enforceable right to payment for performance completed and no alternative use for the asset, it recognises
revenue at the point of completion of the set up when the performance obligations have been satisfied, as per AASB 15.
No changes to revenue recognition were identified under AASB 15.
(iv) Rendering of Services – SkoolBag web hosting
Hosting revenue primarily derives from website hosting services. Where consideration is received in advance of
performance, it is initially recorded as deferred revenue. Revenue is recognised as the performance obligations are
satisfied which is considered to be evenly over the contracted term.
No changes to revenue recognition were identified under AASB 15.
(v) Rendering of Services – SkoolBag Online marketing
Online marketing revenue consists of rebates received from advertisers for successful customer sign-ups to advertiser
services. Revenue is recognised at the point where advertisers confirm the rebates have been earned.
No changes to revenue recognition were identified under AASB 15.
(vi) Technology Sales and Transaction prices
The Group’s customer contracts may include multiple performance obligations. In these cases the Group allocates the
transaction price to each performance obligation based on the relative standalone selling prices of each distinct service.
Standalone selling prices are determined based on prices charged to customers for individual products and services taking
into consideration the size and length of contracts, service rate cards and the Group’s overall go to market strategy.
No changes to revenue recognition were identified under AASB 15.
(vii) Principal versus agent considerations
The Group acts as an agent for vendors of Cloud Services and recommends such services to customers where appropriate.
Where consumption of such services meet certain criteria set by the vendor, the Group may be entitled to rebates. Such
rebates are recognised in arrears upon confirmation by the vendors of the rebates earned.
No changes to revenue recognition were identified under AASB 15.
(viii) Customer acquisition costs
Incremental costs of obtaining a contract with a customer are capitalised when expected to be recovered under the
contract.
Where costs are incurred in transitioning a Managed Services contract, such costs are capitalised and amortised over the
expected period of benefit.
The Group capitalised $768,523 of customer acquisition costs for the year ended 30 June 2019. These costs are amortised
over the length of the contracts, which is up to 60 months. $74,768 was amortised for the year ended 30 June 2019.
No adjustments have been made for prior periods.
AASB 15 allows entities to immediately expense costs which would have been amortised within a year or less and for
such situations the Group recognises the incremental costs of obtaining contracts as an expense when incurred.
(viii) Taxation impacts
The adoption of AASB 15 has not resulted in a deferral of revenues and costs of goods sold from prior periods into future
periods.
(v) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial
period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
028
MOQ ANNUAL REPORTFor personal use only
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)
(w) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the
weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued
during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Potential ordinary shares are anti-dilutive when their conversion to ordinary shares would increase earnings per share or
decrease loss per share from continuing operations.
(x) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment.
Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by
reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there
is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables.
Refer to Note 1(l) for further discussion on determination of impairment losses.
The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an
impairment allowance had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.
(y) Work in progress
Work in progress is stated as the aggregate of costs incurred to date plus recognised profits less recognised losses and progress
billings. Cost includes all costs directly related to specific contracts, and an allocation of overhead costs attributable to contract
activity in general.
Project profits are recognised on the stage of completion basis and measured using the proportion of costs incurred to date as
compared to expected total costs. Where losses are anticipated they are provided for in full.
Project revenue has been recognised on the basis of the terms of the contract adjusted for any variations or claims allowable
under the contract. Any credit balance in work in progress is reclassified as income in advance.
When the outcome of the project cannot be estimated reliably, revenue is only recognised to the extent that the costs incurred
are recoverable
(z) Trade and other payables
Trade and other payables represent the principal amounts outstanding at balance date, plus, where applicable, any accrued
interest. These amounts are unsecured and are usually settled within 30 days of recognition.
(aa) Operating segments
The Company has identified its operating segments based on internal reports that are reviewed and used by the Board of
Directors (chief operating decision makers) to make financial and operational decisions and to allocate resources. We attribute
sales to an operating segment based on the type of product or service provided to the customer.
We have identified three reportable segments, as follows:
- Technology Sales – provision of vendor hardware, software and associated licenses and maintenance contracts;
-
-
Professional Services – provision of a range of specialist services including consulting, project management, systems and
software engineering services to assist clients with strategy, architecture, design, development and implementation of ICT
solutions; and
Recurring Services – a combination of managed services including operations, support and ICT management, as well as a
range of in-house developed commercialised IP and Cloud (SAAS) based solutions.
The consolidated entity primarily services clients in one geographical segment being Australia, with support from Australia, Sri
Lanka and New Zealand. However, there are no material revenues generated outside of Australia, and as a result no additional
geographical segment information has been provided.
029
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only
NOTES TO THE CONSOLIDATED FINANCIAL REPORT
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)
(bb) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which
are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or
payments to suppliers.
(cc) New Accounting Standards for Application in Future Periods
Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the Group, together
with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are
discussed below:
AASB 16: Leases
Applicable to annual reporting periods commencing on or after 1 January 2019. When effective, this Standard will replace the
current accounting requirements applicable to leases in AASB 117: Leases and related interpretations. AASB 16 introduces a
single lessee accounting model that eliminates the requirement for leases to be classified as either operating leases or finance
leases. Lessor accounting remains similar to current practice.
The main changes introduced by the new Standard are as follows:
(i)
(ii)
(iii)
(iv)
recognition of the right-to-use asset and liability for all leases (excluding short term leases with less than 12 months of
tenure and leases relating to low value assets);
depreciating the right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding
of the liability in principal and interest components;
inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease liability using
the index or rate at the commencement date;
application of a practical expedient to permit a lessee to elect not to separate non-lease components and instead account
for all components as a lease; and
(v)
additional disclosure requirements.
The transitional provisions of AASB 16 allow a lease to either retrospectively apply the Standard to comparatives in line with
AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity at the date of initial
application.
