MONEYSWITCH LIMITED
ABN 49 103 575 042
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2006
1
MONEYSWITCH LIMITED
ABN 49 103 575 042
CORPORATE INFORMATION
Directors
Richard Freemantle (Chairperson)
Jost Stollmann
Paul A Wood
William J Bartlett
Denis A Calvert
Robert A Ferguson
Thomas J Girgensohn
Company Secretary
Mark A Wood
Registered Office
Level 5, 121 Walker Street
North Sydney, New South Wales, 2060
(02) 8907 1700
Solicitors
Sparke Helmore
Auditors
Ernst & Young
Internet Address
www.MoneySwitch.net
2
MONEYSWITCH LIMITED
ABN 49 103 575 042
CONTENTS
Directors’ Report
Income Statement
Balance Sheet
Statement of Cash Flows
Statement of Changes in Equity
Notes to and Forming Part of the Financial Statements
Note 1 – Statement of Accounting Policies
Note 2 – Revenue and Expenses
Note 3 – Income Tax
Note 4 – Cash and Cash Equivalents
Note 5 – Receivables
Note 6 – Property, Plant and Equipment
Note 7 – Share-based Payments
Note 8 – Payables
Note 9 – Provisions
Note 10 – Contributed Equity and Reserves
Note 11 – Additional Financial Instrument and Disclosure
Note 12 – Commitments and Contingencies
Note 13 – Capital Commitments
Note 14 – Controlled Entities
Note 15 – Subsequent Events
Note 16 – Financial Reposting by Segments
Note 17 – Auditor’s Remuneration
Note 18 – Related Party Disclosures
Note 19 – Transition to AIFRS
Directors’ Declaration
Independent Audit Report
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3
MONEYSWITCH LIMITED
ABN 49 103 575 042
Your directors submit their report for the year ended 30 June 2006.
DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the date of this
report are as follows. Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Richard Freemantle (Non-Executive Chairperson)
Non-Executive Chairperson since 20 June 2003.
Richard has been involved in establishing and growing companies for more than 20 years. Starting in
the early 1980s he created Network Solutions, which grew under his leadership to become Australia's
largest and most successful network integration company.
In 1990 Richard established the first international subsidiary for Cisco Systems in Australia. As this
grew into one of Cisco's key international markets, Richard was promoted to build Cisco's operations
in Europe and then promoted to Senior Vice President and member of Cisco's senior management
team. He returned to Australia to establish the Cisco Asia Pacific headquarters, growing the business
to more than 4000 staff and US$3B in revenue.
Since retiring from Cisco, Richard has been involved in board positions on a number of technology
start-up companies, including as Chairperson for the successful public float of Eserv Global in 2002.
Richard has not held any other directorships of listed public companies in the past 3 years.
Jost Stollmann (Director and Chief Executive Officer)
Executive Director and Chief Executive Officer since 5 April 2005.
Jost founded and grew the German system and network integrator CompuNet Computer AG into a
US$1B company, sold it to GE Capital and led the integration and expansion of GE Capital IT
Solutions across the continent as President of Europe. As Federal Shadow Minister of Economy and
Technology, he ran and managed his own election campaign, contributing significantly to the landslide
victory of the first German government of Chancellor Gerhard Schröder.
Jost has not held any other directorships of companies in the past 3 years.
4
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
Names, qualifications, experience and special responsibilities continued
Paul A Wood (Director and Chief Technical Officer)
Executive Director since 3 February 2003 and Chief Technical Officer since 5 April 2005.
Paul has been in the network technology business throughout his career, most recently at Cisco
Systems in a business development role. He was the co-founder and Chief Executive Officer of
Metaplex, a networking software business that was purchased by Cisco Systems in 1996. Metaplex
developed products that allowed IBM networking systems to use Internet protocols. Metaplex was a
key contributor to Data Link Switch (DLSw) which is in service in most banks worldwide today.
Paul was the founder and Chief Executive Officer of Netlink, a venture capital based data
communications company that developed products in the mainframe networking area. Netlink was
sold to Cabletron Systems, a US public company. Paul’s initial experience was in networking,
technical and product management roles at IBM.
Paul was Chief Executive Officer of MoneySwitch from 3 February 2003 until 5 April 2005.
Paul has not held any other directorships of companies in the past 3 years.
William J Bartlett FCA, CPA, FCMA, CA (SA) (Non-Executive Director)
Non-Executive Director since 14 April 2004.
Bill has 35 years of accounting experience and was a partner of Ernst & Young in Australia for 23
years, retiring on 30 June 2003. He has extensive experience in the actuarial, insurance and financial
services sectors through membership of many industry and regulatory advisory bodies including the
Life Insurance Actuarial Standards Board since 1994.
During the past three years Bill has served as a director of the following listed companies:
• Peptech Limited *
• Retail Cube Limited *
• RGA Inc *
• Suncorp-Metway Limited *
* denotes current directorship
Denis A Calvert (Non-Executive Director)
Non-Executive Director since 14 April 2004.
Denis Calvert has EFTPOS and acquiring skills, having been Executive Vice President for Global
Sales and Marketing of Verifone Inc, a major EFTPOS supplier. He was Division Head of Retail and
Merchant Services for Citibank North America, responsible for the integration of all global merchant
services operations. He was also Chief Executive Officer of Tasq Technology Inc. which provides
outsourced EFTPOS technology and logistical support to more than 1.4M retail merchants. Denis is
currently an advisor to several EFTPOS manufacturers and payment processors.