Estimated impact of AASB 16 on the Group when the standard is applied
Due to the adoption of AASB 16, the Group’s EBITDA will improve, while its interest and Amortisation (Depreciation) expense
will increase. This is due to the change in the accounting for expenses of leases that were classified as operating leases under
AASB 117. The current liabilities will be increased which could reduce the net working capital of the Group
At the 30 June 2019 the Group expects the following impact if the standard was adopted
Statement of Financial Position
The right of Asset
$2,666,927
Lease Liability –Current
($703,784)
Lease Liability –Non-Current
($2,362,528)
Retained Earnings
($399,385)
The Group expects the impact to reduce profit before tax for 30 June 2019 of $24,463 and that operating cashflows will
increase by $703,784.
030
MOQ ANNUAL REPORTFor personal use only
NOTE 2: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best
available current information. Estimates assumed a reasonable expectation of future events and are based on current trends and
economic data, obtained both externally and within the Company.
Key Estimates
Impairment of Non-Current Assets
The Company assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to an
impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations
performed in assessing recoverable amounts incorporate a number of key estimates.
Debtors (Bad Debt Provision)
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is
assessed by taking into account the recent sales experience, historical collection rates and specific knowledge of the individual
debtors’ financial position.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill
has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the
cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than
expected, a material impairment loss may arise.
Taxation
The Group’s accounting policy for taxation requires management’s judgment in assessing whether deferred tax assets and deferred
tax liabilities are recognized in the Statement of Financial Position. Deferred tax assets, including those arising from un-recouped tax
losses and temporary differences are recognized only where it is considered more likely than not that they will be recovered, which
is dependent upon the generation of sufficient future taxable profits.
Assumptions about the generation of future profits depend upon management’s estimates of future profitability and cash flows. These
depend upon estimates of future income, operating costs, capital expenditure, dividends and other capital management transactions.
Judgments and assumptions are also required in relation to the application of income tax legislation. These judgments and assumptions
are subject to risk and uncertainty. Therefore there is a possibility that changes in circumstances will alter expectations, which
may impact the amount of deferred tax assets and deferred tax liabilities recognized in the Statement of Financial Position and the
amount of tax losses and temporary differences not yet recognized. In such circumstances, some or all of the carrying amounts of
recognized deferred tax assets and liabilities may require adjustment, resulting in a correction to the Statement of Profit or Loss and
Comprehensive Income.
Share-based payments
The fair value of options issued under the MOQ Limited Employee Incentive Plan is measured by reference to the fair value of options
granted. The fair value estimate is based on the Black Scholes option-pricing model. The contractual life of the options is used as an
input into the model. Further information regarding assumptions is included in Note 30.
031
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 3: FINANCIAL RISK MANAGEMENT
Recoverability of Work in Progress
The Company assesses work in progress on a monthly basis to determine whether the amounts accrued are recoverable to the Group
when billed to customers. At the reporting date, the directors believe that the carrying value of work in progress is recoverable in full.
Valuation of Provisions
The Company has assessed the value of provisions at the reporting date in line with the accounting policy at Note 1(r).
Risk management is the role and responsibility of the board. The Group’s current activities expose it to minimal risk. However, as
activities increase there may be exposure to credit, liquidity, foreign currency and interest rate risks.
Determination of Intangible Property Acquired
The company has assessed the value of intangible property acquired from the acquisition of Skoolbag and Tetran using management’s
judgement in determining the fair values of the property acquired.
(a) Credit Risk
The Group has no significant concentrations of credit risk other than one large debtor amount of $1.6m (16% of total trade
receivables as at 30 June 2019). As at the date of this report approximately $539k has been received. As there are no other
major concentration of debtors, no sensitivity analysis has been prepared by the Group. The ageing of the Group’s trade and
other receivables net of bad debt provisions at the reporting date is:
Current
30 - 60 days
60 - 90 days
More than 90 days
2019
$
6,301,563
1,700,488
539,351
1,282,836
9,824,238
2018
$
8,399,625
903,390
499,741
196,410
9,999,166
The directors believe that the above stated balances are fully recoverable.
(b) Liquidity
Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. The
Group manages liquidity risk by preparing forecasts and monitoring actual cash flows and requirements for future capital
raisings. The Group has a committed credit line available, which is appropriate given the nature of its operations. Surplus funds
are invested in a cash management account with Westpac Banking Corporation, St George and HSBC which is available as
required.
The material liquidity risk for the Group is the ability to raise equity or access debt finance as required in the future.
032
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only
NOTE 3: FINANCIAL RISK MANAGEMENT (continued)
(c)
Interest rate risk
The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of
changes in market rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is:
Floating
Interest Rate
$
1 year or less
Fixed Interest
Rate
$
Non Interest
Bearing
$
Over 1 to 5
years
Non Interest
Bearing
$
$
Total
$
30 June 2019
Financial assets
Cash and deposits
Current receivables
Other assets
Weighted average interest rate
Financial liabilities
Trade and other payables
Borrowings
Tax Payable
Weighted average interest rate
265,539
-
-
265,539
0%
-
-
-
-
Nil
-
-
-
-
-
-
-
-
-
4,965,067
9,824,238
112,017
14,901,322
-
-
545,991
545,991
5,230,606
9,824,238
658,008
15,712,852
(8,963,037)
-
(56,019)
(9,019,056)
-
-
-
-
(8,963,037)
-
(56,019)
(9,019,056)
5,882,266
545,991
6,693,796
Net financial assets
265,539
The directors do not consider the results of the Group to be subject to significant sensitivity arising from interest rate risks.
Floating
Interest Rate
$
1 year or less
Fixed Interest
Rate
$
Non Interest
Bearing
$
Over 1 to 5
years
Non Interest
Bearing
$
Total
$
30 June 2018
Financial assets
Cash and deposits
Current receivables
Other assets
Weighted average interest rate
Financial liabilities
Trade and other payables
Borrowings
Tax Payable
Weighted average interest rate
1,807,947
-
-
1,807,947
0%
-
-
-
-
Nil
Net financial assets
1,807,947
(d) Foreign currency risk
-
-
-
-
-
-
-
-
-
2,155,791
9,999,166
27,117
12,182,074
-
-
422,219
422,219
3,963,738
9,999,166
449,336
14,412,240
(8,325,577)
-
(172,893)
(8,498,470)
-
-
-
-
(8,325,577)
-
(172,893)
(8,498,470)
3,683,604
422,219
5,913,770
The Group has subsidiaries in Sri Lanka and New Zealand, which serves primarily as service and support centres. As all
intercompany loans are repayable in AUD$, the group is not materially exposed to foreign currency risk and as such, no
sensitivity analysis has been made by the Group.
033
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only
NOTE 3: FINANCIAL RISK MANAGEMENT (continued)
(e) Fair value hierarchy
The Group has not disclosed the fair values for financial instruments such as short-term trade receivables and payables because
their carrying amounts are a reasonable approximation of their fair values.
NOTE 4: SEGMENT INFORMATION
The segment information provided to the Board of directors, for the reportable segments* is as follows:
30 June 2019
Recurring
Services
$
Professional
Services
$
Technology
Sales
$
Unallocated
$
Total
$
Revenue from external customers
Other income
13,545,139
-
17,792,941
-
36,531,936
-
-
59,646
67,870,016
59,646
Total Reportable Segment results
3,303,917
3,071,620
6,157,456
(11,904,380)
628,613
Total segment assets
Total segment liabilities
30 June 2018
-
-
-
-
-
-
35,134,019
35,134,019
13,841,069
13,841,069
Revenue from external customers
Other income
11,358,397
-
18,124,518
-
29,650,500
-
-
139,767
Total Reportable Segment results
2,326,283
3,967,355
5,313,914
(10,038,613)
59,133,415
139,767
1,568,939
32,194,540
32,194,540
13,333,124
13,333,124
Total segment assets
Total segment liabilities
-
-
-
-
-
-
*please refer to Note 1(aa) for a description of each of the Reportable Segments.
034
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only
NOTE 5: PARENT ENTITY DETAILS
Summarised presentation of the parent entity, MOQ Limited:
(a) Summarised statement of financial position
Assets
Current assets
Non current assets
Total assets
Liabilities
Current liabilities
Non current liabilities
Total liabilities
Net assets
Equity
Share Capital
Reserves
Accumulated losses
Total equity
(b) Summarised statement of comprehensive income
Profit / (Loss) for the year after tax
Total comprehensive income / (loss) for the year
(c) Guarantees entered into by the parent
The parent has not entered into any guarantees other than disclosed in this report.
(d) Contingent liabilities of the parent
The parent is not aware of any contingent liabilities other than disclosed in this report.
(e) Commitments of the parent
The parent does not have any commitments other than disclosed in this report.
NOTE 6: REVENUE AND OTHER INCOME
(a) Revenue from operations1
(b) Other income
Interest received
Other income
2019
$
2018
$
320,374
19,905,394
20,225,768
232,518
19,164,855
19,397,373
(95,028)
(224,998)
(1,375,813)
(1,372,854)
(1,470,841)
18,754,927
(1,597,852)
17,799,521
49,615,752
49,615,752
478,611
281,045
(31,339,437)
(32,097,276)
18,754,926
17,799,521
757,847
757,847
(290,124)
(290,124)
2019
$
2018
$
67,870,016
59,133,415
19,035
40,611
59,646
13,284
126,483
139,767
Total revenue and other income
67,929,662
59,273,182
1 Refer to Note 1(u) for the Group’s new accounting policy for FY19 and the impact of the application of AASB 15
035
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 7: OPERATING PROFIT
Profit before income tax includes the following expenses:
(a) Cost of sales
Technology
Recurring services
Professional services
(b) Depreciation – office equipment and software
Amortisation – intangible assets
(c) Employee benefits, other labour and related expenses
Wages and salaries
Superannuation
Other employee benefits expenses
(d) Legal costs
(e) Professional fees
Consultants fees1
Compliance fees
Other Fees
2019
$
2018
$
30,374,480
10,241,222
14,721,321
55,337,023
400,378
324,234
724,612
4,682,355
352,569
1,322,602
6,357,526
24,336,586
9,032,114
14,157,163
47,525,863
367,566
244,213
611,779
4,242,663
357,929
1,214,421
5,815,013
101,575
81,153
757,699
162,967
12,066
932,732
108,717
195,153
15,624
319,494
1 Includes $349,462 tax advisory costs for recovery of historical deferred tax asset of $1,647,442 by way of a Private Ruling from the Australian Tax
office.
NOTE 8: INCOME TAX
(a) The components of tax benefit / (expense) comprise:
Current tax
Deferred tax
(b) Numerical Reconciliation of Income Tax Expense to Prima Facie Tax Payable
Profit before income tax expense
Income tax calculated at 30% (2018: 30%)
Tax rate differential
Other expenditure not allowed for income tax purposes
Foreign exchange differences
R&D offset income tax variance
Over Provision in respect of prior years
Other income for income tax purposes
Temporary income tax differences
Tax effect of tax losses able to be utilised due to private tax ruling
Income tax (expense) / benefit
The applicable weighted average effective tax rates are as follows:
036
2019
$
2018
$
264,292
1,395,118
1,659,410
(357,517)
(82,241)
(439,758)
628,613
(188,584)
7,727
8,435
-
-
142,022
42,368
111,961
1,535,481
1,659,410
263.98%
1,568,939
(470,682)
3,122
14,174
(23)
13,651
-
-
-
-
(439,758)
(28.0%)
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 8: INCOME TAX (continued)
(c) Tax effects relating to other comprehensive income
There is no tax effect relating to components of other comprehensive income.