During the past three years Denis has served as a director of the following company:
• Verifone Australia Pty Ltd
* denotes current directorship
5
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
Robert A Ferguson (Non-Executive Director)
Non-Executive Director since 14 November 2005.
Rob began his career as a Research Analyst for a Sydney stockbroker. He joined Bankers Trust
Australia as a portfolio manager in 1972 when the company's turnover totalled $6 million and became
Managing Director in 1985. Through his ongoing delivery of higher investment performance, he and
his team built BT Funds Management into the leader in the retail mutual funds business. By the mid-
1990s, Bankers Trust had $50 billion under its care. Following the sale of the funds management arm
of Bankers Trust to Principal Financial Group in 1999, Rob became Chairman of BT Funds
Management. He stepped down from that position in 2002.
During the past three years Rob has served as a director of the following companies:
• Lowy Institute for International Policy*
• Sydney Institute*
• The Sydney Writers’ Festival Limited*
* denotes current directorship
Dr Thomas J Girgensohn (Non-Executive Director)
Non-Executive Director since 9 March 2006 .
Thomas Girgensohn brings to MoneySwitch extensive experience in the consulting sector in both
Australia and internationally. He is a previous Managing Partner (Australia and New Zealand) of the
Boston Consulting Group and was also a former chairman of Netcomm Ltd and TDG Logistics as well
as a former director of the Strathfield Group, Byron Holdings Ltd and Comweld Group Pty Ltd. Dr
Girgensohn has a PhD in Business Administration from the University of Munich, a Master of
Business Administration from the University of Saarbrucken and a Bachelor of Economics from the
University of Bochum, all in Germany. Dr Girgensohn is a current Fellow of the Australian Institute of
Company Directors.
During the past three years Thomas has served as a director of the following companies:
• Dairy Farmers*
• Stemcor Australia Pty Ltd*
• Australian Bulk Minerals*
* denotes current directorship
6
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
COMPANY SECRETARY
Mark A Wood
Company Secretary since 29 July 2004.
Mark has a Bachelor of Business, Hospitality and Tourism from Macquarie University, and is currently
the Business Development Manager of MoneySwitch Limited.
Interests in the shares and options of the company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of MoneySwitch Limited
were:
Person
Richard Freemantle*
Jost Stollmann
Paul A Wood^
William J Bartlett#
Denis A Calvert+
Robert A Ferguson
Thomas J Girgensohn^
Ordinary
Shares
6,111,112
11,680,999
9,664,836
924,222
2,831,313
2,949,495
1,818,182
Options over
Ordinary
Shares
726,667
1,020,000
2,833,333
386,667
386,667
32,821
13,427
* Includes Ordinary Shares held by Cazalla Developments Pty Ltd being an associate of Richard Freemantle.
^ Includes Ordinary Shares held by Pamela R Wood and Mark A Wood being associates of Paul A Wood.
# Shares jointly held with Delwyn Bartlett.
+ Includes Ordinary Shares held by Tamoda Pty Ltd being an associate of Denis A Calvert.
^Includes Ordinary Shares held by Dacroft Pty Ltd being an associate of Thomas J Girgensohn.
DIVIDENDS
No dividends have been declared or paid since the date of incorporation
7
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
CORPORATE INFORMATION
Corporate Structure
MoneySwitch Limited is an unlisted public company. It is incorporated and domiciled in Australia. The
registered office of MoneySwitch is Level 5, 121 Walker Street, North Sydney, New South Wales, 2060.
Nature of operations and principal activities
MoneySwitch’s principal activities are:
• Providing electronic transaction acquiring services to Australian businesses (merchants). This
includes the authorisation, clearing and settlement of credit card and pin based debit card
transactions. It also includes the provision of direct debit services.
• Developing the transaction switching and payment software and infrastructure required to support the
provision of credit and debit acquiring services.
There have been no significant changes in the nature of those activities during the year.
Employees
The company employed 28 employees as at 30 June 2006 (compared to 17 employees in 2005).
OPERATING AND FINANCIAL REVIEW
Overview
MoneySwitch Limited was founded on 3 February 2003 by Paul Wood, Peter Haig and Andrew Rothwell. All
have maintained their association with MoneySwitch with Paul Wood as Chief Technical Officer, Peter Haig as
Vice President of Engineering and Andrew Rothwell as Senior Software Manager.
Credit and Debit Acquiring Services
MoneySwitch is a specialist financial institution focussed on providing credit and debit acquiring
services. As such, the Company is developing the necessary relationships, policies, procedures,
systems and approvals to comply with the stringent prudential and regulatory requirements to perform
electronic transaction processing, clearing and settlement activities.
Software development
MoneySwitch’s focus is on using proven modern technology to provide extremely reliable, secure, low
cost and flexible acquiring services to merchants and value-added resellers. As such, MoneySwitch
owns its own switching and payment software code and has continued to develop this code over the
course of the year.
Performance Indicators
The Board and Management monitor MoneySwitch’s overall performance - from overall business positioning
through to the performance of the Company against software engineering development plans, business
performance operating plans and financial budgets.