(d) Unrecognised Tax losses
Potential tax benefit at 30% (2018: 30%)
(e) Current tax payable / recoverable
2019
$
2018
$
-
-
Current tax payable is $56,019, relating to income tax for MOQdigital NZ Limited.
Current tax receivable is $81,860 relating to income tax instalments paid for Iimage Technical Services Pty Ltd (“Skoolbag”)
(f) Recognised deferred tax assets and liabilities
Deferred income tax balances at 30 June 2019 relate to the following:
(i) Deferred tax liabilities
Prepaid expenditure
Other
Deferred Tax Liabilities
(ii) Deferred tax assets
Provisions
M&A costs
Deferred Revenue
Other Assets
Employee obligations
Other
Tax losses*
Deferred Tax Assets
-
-
-
519,191
41,953
360,662
208,153
537,761
54,724
333,041
2,055,485
(4,010)
-
(4,010)
54,821
44,698
-
-
510,135
54,724
-
664,378
* A private ruling was lodged on 5 February 2019 (after finalisation of the 2018 financial statements but before lodgement of the
2018 Income Tax Return) applying for modification of the continuity of ownership test for tax losses related to the entity prior to
reconstruction that were initially treated as lost in accordance with the continuity of business rules under the Australian Taxation
legislation. On 11 April 2019, the Australian Taxation Office ruled in favour of MOQ and tax returns were amended to ensure use
of the losses. The amendments resulted in additional tax losses of $5,118,269 being recognised.
(g) Tax consolidation
For the purposes of income taxation MOQ Limited and its 100% Australian owned subsidiaries form a tax consolidated group.
The head entity of the consolidated group is MOQ Limited.
The head entity is responsible for the liabilities of the group. Intra group transactions are ignored for tax purposes and there is a
single return lodged on behalf of the group.
037
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 9: CASH AND CASH EQUIVALENTS
Cash at bank
NOTE 10: TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for doubtful debts
Other receivables
2019
$
2018
$
5,230,606
3,963,738
5,230,606
3,963,738
2019
$
2018
$
10,172,536
10,061,201
(386,386)
(113,825)
38,088
51,790
9,824,238
9,999,166
Management believes that any debts that have not provided for and are past due by more than 30 days are still collectible in full based
on historic payment behaviour. The amounts that are past due but not impaired are $3,288,729 at 30 June 2019.
Please refer to Note 3(a) for a further breakdown of the ageing of receivable amounts.
NOTE 11: WORK IN PROGRESS
2019
$
2018
$
233,380
233,380
455,590
455,590
2019
$
2018
$
30,157
548,848
170,312
749,317
545,407
524,117
27,117
1,291,589
-
1,318,706
422,219
-
1,069,524
422,219
Work In Progress
NOTE 12: OTHER ASSETS
(a) OTHER ASSETS - CURRENT
Deposits
Prepayments
Other
(a) OTHER ASSETS – NON-CURRENT
Deposits
Other
038
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 13: PROPERTY, PLANT AND EQUIPMENT
At 30 June 2019
Cost
Accumulated depreciation
At 30 June 2018
Cost
Accumulated depreciation
Leasehold
Improvements
$
Office
Equipment &
Software
$
865,145
(420,327)
444,818
748,831
(266,432)
482,399
1,367,503
(928,967)
438,536
1,119,186
(709,186)
410,000
Reconciliation of carrying amounts at the beginning and end of the year:
At 1 July 2018
Additions
Disposals
Depreciation
Foreign currency translation differences
At 30 June 2019
At 1 July 2017
Additions
Disposals
Depreciation
Foreign currency translation differences
At 30 June 2018
Total
$
2,232,648
(1,349,294)
883,354
1,868,017
(975,618)
892,399
Total
$
892,399
399,377
(11,584)
Leasehold
Improvements
$
Plant and
Equipment
$
482,399
116,752
-
410,000
282,625
(11,584)
(154,333)
(246,045)
(400,378)
-
444,818
183,545
449,983
-
3,540
438,536
341,991
296,119
(10,234)
3,540
883,354
525,536
746,102
(10,234)
(151,129)
(216,437)
(367,566)
-
482,399
(1,439)
410,000
(1,439)
892,399
039
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only 2019
$
2018
$
9,339,308
9,339,308
3,942,630
3,942,630
488,196
637,239
13,770,134
13,919,177
1,441,875
(195,754)
1,246,121
583,741
(20,563)
563,178
15,016,255
14,482,355
Skoolbag software
development
$
563,178
858,134
-
(175,191)
1,246,121
-
583,741
-
(20,563)
563,178
NOTE 14: INTANGIBLE ASSETS
Goodwill on acquisition of TETRAN Group
Goodwill on acquisition of Skoolbag
Intangible Property Acquired Skoolbag
Intangible Property – Skoolbag software development - cost
Intangible Property – Skoolbag software development - accumulated depreciation
Reconciliation of carrying amounts at the beginning and end of the year:
At 1 July 2018
Additions
Disposals
Amortisation
At 30 June 2019
At 1 July 2017
Additions
Disposals
Amortisation
At 30 June 2018
040
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 14: INTANGIBLE ASSETS (continued)
Impairment Testing:
Goodwill arising from a business combination is allocated to CGUs (cash generating units) or groups that are expected to benefit from
the synergies of the combination. Accordingly, TETRAN’s CGU has been combined with certain MOQdigital income. For the purposes
of impairment testing, goodwill has been allocated to MOQ’s CGUs as follows:
TETRAN – Managed Services
TETRAN – Professional Services
TETRAN - Technology
Skoolbag
2019
$
2018
$
4,756,889
4,756,889
2,444,598
2,444,598
2,137,821
2,137,821
3,942,630
3,942,630
13,281,938
13,281,938
The recoverable amounts were based on fair values estimated using discounted cash flows.