The Board, together with Management, have identified key milestones and deadlines that are used to monitor
MoneySwitch’s development. Management monitors achievement of milestones and deadlines on a bi-weekly
basis. Directors receive status reports for review prior to each monthly board meeting.
8
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
Operating Results for the Year
The Company reported an operating loss after providing for income tax of $4,386,098 (2005: $1,263,082
loss). This result was in line with expectations given that the Company is in the development stage of its
lifecycle.
2006
2005
Revenues
Operating Profit
Revenues
Operating Profit
MoneySwitch Limited
$631,945
-$4,386,098
$389,586
-$1,263,082
Investments for Future Performance
The Company has been actively working with Visa, MasterCard and other upstream credit and debit
participants to build the relationships, commercial arrangements and physical connections necessary for
MoneySwitch to provide acquiring services to its merchants.
In parallel, the Company is investing significant human resources to develop its switching and payments
system architecture. It is also investing capital for the purchase of computer servers and networking and
security monitoring equipment to scale-up MoneySwitch’s production IT infrastructure.
Review of Financial Condition
Capital Structure
During the period, the Company issued 19,020,203 ordinary shares and raised $9,650,000 of
additional capital. The capital was raised to ensure that MoneySwitch was fully compliant with the
prudential capital requirements imposed on it by the Australian Prudential Regulation Authority
(APRA) and to fund on-going operations.
The capital raising was completed in two tranches – on 28 November 2005; 7,555,557 ordinary
shares were issued at $0.45 per share totalling $3,400,000, and on 31 March 2006 and 06 April 2006;
10,909,091 ordinary shares were issued at $0.55 per share totalling $6,000,000. In addition, on 19
December 2005, 555,555 options were exercised at an exercise price of $0.45 per share totalling
$250,000.
As at 30 June 2006 the Company had no debt.
Cash from Operations
MoneySwitch continued to operate at a loss for the 2005/6 financial year, in line with the fact that the
Company is in the development phase of its lifecycle.
The Company had interest income of $279,698 for the period. The Company also claimed an R&D
Tax Rebate through the Industry Research and Development (IR&D) Board and the Australian
Taxation Office of $352,227.
Liquidity and Funding
The Company had cash-on-hand of $7,903,263 at the end of the period.
Under MoneySwitch’s banking authority as a Specialist Credit Card Institution (SCCI), the Company is
required by APRA to hold Tier 1 capital in the greater of the following two amounts:
(a) $5 million; or
9
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
(b) 20% of the value of the risk weighted on- and off- balance sheet credit exposures of the
company (at the time of calculation).
MoneySwitch has sufficient capital to meet APRA’s Tier 1 capital requirements.
Risk Management
MoneySwitch is prudentially supervised by the Australian Prudential Regulation Authority (APRA) and is
required to comply with prudential standards and provide quarterly capital adequacy and liquidity reporting.
The Company has developed the policies, procedures and systems required to ensure on-going compliance
with the standards and generate the required quarterly reports.
Statement of Compliance
This report is based on the guidelines in The Group of 100 Incorporated publication Guide to the Review of
Operations and Financial Condition.
EMPHASIS OF MATTER
Although the Company has made operating losses in the prior 3 years, this is inline with expectations given
that MoneySwitch was in the start-up phase of its business development. MoneySwitch has sufficient cash for
the 2006/7 financial year to pay its debts, as and when, they become due and payable. It is also able to
manage and control its expenses. As such the directors believe the Company is a viable going concern.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 8 July 2005, MoneySwitch became a principal member of MasterCard.
On 25 July 2005, MoneySwitch became the fourteenth Tier 1 Member of the Bulk Electronic Clearing System
(BECS) and the first new Tier 1 Member in ten years. This allows MoneySwitch to settle directly into the
nominated transaction bank accounts of its customers.
On 8 August 2005, Brad Banducci was appointed Chief Financial Officer. Brad was previously a Vice
President and Director of The Boston Consulting Group and the Leader of its Asia Pacific Corporate Finance
and Strategy Practise.
On 17 November 2005, Robert Ferguson joined the MoneySwitch Board of Directors, contributing his strong
financial background as a previous Managing Director of Bankers Trust.
MoneySwitch became a Principal Member of Visa International on 1 December 2005 after completing its
testing and certification process.
MoneySwitch appointed John Hallis as Vice President Operations on 14 February 2006. John’s focus is on
building an efficient responsive Operations team. He has done so on two previous occasions, most notably
setting up Cisco System’s Asia Pacific customer care organisation.
On 9 March 2006, Dr Thomas J Girgensohn, a former managing partner of The Boston Consulting Group
Australia and New Zealand, joined the MoneySwitch Board of Directors, contributing his strategy and board
governance skills.
On 1 May 2006, MoneySwitch was issued a Variation of Conditions document from APRA, which specifically
notes that MoneySwitch can provide direct debit and BPAY in addition to credit card and debit card acquiring.
On 15 June 2006, MoneySwitch became a member of the Consumer Electronic Clearing System (CECS) as
an EFTPOS Acquirer.
10
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
There has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material or unusual nature which, in the opinion of the directors of the company, will
significantly affect the operation of the company, the results of these operations or the state of affairs of the
company in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The directors foresee that in the 2006/7 financial year MoneySwitch will continue activities towards launching
its range of electronic transaction acquiring services.
SHARE OPTIONS
Unissued shares
As at the date of this report, there were 16,141,065 un-issued ordinary shares under options. Option holders
do not have any right, by virtue of the option, to participate in any share issue of the company.
Shares issued as a result of the exercise of options
During the financial year, an employee exercised the option to acquire 555,555 fully paid ordinary shares in
MoneySwitch Limited at an exercise price of $0.45. Since the end of the financial year, no further options
have been exercised.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During or since the financial year, the company has not in respect of any person who is, or has been, an
officer or auditor of the company or of a related body corporate:
(a) indemnified or made any relevant agreement for indemnifying against a liability, including costs and
expenses in successfully defending legal proceedings with the exception of the general indemnity
provisions contained in the Company's Constitution.
During or since the financial year, the company has paid premiums in respect of a contract insuring all the
directors and officers of MoneySwitch Limited against legal costs incurred in defending proceedings for
conduct involving:
(a) a wilful breach of duty; or
(b) a contravention of sections 182 or 183 of the Corporations Act 2001,
as permitted by section 199B of the Corporations Act 2001.
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of committees of directors) held during the year and
the number of meetings attended by each director is as follows:
11
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
Directors’
Meetings
Committee Meetings
Number of meetings held:
Number of meetings attended:
Richard Freemantle
Jost Stollmann
Paul A Wood
William J Bartlett
Denis A Calvert
Robert A Ferguson
Thomas J Girgensohn
11
11
10
11
10
7
6^
2+
Audit
4
Risk
9
Remuneration
2
—
—
2#
4
1
2^
1+
—
—
9
8
4
—
—
2
—
1#
—
1
1^
1+
Directors meetings have been held every month except for the month of January 2006.
Notes:
^
+
#
Robert A Ferguson attended all meetings held since his appointment to the Board, Audit Committee
and Remuneration Committee.
Thomas J Girgensohn attended all meetings held since his appointment to the Board, Audit
Committee and Remuneration Committee.
Paul A Wood attended all meetings held prior to his resignation from the Audit Committee and
Remuneration Committee.
Committee Membership
As at the date of this report, the Company had an Audit Committee, a Risk Committee and a Remuneration
Committee of the Board of directors.
Members acting on the Committees of the Board during the year were:
Audit
Risk
Remuneration
Current
W Bartlett (c)
R Ferguson
T Girgensohn
During the year
D Calvert *
P Wood #
Current
D Calvert (c)
B Bartlett
P Wood
During the year
—
Current
R Freemantle (c)
D Calvert
R Ferguson
T Girgensohn
During the year
P Wood #
Notes
(c)
*
#
Designates the chairperson of the committee.
D Calvert was on the Audit Committee until 11 May 2006.
P Wood was on the Audit Committee until 17 November 2005 and the Remuneration
Committee until 11 May 2006.
12
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The directors received the following declaration from the Auditor of MoneySwitch Limited.
13
MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ REPORT (cont’d)
The following non-audit services were provided by the entity’s auditor, Ernst & Young. The directors are
satisfied that the provision of non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided
means that auditor independence was not compromised.
NON-AUDIT SERVICES
Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:
Extended Assurance Services
Capital Verification Agreed Upon Procedures
CECS Agreed Upon Procedures
Review and Lodgement of the Company Income Tax Return
$13,390
$5,282
$62,256
$6,000
Signed in accordance with a resolution of the directors.
Richard Freemantle
Chairperson
Sydney, 16 August 2006
Jost Stollmann
Director and Chief Executive Officer
14
MONEYSWITCH LIMITED
ABN 49 103 575 042
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2006
Continuing Operations
Revenue
Depreciation expense
Share-based payments expense
Engineering expenses
General and administrative expenses
Operations expenses
Sales and marketing expenses
NOTE
30-Jun-06
30-Jun-05
$
$
2
631,945
389,586
105,081
1,392,823
1,719,755
1,250,107
540,090
10,187
30,701
301,841
862,157
395,207
31,942
30,820
Profit/(loss) from continuing operations before related
income tax expense
(4,386,098)
(1,263,082)
Income tax expense
3
-
-
Net profit/(loss)
(4,386,098)
(1,263,082)
The above Income Statement should be read in conjunction with the accompanying notes.
15
MONEYSWITCH LIMITED
ABN 49 103 575 042
BALANCE SHEET
AS AT 30 JUNE 2006
ASSETS
Current Assets
Cash and cash equivalents
Receivables
Investment securities
Total Current Assets
Non-current Assets
Property, plant and equipment
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Payables
Provisions
30-Jun-06
30-Jun-05
$
$
4
5
12(b)
7,903,263
393,077
1,553,677
3,154,563
361,240
-
9,850,017
3,515,803
6
581,752
86,009
581,752
86,009
10,431,769
3,601,812
8
9
144,171
80,536
28,077
23,399
Total Current Liabilities
224,707
51,476
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
224,707
51,476
10,207,062
3,550,336
10
10
10
14,500,001
1,725,428
(6,018,367)
4,850,000
332,605
(1,632,269)
10,207,062
3,550,336
The above Balance Sheet should be read in conjunction with the accompanying notes.