The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions
represents management’s assessment of future trends in the ICT industry and have been based on data from both external and internal
sources.
TETRAN
Discount rate
Terminal Value Growth Rate
Skoolbag
Discount rate
Terminal Value Growth Rate
2019
14%
2.5%
2019
14%
1%
The discount rate was a post-tax measure estimated based on a conservative mix of historical weighted average cost of capital and
debt.
The cashflow projections included specific estimates for 3 years for TETRAN and 3 years for Skoolbag. The basis of estimation of the
three-year cash flows uses the following key operating assumptions:
- Three year budgeted EBITDA is based on management’s forecasts of revenue from its operating segments. Revenue forecasts take
into account historical revenue and consider external factors such as market sector.
- Costs are calculated taking into account historical margins, known increases and estimated inflation rates over the period.
The estimated recoverable amount of the CGUs exceeded their carrying amounts by $4.1 million for TETRAN and $1.67m for
Skoolbag. Management recognises that actual results (EBITDA) may vary to what has been estimated. Management has identified that
a possible change in either of two key assumptions could cause the carrying amount to exceed the recoverable amount. The following
table shows the amount by which these two assumptions would need to change individually for the estimated recoverable amount to
be equal to the carrying amount.
Discount Rate
Average Budgeted EBITDA growth rate
TETRAN-
Managed
Services
2019
TETRAN-
Professional
Ser-vices
2019
15%
9%
18%
16%
TETRAN-
Technology
2019
38%
8%
Skoolbag
2019
18%
36%
041
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 15: TRADE AND OTHER PAYABLES
Trade creditors
Other payables and accrued expenses
There are no trade and other payables that are considered past due.
NOTE 16: DEFERRED REVENUE
CURRENT
Unearned income – subscription, consulting and licenses
NOTE 17: PROVISIONS
CURRENT
Employee entitlements
- Provision for Annual Leave
- Provision for Long Service Leave
NON-CURRENT
Employee entitlements
- Provision for Long Service Leave
2019
$
2018
$
7,020,552
6,867,231
1,942,485
1,458,346
8,963,037
8,325,577
2019
$
2018
$
2,891,056
2,891,056
3,021,008
3,021,008
2019
$
2018
$
1,013,140
758,593
860,801
844,312
1,771,733
1,705,113
159,224
159,224
108,533
108,533
Employee provisions includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave
entitlements that have vested due to employees having completed the required period of service. Based on past experience, the
company does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled
within the next 12 months. However, these amounts must be classified as current liabilities since the company does not have an
unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement.
042
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 18: SHARE CAPITAL
(a) Details of share issues
2019
2018
No. Of Shares
Share Value $
No. Of Shares
Share Value $
Balance at the beginning of the year
161,320,702
49,615,752
161,320,702
49,615,752
Movement
-
-
-
-
Balance at the end of the year
161,320,702
49,615,752
161,320,702
49,615,752
For the 2019 financial year:
Holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at
shareholder meetings, otherwise each member present at a meeting or by proxy has one vote on a show of hands. In the event of the
winding up of the Company, ordinary shareholders rank after creditors and share in any proceeds on winding up in proportion to the
number of shares held.
(b) Options
Unlisted
Unlisted
Total
Balance at
30/06/2018
3,690,901
-
3,690,901
Balance at
30/06/2019
3,690,901
4,036,358
7,727,259
Exercise price
Expiry
$0.275
$0.255
01/09/2020
01/07/2022
A summary of the movements of all company options issues is as follows:
Options outstanding at 30 June 2018
Granted
Forfeited
Exercised
Expired
Options outstanding at 30 June 2019
Options exercisable as at 30 June 2019
The weighted average life of the outstanding share options at 30 June 2019 is 2.13 years.
Options outstanding at 30 June 2017
Granted
Forfeited
Exercised
Expired
Options outstanding at 30 June 2018
Options exercisable as at 30 June 2018
No. of
Options
Weighted Average
Exercise Price
3,690,901
4,036,358
-
-
-
7,727,259
1,804,951
$0.275
$0.255
-
-
-
$0.265
$0.275
No. of
Options
Weighted Average
Exercise Price
3,707,568
$0.305
-
-
-
(16,667)
3,690,901
-
-
-
-
$7.00
$0.275
-
043
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 18: SHARE CAPITAL (continued)
(d) Capital management
Management controls the capital of the Group in order to generate long-term shareholder value and ensure that the Group can
fund its operations and continue as a going concern.
The Group’s capital includes ordinary share capital supported by financial assets.
The Group is not subject to any externally imposed capital requirements.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in
response to changes in these risks and in the market. These responses include the management of debt levels, distributions to
shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.
NOTE 19: RESERVES
Reserves at the beginning of financial year
Option Premium Reserve1
Foreign Exchange Translation Reserve
Reserves at end of financial year
1 Refer to note 18(b) for details of options outstanding at 30 June 2019
NOTE 20: ACCUMULATED LOSSES
Accumulated losses at beginning of financial year
Net profit for the year after income tax
Accumulated losses at end of financial year
NOTE 21: FRANKING CREDITS
2019
$
141,766
197,566
(54,055)
285,277
2018
$
(26,763)
160,750
7,779
141,766
2019
$
2018
$
(30,896,102)
(32,025,283)
2,288,024
1,129,181
(28,608,078)
(30,896,102)
2019
$
2018
$
Franking credits available for subsequent financial years based on a tax rate of 30%
964,270
1,089,071
044
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only
NOTE 22: KEY MANAGEMENT PERSONNEL DISCLOSURE
Compensation received by key management personnel of the consolidated entity:
Short term employee benefits
Other payments
Other long-term employee benefits
Post employment benefits
Short-term employee benefits
2019
$
2018
$
1,210,155
1,195,520
81,000
9,238
72,000
7,919
108,528
108,071
1,408,921
1,383,510
These amounts include fees and benefits paid to the non-executive Chair and non-executive directors as well as all salary, paid leave
benefits, fringe benefits and cash bonuses awarded to executive directors and other KMP.