16
MONEYSWITCH LIMITED
ABN 49 103 575 042
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2006
Cash flows from operating activities
Receipt for research & development tax concession
Payments to suppliers and employees
Interest received
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Gross payments for investment securities
30-Jun-06
30-Jun-05
$
$
327,724
(3,353,812)
279,288
99,919
(1,289,471)
50,144
(2,746,800)
(1,139,408)
(600,824)
(1,553,677)
(90,318)
-
4
6
Net cash flows used in investing activities
(2,154,501)
(90,318)
Cash flows from financing activities
Proceeds from issue of shares
10
9,650,001
3,950,000
Net cash flows from/(used in) financing activities
9,650,001
3,950,000
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
4,748,700
3,154,563
2,720,274
434,289
Cash and cash equivalents at end of period
4
7,903,263
3,154,563
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
17
MONEYSWITCH LIMITED
ABN 49 103 575 042
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2006
Attributable to equity holders of MoneySwitch Limited
Total
Equity
Retained
Earnings
Issued
Capital
$
$
$
Other
Reserves
(Note 10)
$
At 1 July 2004
900,000
(369,187)
30,764
561,577
Profit/(loss) for the period
Issue of share capital
Exercise of options
Cost of share-based payments
At 30 June 2005
Profit/(loss) for the period
Issue of share capital
Exercise of options
Cost of share-based payments
10
10
10
10
10
10
-
3,450,000
500,000
-
(1,263,082)
-
-
-
-
-
-
301,841
(1,263,082)
3,450,000
500,000
301,841
4,850,000
(1,632,269)
332,605
3,550,336
-
9,400,001
250,000
-
(4,386,098)
-
-
-
-
-
-
1,392,823
(4,386,098)
9,400,001
250,000
1,392,823
At 30 June 2006
14,500,001
(6,018,367)
1,725,428
10,207,062
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
18
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
1. STATEMENT OF ACCOUNTING POLICIES
The significant policies which have been adopted in the preparation of this financial report are set out below:
The financial report covers the economic entity of MoneySwitch Limited. MoneySwitch Limited is an unlisted
public company, incorporated and domiciled in Australia.
(a) Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the
Corporations Act 2001 and Australian Accounting Standards.
Unless otherwise indicated, all amounts are expressed in Australian dollars.
All amounts contained in the financial report and directors' report have been rounded to the nearest dollar ($1).
The financial report has been prepared on the basis of historical cost and, except where stated, does not take
into account changing money values or fair values of non-current assets.
(b) Going Concern
The directors consider the going concern assumption to be appropriate. MoneySwitch Limited is in the
development phase of operations and has a history of raising sufficient capital to meet the Company's expenditure
and prudential capital needs. MoneySwitch Limited is able to control its expenses. Should current cash levels not
be sufficient to meet the Company's prudential capital requirements, the Company will seek to raise additional
funding through capital raising in the 2006/2007 financial year internally from existing shareholders and/or
externally from additional strategic investors as required.
(c) Statement of compliance
The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures that the financial
report, comprising the financial statements and notes thereto, complies with International Financial Reporting
Standards (“IFRS”).
These financial statements are the first MoneySwitch Limited financial statements to be prepared in accordance
with AIFRS. AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards
has been applied in preparing these financial statements. Certain of the exemptions allowed by AASB 1 from
retrospective application have been used, details can be found in the applicable notes below. Comparatives
for the year ended 30 June 2005 have been restated accordingly.
Reconciliations of AIFRS equity and profit for 30 June 2005 to the balances reported in the 30 June 2005
financial report and at transition to AIFRS are detailed in note 19.
19
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
STATEMENT OF ACCOUNTING POLICIES (cont'd)
(c) Statement of compliance (cont'd)
Except for the revised AASB 119 Employee Benefits (issued December 2005), Australian Accounting Standards
that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting
period ending 30 June 2006:
Title
Affected standard(s)
AASB 2005-1
AASB 139
AASB 2005-4
AASB 2005-5
AASB 139
AASB 132
AASB 1
AASB 1023
AASB 1038
AASB 1
AASB 139
AASB 2005-6
AASB 3
AASB 2005-9
AASB 2005-10
AASB 4
AASB 1023
AASB 139
AASB 132
AASB 132
AASB 101
AASB 114
AASB 117
AASB 133
AASB 2006-1
AASB 121
AASB 7
AASB 7
AASB 2002-2
AASB 1
Nature of change to
accounting policy
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. Therefore
no impact.
No change to accounting
policy required. Therefore
no impact.
Application date (*)
1 January 2006
1 January 2006
1 January 2006
1 January 2006
1 January 2006
1 January 2007
1 January 2006
1 January 2007
30 June 2006
*Application date is for the annual reporting periods beginning on or after the date shown in the above table.
Changes made to accounting policies to comply with AIFRS are detailed below in note 1, paragraph (d) through
paragraph (v).
20
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
STATEMENT OF ACCOUNTING POLICIES (cont'd)
(d) Significant accounting judgements, estimates and assumptions
The adoption of AASB 2 Share-based payments have had a significant impact on the amounts recognised in the
financial statements. The details can be found in the applicable notes below.
The Company recognises the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date on which they are granted. The fair value has been determined using the
Black Scholes model, and the assumptions related to this can be found in note 7.
(e) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the
revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is
recognised.