Other payments
These amounts represent cash bonus and commissions payments awarded to KMP.
Other long-term benefits
These amounts represent long service leave benefits accruing during the year, long-term disability benefits, deferred bonus and share
based payments.
Post-employment benefits
These amounts are the current-year’s estimated cost of providing for the Group’s superannuation contributions made during the year.
Further information in relation to KMP remuneration can be found in the directors’ report.
NOTE 23: RELATED PARTY TRANSACTIONS
(a) The Group’s main related parties are as follows:
(i) Key management personnel:
Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or
indirectly, including any director (whether executive or otherwise) of that entity, are considered key management personnel.
For details of disclosures relating to key management personnel, refer to Note 23.
(ii) Other related parties:
Other related parties include entities over which key management personnel have joint control.
(b) Transactions with related parties:
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available
to other parties unless otherwise stated.
MOQdigital provided product sales of $7,418 to the Maia Group (formerly Alleasing Group), a company that is controlled by
Monash Private Capital. Monash Private Capital is an entity associated with Joey Fridman and David Shein. No amounts related
to these services were outstanding as at 30 June 2019.
During the year, Monash Private Capital was engaged at an arm’s length basis to consult on various acquisition opportunities.
Consulting fees were paid to Monash of $193,826. No amounts related to these services were outstanding as at 30 June 2019.
On 1st September 2019, MOQ successfully completed the acquisition of Wardy IT Solutions Pty Ltd. As per the terms of their
contract, Monash Private Capital is entitled to a success fee of $250,000 which is payable on completion.
(c) Loans to/from related parties:
There are no amounts outstanding or payable to related parties as at 30 June 2019 (2018: $Nil).
045
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only
NOTE 24: AUDITOR’S REMUNERATION
Amounts paid / payable to Stantons International for audit and review
work undertaken under the Corporation Act 2001
Amounts paid / payable to Ernst and Young for audit and review
work undertaken in Sri Lanka
NOTE 25: CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are no contingent assets or liabilities.
NOTE 26: CAPITAL AND LEASING COMMITMENTS
Operating lease commitments
Payable - minimum lease payments
- not later than 1 year
- later than 1 year and not later than 5 years
- later than 5 years
NOTE 27: EARNINGS PER SHARE
Operating lease commitments
(a) Basic earnings per share (cents per share)
From continuing operations
(b) Diluted earnings per share (cents per share)
From continuing operations
2019
$
2018
$
94,500
71,000
8,946
12,203
2019
$
706,978
2,310,380
-
2018
$
538,693
837,971
-
3,017,358
1,376,664
2019
$
2018
$
1.42
0.70
1.35
0.68
(c) Reconciliation of earnings in calculating earnings per share
Basic and diluted profit per share
Profit from continuing operations attributable to ordinary equity holders
2,288,024
1,129,181
(d) Total shares
Weighted average number of ordinary shares outstanding during the year used in the
calculation of basic earnings per share
161,320,702
161,320,702
Weighted average number of ordinary shares outstanding during the year used in the
calculation of diluted earnings per share
169,047,961
165,011,603
NOTE 28: DISCONTINUED OPERATIONS
There were no discontinued operations in FY19.
046
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 29: CASH FLOW INFORMATION
Reconciliation of net cash provided by operating activities to net profit after tax
Profit for the period after tax
Add back: Income tax (benefit) / expense
Profit for the period before tax
Non cashflows and non-operating cashflows in profit:
Depreciation / Amortisation
Share option expense
Change in assets and liabilities:
Decrease / (Increase) in trade debtors
Decrease / (Increase) in work in progress
Decrease / (Increase) in other current assets
Decrease / (Increase) in deferred tax assets
Increase / (Decrease) in payables
Increase / (Decrease) in unearned revenue
Increase / (Decrease) in provision for employee entitlements
Cash flow from operations
NOTE 30: SHARE BASED PAYMENTS
2019
$
2018
$
2,288,023
1,129,181
(1,659,410)
439,758
628,613
1,568,939
724,612
197,566
611,779
160,750
278,620
232,210
742,636
-
581,664
(129,952)
117,311
3,373,281
(1,811,246)
(146,012)
(831,699)
27,517
678,451
1,308,354
321,920
1,888,753
The assessed fair value of the 4,036,358 options granted during the year was $281,249 (2018:$Nil) as calculated at the date of grant
using the Black-Scholes model for the valuation of call options, the inputs of which included:
No of options
Grant date
Exercise by
Expected average life of the options
Exercise price per share
Share price at grant date
Expected volatility
Risk-free interest rate
Value of options at grant date
4,036,358
1 July 2018
1 July 2022
4 years
25.5 cents
24 cents
46.78%
2.28%
$281,249
Further details regarding share based payments to key management personnel can be found in the audited Remuneration Report set
out in the Director’s Report.