(i) Service revenue
Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract.
Stage of completion is measured using the labour hours incurred to date as a percentage of total estimated labour
hours for each contract. Where the contract outcome cannot be reliably measured, revenue is recognised only to
the extent that costs have been incurred, where it is probable that the costs will be recovered.
(ii) Interest income
The Company has elected to apply the option available under AASB 1 of adopting AASB 132 and AASB 139 from
1 July 2005. The relevant accounting policies for interest income applicable for the years ending 30 June 2006
and 30 June 2005 are:
Accounting policies applicable for the year ending 30 June 2006
Interest income is recognised in the income statement on an accruals basis, using the effective interest method.
This method measures the amortised cost of a financial asset and allocates the interest income over the relevant
period using the effective interest which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Accounting policies applicable for the year ending 30 June 2005
Revenue is recognised when the Company's right to receive payment is established.
(f) Leases
Leases under which the Company assumes all the risks and benefits are classified as financial leases. Other
leases are classified as operating leases. Finance leases are capitalised at the inception of the lease at the
fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments
are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges are recognised as an expense.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease-
term, if there is no reasonable certainty that the Company will obtain ownership of the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term.
21
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
STATEMENT OF ACCOUNTING POLICIES (cont'd)
(g) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, and deposits held at call with financial institutions.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
(h) Receivables
Receivables (current) are recognised and carried at original value less a provision for any uncollectible debts.
An estimate of recoverable amounts is made when collection of the full amount is no longer probable. Bad debts
are written-off as incurred.
Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as
income on an accrual basis.
(i) Investments
Investment securities are securities purchased with the intent of being held to maturity. The Company currently
does not have any investments held for trading. All non-derivative financial assets with fixed or determinable
payments and fixed maturity are classified as held-to-maturity where management has the positive intention and
ability to hold to maturity.
All investments are initially recognised at cost, being the fair value of the consideration given including
acquisition charges associated with the investment. Investments that are intended to be held to maturity
are subsequently measured at amortised cost, less provision for impairment in value. Amortised cost is calculated
by taking into account any discount or premium on acquisition, over the period to maturity. For investments
carried at amortised cost, gains and losses are recognised in profit or loss when the investments are
derecognised or impaired as well as through the amortisation process.
Purchases and sale of investments are recognised on settlement date - the date on which the Company receives
or delivers the asset.
(j) Income Taxes
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts in the financial statements.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the balance sheet date. The relevant tax rates are applied to the cumulative
amounts of deductible and taxable temporary differences to recognise the deferred tax asset or liability.
An exemption is made for temporary differences arising from the initial recognition of an asset or a liability.
No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction,
other than a business combination, that at the time of the transaction did not affect either accounting profit or loss
or taxable profit or loss.
22
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
STATEMENT OF ACCOUNTING POLICIES (cont'd)
(j) Income Taxes (cont'd)
Deferred tax assets relating to tax losses, unused tax credits and deductible temporary differences are not
carried forward as an asset unless it is probable that the future taxable amounts will be available to utilise those
temporary differences, losses and tax credits.
(k) Other Taxes
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
- where the GST incurred on the purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
- receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the balance sheet.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority
are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the taxation authority.
(l) Acquisition of assets
All assets acquired including property, plant and equipment are initially recorded at their cost of acquisition
at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly
attributable to the acquisition.
Expenditure is only recognised as an asset only when it is probable that future economic benefits associated with
the asset will flow to the Company and the cost of the item can be measured reliably. All other expenditure is
expensed as incurred.
(m) Recoverable amount of non-current assets valued on cost basis
The carrying amount of non-current assets valued on the cost basis are reviewed to determine whether
they are in excess of their recoverable amount at balance date. If the carrying amount of
a non-current asset exceeds the recoverable amount, the asset is written down to the lower amount.
The write-down is expensed in the reporting period in which it occurs.
Recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.
Where a group of assets working together supports the generation of cash inflows, recoverable amount is
determined for the cash-generating unit to which the asset belongs, unless the asset's value in use
can be estimated to be close to its fair value.
23
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
STATEMENT OF ACCOUNTING POLICIES (cont'd)
(n) Property, Plant and Equipment
(i) Cost and Valuation
Freehold land and buildings on freehold land are measured on a fair value basis. At each reporting date,
the value of each asset in these classes is reviewed to ensure that it does not differ materially from the
asset's fair value at that date. Where necessary, the asset is revalued to reflect its fair value.
All other classes of property, plant and equipment are measured at cost less accumulated depreciation
and any impairment in value. The Company recognises in the carrying amount of an item of property, plant and
equipment the cost of replacing parts when the cost is incurred and the recognition criteria are met.
When each major inspection is performed, its cost is recognised in the carrying amount of the item of
property, plant or equipment, as a replacement, provided that the recognition criteria are satisfied.
Where assets have been revalued, the potential effect of the capital gains tax on disposal has not been taken
into account in the determination of the revalued carrying amount. Where it is expected that a liability for
capital gains tax will arise, this expected amount is disclosed by way of note.
(ii) Depreciation
Depreciation is provided on a straight-line basis on all property, plant and equipment, other than freehold land.