047
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only NOTE 31: CONTROLLED ENTITIES
Name of entity
Country of Incorporation
Class of Shares
iimage Technical Services Pty Ltd
TETRAN Pty Ltd
MOQdigital NZ Limited
MOQdigital (Singapore) Pte Limited*
MOQdigital Asia Pacific (PVT) Limited
MOQdigital Pty Ltd
Pinnacle Software (Australia) Pty Ltd
Coral Communities Pty Ltd
Australia
Australia
New Zealand
Singapore
Sri Lanka
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity holding
2019
100%
100%
100%
-
100%
100%
100%
100%
2018
100%
100%
100%
100%
100%
100%
100%
-
* MOQdigital (Singapore) Pte Limited, a dormant subsidiary, was de-registered on 7 March 2019
** Coral Communities Pty Ltd was incorporated on 2 April 2019
NOTE 32: EVENTS SUBSEQUENT TO REPORTING DATE
MOQ Limited completed the acquisition of Wardy IT Solutions Pty Ltd (Wardy IT) on 1st September 2019.
The acquisition was settled for an upfront consideration of $6.4m in cash and shares, after adjusting for $1.1m in net debt and working
capital.
The consideration was $2m funded out of existing MOQ cash reserves, and $4.4m issued in shares, equating to 16,142,939 MOQ
shares issued at 27.5c per share.
A further earn-out capped at $6m may become payable in October 2020 in relation to Wardy IT financial performance for the 12
months ending 31 August 2020, subject to achieving certain performance criteria.
END OF AUDITED STATEMENTS
048
MOQ ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL REPORTFor personal use only DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of MOQ Limited (the “Company”), the directors of the company declare that:
1.
In the opinion of the directors of the Company, the financial statements and notes, as set out on pages 18 to 48 are in
accordance with the Corporations Act 2001 and
i.
ii.
comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements,
constitutes compliance with International Financial Reporting Standards (IFRS); and
give a true and fair view of the financial position as at 30 June 2019 and of the performance for the year ended on that date
of the consolidated group;
2.
3.
4.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when
they become due and payable;
the audited remuneration disclosures set out on pages 11 to 16 of the directors’ report comply with accounting standard AASB
124 Related Party Disclosures and the Corporation Regulations 2001; and
the directors have been given the declarations required by s 295A of the Corporations Act 2001 from the Chief Executive Officer.
On behalf of the Directors
David Shein
Non Executive Chairman
19 September 2019
049
MOQ ANNUAL REPORTFor personal use only
PO Box 1908
West Perth WA 6872
Australia
Level 2, 1 Walker Avenue
West Perth WA 6005
Australia
Tel: +61 8 9481 3188
Fax: +61 8 9321 1204
ABN: 84 144 581 519
www.stantons.com.au
Stantons International Audit and Consulting Pty Ltd
trading as
Chartered Accountants and Consultants
19 September 2019
Board of Directors
MOQ Limited
Suite 1,Ground Floor
3-5 West Street
North Sydney,NSW,2060
Dear Sirs
RE: MOQ LIMITED
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of MOQ Limited.
As Audit Director for the audit of the financial statements of MOQ Limited for the year ended 30 June 2019, I
declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
Yours faithfully,
STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(Trading as Stantons International)
(An Authorised Audit Company)
Samir Tirodkar
Director
Liability limited by a scheme approved
under Professional Standards Legislation
For personal use only
Stantons International Audit and Consulting Pty Ltd
trading as
Chartered Accountants and Consultants
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
MOQ LIMITED
PO Box 1908
West Perth WA 6872
Australia
Level 2, 1 Walker Avenue
West Perth WA 6005
Australia
Tel: +61 8 9481 3188
Fax: +61 8 9321 1204
ABN: 84 144 581 519
www.stantons.com.au
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of MOQ Limited, the Company and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of
profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial statements, including
a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Liability limited by a scheme approved
under Professional Standards Legislation
For personal use only
Key Audit Matters
We have defined the matters described below to be key audit matters to be communicated in our report.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key Audit Matters
How the matter was addressed in the audit
Revenue recognition
AASB 15 Revenue
from Contracts with
Customers (AASB 15) became effective for
periods beginning on or after 1 July 2018. A
substantial amount of
the Group’s revenue
relates to revenue from sale of goods and
rendering
included
professional services and managed services).
The Group offers many products and services to
its customers
that require different revenue
recognition accounting policies given different
performance obligations profiles, as outlined in
note 1(u) to the financial statements.
services
(which
of
Revenue recognition has been assessed as key
audit matter due to the different recognition
polices.
Impairment of Goodwill
The Group carries Goodwill totalling $13,281,938
(refer to Note 14) in terms of the application of
the Group's accounting policy for
Intangible
assets, as set out in Note 1(c).
The carrying value of Goodwill is a key audit
matter due to:
The significance of the total balance (38%
of total assets);
For the CGU’s which contain goodwill, the
determination of
recoverable amount,
being the higher of fair value less costs to
sell and value-in-use, requires judgement
on
in both
identifying and then valuing the relevant
CGU’s.
the part of management
The assessment of impairment of the
Group’s goodwill balances incorporated
significant judgement in respect of factors
such as discount rates and growth rates.
A key audit matter for us was whether the
Group’s value in use model for impairment
included appropriate consideration of
these
factors on
their significant estimates and
judgements and the selection of Key external
and internal inputs.
Inter alia, our audit procedures included the following:
Our audit procedures included considering the
revenue
in
i.
appropriateness of
recognition accounting policies
accordance with AASB 15.
the Group’s new
to ensure
ii.
Performing tests for accuracy, completeness
and cut-off of customer invoicing on a sample basis.
iii.