Major depreciation periods are:
Plant and Equipment:
- Furniture and Office Equipment
- Computer Equipment
2006
2005
5 years
4 years
5 years
4 years
The assets' residual values, remaining useful lives and depreciation methods are reassessed and adjusted, if
appropriate, at each balance sheet date.
(iii) Impairment
The impairment testing for property, plant and equipment is conducted in accordance with the Accounting Policy in
Note 2(m).
(iv) Derecognition and disposal
An items of property, plant and equipment is derecognised on disposal or when no future economic benefits are
expected to arise from continued use of the asset. Gains and losses on disposals are calculated as the difference
between the net disposal proceeds and asset's carrying amount and are included in the income statement in the
year the item is derecognised.
(o) Research and Development Costs
Research and development costs are expensed as incurred, except where future benefits are expected
beyond any reasonable doubt, to exceed those costs. Where research and development costs are deferred
such costs are amortised over future periods on a basis related to expected future benefits. Unamortised
costs are reviewed at each reporting date to determine the amount (if any) that is no longer recoverable and
any amount identified is written off.
24
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
STATEMENT OF ACCOUNTING POLICIES (cont'd)
(p) Trade and Other Payables
Liabilities for trade creditors and other amounts are carried at cost, which is the fair value of the consideration to
be paid in the future for goods and services received, whether or not billed to the entity.
(q) Provisions and Contingencies
Provisions are recognised when the Company has a legal, equitable or constructive obligation to
make a future sacrifice of economic benefits to other entities as a result of past transactions or other past
events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can
be made of the amount of the obligation.
If the impact of the time value of money is material, provisions are discounted using a current pre-tax
rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision
due to the passage of times is recognised as a finance cost.
Contingent liabilities and contingent assets are not recognised in the balance sheet, but are disclosed in the
relevant notes to the financial statements. They may arise from uncertainty as to the existence of a liability or asset,
or represent an existing liability or asset in respect of which settlement is not probable or the amount cannot be
reliably measured. Where settlement becomes probable, a liability or asset is recognised.
(r) Employee Benefits
Provision is made for employee benefits accumulated as a result of employees rendering services
up to the reporting date. These benefits include wages and salaries, annual leave and long
service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee
benefits expected to be settled within the twelve months of the reporting date are measured at their nominal
amounts based on remuneration rates which are expected to be paid when the liability is settled.
Employee benefit expenses and revenues arising in respect of the following categories:
- wages and salaries, non-monetary benefits, annual leave, long service leave and
other leave benefits; and
- other types or employee benefits
are recognised against profits on a net basis in their respective categories.
(s) Share-based payment transactions
Share-based compensation benefits are provided to employees (including directors) via the MoneySwitch
Stock Option Plans.
The Company has applied the requirements of AASB 1 ‘First-time Adoption of Australian Equivalents to IFRS’
in respect of equity-settled share-based payment transactions and has applied AASB 2 ‘Share based Payments’
only to equity instruments granted after 7 November 2002 that had not vested before 1 January 2005, as given
below:
Shares, options and rights granted before 7 November 2002 and/or vested before 1 January 2005
No expense is recognised in respect of these options. The shares are recognised when the options are
exercised and the proceeds received allocated to share capital.
25
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
STATEMENT OF ACCOUNTING POLICIES (cont'd)
(s) Share-based payment transactions (cont'd)
Shares, options and rights granted after 7 November 2002 and vested after 1 January 2005
The cost of these equity-settled transactions with employees is measured by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined internally using
the Black-Scholes Option Valuation Model, further details of which are given in note 7.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the employees become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects
(i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the
Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at the
reporting date. No adjustment is made for the likelihood of market performance conditions being met as the effect
of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition.
There were no modifications to the terms of outstanding options during the financial year.
(t) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
(u) Foreign currency translation
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the balance sheet date.
(v) Derecognition of Assets and Liabilities
Assets and liabilities are derecognised in the balance sheet upon sale, maturity or settlement. Gains and losses are
recognised in profit or loss when the assets/liabilities are derecognised.
26
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
2. REVENUE AND EXPENSES
Profit or loss has been arrived at after charging (crediting) the following items:
Revenue
Interest and other income
R&D tax rebate
Depreciation and amortisation
Depreciation of non-current assets
- Property, plant & equipment
Share-based payments expense
Equity-settled share-based payments (note 7)
Engineering expenses
Employee benefits expense
Recruitment
Rent
Training
Travel
Other
General and administrative expenses
Interconnect & membership
Professional fees
Employee benefits expense
Provision for employee leave entitlement
Legal
Rent
Travel
Insurance
Other
Operations expenses
Communication and hosting
Scheme fees
Employee benefits expense
Other
Sales and marketing expenses
Brand development and market research
Total expenses
27
30-Jun-06
30-Jun-05
$
$
279,718
352,227
631,945
61,862
327,724
389,586
105,081
105,081
30,701
30,701
1,392,823
1,392,823
301,841
301,841
1,521,311
104,299
35,294
10,974
9,377
38,500
1,719,755
509,708
153,421
262,639
57,137
52,375
49,210
32,583
23,209
109,825
1,250,107
255,454
178,926
105,320
390
540,090
745,237
-
46,177
-
-
70,743
862,157
116,107
-
14,139
61,724
7,848
17,633
17,381
160,375
395,207
-
-
24,690
7,252
31,942
10,187
10,187
30,820
30,820
5,018,043
1,652,668
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
3. INCOME TAX
Operating profit for the year
Prima facie income tax expense on profit from continuing operations (30%)
Expenditure not allowable for income tax purposes
Share-based payments expense
R&D tax concession
Other non-deductible expenses
Tax effect of timing differences and current year tax losses
not brought to account: not probable of recovery
This future income tax benefit will only be obtained if:
(a) future taxable income is derived of a nature and
amount sufficient to enable the benefit to be realised;
(b) the conditions for deductibility imposed by taxation
legislation continue to be complied with;
(c ) no changes in taxation legislation adversely affect
the entity in realising the benefit.