Performing cut-off procedures to ensure all
revenue was captured in the appropriate financial
year;
Assessing
iv.
related disclosures within the financial report.
the adequacy of
the Group’s
Inter alia, our audit procedures
following:
included
the
We assessed management’s determination of
i.
the Group’s CGUs based on our understanding of the
nature of
the Group’s Business and economic
environment in which the CGUs operate. We also
analysed the internal reporting of the Group to
assess how earnings streams are monitored and
reported;
We
evaluated management’s
ii.
process
regarding valuation of the Group’s goodwill assets to
tested
determine any asset
management’s models, such as the preparation and
review of forecasts.
impairments. We
iii.
We challenged the Group’s assumptions and
estimates used to determine the recoverable value of
its assets,
forecast
including
revenue, cost and discount rates.
those relating
to
We checked the mathematical accuracy of the
iv.
cash flow models and agreed relevant data to the
latest forecasts;
vi.
We performed sensitivity analysis in two main
areas. These included the discount rate and average
budgeted EBITDA growth assumptions on the CGUs
with a higher risk if impairment.
For personal use only
Recoverability of Trade Receivables
As at 30 June 2019, the Group had trade
receivables and other receivables of $9,824,238.
Inter alia, our audit procedures included the following:
Management assess the recoverability of trade
receivables by
reviewing customers’ aging
profile, credit history and status of subsequent
settlement,
an
and
impairment provision is required.
determine whether
For the purpose of impairment assessment,
significant judgement and assumptions, including
the credit risks of customers, the timing and
amount of realisation of these receivables, are
required
impairment
events and the determination of the impairment
charge.
identification of
the
for
i.
ii.
iii.
list of
long outstanding
Obtained a
receivables and identified any debtors with
financials difficulty through discussion with
management.
represents 16% of
As disclosed note 3(a) the company has one
debtor which
the
outstanding balance at 30 June 2019. We
discussed this and other balances with
the
senior management
recoverability of the debtors and collection
period;
regarding
Assessed the recoverability of the balances
by comparing the outstanding amounts as at
year end against subsequent settlements.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2019, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
For personal use only
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor's judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and
fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity's internal control.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial
report.
We conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that achieves
fair presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in Internal control that we identify during our
audit.
The Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements. We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance
in the audit of the consolidated financial report of the current period and are therefore key audit matters. We
describe these matters in our auditor's report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
For personal use only
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 16 of the directors’ report for the year
ended 30 June 2019.
In our opinion, the Remuneration Report of MOQ Limited for the year ended 30 June 2019 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(Trading as Stantons International)
(An Authorised Audit Company)
Samir Tirodkar
Director
West Perth, Western Australia
19 September 2019
For personal use only
MONTECH HOLDINGS LIMITED AND
ITS CONTROLLED ENTITIES
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES
ABN: 94 050 240 330
The following information is current as at 13 September 2019.
ORDINARY SHARES
177,463,641 fully paid ordinary shares held by 694 individual shareholders. All ordinary shares carry one vote per share.
UNQUOTED OPTIONS
The Company has on issue:
•
•
3,690,901 options exercisable at 27.5 cents expiring on 1 September 2020 amongst MOQ employees.
3,4036,358 options exercisable at 25.5 cents expiring on 1st July 2022 amongst MOQ employees.
Options do not carry any votes
DISTRIBUTION OF HOLDERS FULLY PAID ORDINARY SHARES
Category
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of holders
Number held
% of issued shares
102
233
53
52
254
694
166,118,196
10,739,006
437,400
140,358
28,681
93.61
6.05
0.25
0.08
0.02
177,463,641
100.00
The number of holders who held less than a marketable parcel of shares was nil.
SUBSTANTIAL SHAREHOLDERS
The names of substantial shareholders who have notified the Company in accordance with Section 671B of the Corporations Act are:
Holder
A/C designation
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MONASH PRIVATE CAPITAL PTY LTD
No. of
ordinary
shares
22,592,052
18,228,334
MR SCOTT MCPHERSON
17,655,978
MS KATHY LOUISE EDWARDS
PWJAW PTY LTD
THE WARD DEARNESS FAMILY
17,655,978
14,125,072
% of issued
shares
12.73
10.27
9.95
9.95
7.96
056
MOQ ANNUAL REPORTFor personal use only MONTECH HOLDINGS LIMITED AND
ITS CONTROLLED ENTITIES
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES
ABN: 94 050 240 330
TOP 20 HOLDERS OF EQUITY SECURITIES
Rank
Name
1
2
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MONASH PRIVATE CAPITAL PTY LTD
MR SCOTT MCPHERSON
MS KATHY LOUISE EDWARDS
PWJAW PTY LTD
MATTHEW CHARLES GOGGIN & ROMILY JANE GOGGIN
CITICORP NOMINEES PTY LIMITED
MR DON AMAL NANAYAKKARA
ANACACIA PTY LIMITED
KOMATIE PTY LTD
MOAT INVESTMENTS PTY LTD
DAVCOL NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
UNITED EQUITY PARTNERS PTY LTD
HOLLOWAY COVE PTY LTD
ICON PACIFIC SERVICES PTY LTD
MAST FINANCIAL PTY LTD
JARREN INVESTMENTS PTY LTD
INFLECTION INVESTMENTS PTY LTD
MR KAI MYSLIWIECZ
POLFAM PTY LTD
Total
Grand total
13 Sep 2019
22,592,052
18,228,334
17,655,978
17,655,978
14,125,072
8,827,989
7,004,504
5,651,475
4,174,883
4,110,457
4,000,000
2,500,001
2,387,433
2,130,000
2,050,000
2,017,867
1,750,000
1,583,334
1,267,603
1,135,625
850,000
%IC
12.73
10.27
9.95
9.95
7.96
4.97
3.95
3.18
2.35
2.32
2.25
1.41
1.35
1.20
1.16
1.14
0.99
0.89
0.71
0.64
0.48
141,698,585
177,463,641
79.85
100.00
057
MOQ ANNUAL REPORTFor personal use only
For personal use only