Income tax expense
30-Jun-06
30-Jun-05
$
$
(4,386,098)
(1,315,829)
(1,263,082)
(378,925)
417,847
(176,114)
2,174
(1,071,922)
90,552
(163,862)
-
(452,235)
1,071,922
452,235
-
-
The future income tax benefit comprises cash rebates received/receivable which are available under the
Research and Development Tax Concession of the Income Tax Assessment Act 1936.
28
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
4. CASH & CASH EQUIVALENTS
Cash at bank
Exchange settlement account
30-Jun-06
30-Jun-05
$
$
7,876,480
26,783
7,903,263
3,154,563
-
3,154,563
Cash at bank earns interest at floating rates based on daily bank deposit rates. The Reserve Bank (RBA) pays
interest on balances held in Exchange settlement accounts at a rate 25 basis points below the cash rate.
Reconciliation of net profit after tax to net cash flows from operations
Operating profit for the year
(4,386,098)
(1,263,082)
Adjustments for:
Depreciation and amortisation
Provision for employee leave entitlements
Share-based payments expense
Changes in assets and liabilities
Decrease/(Increase) in receivables
Increase/(Decrease) in payables
Net cash from operating activities
Disclosure of financing facilities - refer to note 10
Disclosure of non-cash financing and investing activities - refer to note 6 & 12
5. RECEIVABLES
Due from other financial institutions
Sundry debtors - Research & development tax rebate
Sundry debtors - others
Interest receivable
Prepayments
105,081
57,137
1,392,823
31,515
14,139
301,841
(31,837)
116,094
(251,898)
28,077
(2,746,800)
(1,139,408)
5,692
352,227
23,010
12,148
-
393,077
-
327,724
20,998
11,718
800
361,240
The Company has applied through AusIndustry for a Research and Development tax concession. A registration
number has been granted and the Application will be lodged with the Australian Taxation Office.
29
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
6. PROPERTY, PLANT AND EQUIPMENT
Year ended 30 June 2006
At 1 July 2005,
net of accumulated depreciation and impairment
Additions
Depreciation charge for the year
At 30 June 2006,
net of accumulated depreciation and impairment
At 1 July 2005
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
At 30 June 2006
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
Year ended 30 June 2005
At 1 July 2004,
net of accumulated depreciation and impairment
Additions
Depreciation charge for the year
At 30 June 2005,
net of accumulated depreciation and impairment
At 1 July 2004
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
At 30 June 2005
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
Furniture
and Office
Equipment ($)
Computer
Equipment
($)
Total
($)
25,795
38,073
(13,173)
60,214
562,751
(91,908)
86,009
600,824
(105,081)
50,695
531,057
581,752
45,096
(19,301)
25,795
86,256
(26,042)
60,214
131,352
(45,343)
86,009
83,169
(32,475)
50,694
649,008
(117,950)
531,058
732,177
(150,425)
581,752
Furniture
and Office
Equipment ($)
Computer
Equipment
($)
Total
($)
12,958
21,974
(9,137)
13,434
68,344
(21,564)
26,392
90,318
(30,701)
25,795
60,214
86,009
23,123
(10,165)
12,958
45,096
(19,301)
25,795
17,912
(4,478)
13,434
86,256
(26,042)
60,214
41,035
(14,643)
26,392
131,352
(45,343)
86,009
30
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
7.SHARE-BASED PAYMENTS
(a) Details of MoneySwitch Stock Option Plans
The MoneySwitch Stock Option Plans were established to issue options over ordinary shares in the Company
to employees or directors of the company or to external consultants who provide services to the Company.
The rules of the MoneySwitch Stock Plans provide that the Board has the authority, in its discretion, and
subject to such terms and conditions as it deems appropriate, to grant options to employees and consultants
(Including directors).
Options granted pursuant to the Stock Options Plans may be exercised, in whole or part, subject to vesting
terms and conditions indicated below:
Type
Linear vesting schedule
Terms and Conditions
Options granted will vest in proportion to the time that passes linearly
during the vesting schedule, subject to maintaining continuos
status as an employee or consultant with the Company during the
vesting schedule;
Service vesting schedule
The options with service vesting schedule may be exercised as to a set
number of shares per agreed day of consulting service, as defined in
the specific option grant.
Fully vested at time of grant
Options may be exercised as to all shares from the vesting
commencement date.
Other relevant terms and conditions applicable to options granted under the MoneySwitch Stock Option Plans
include:
- All stock options granted under those plans had an exercise price equal to the fair value of the underlying
ordinary shares on the date of the grant.
- the term of each option grant shall be 10 years from the date of grant or such shorter term as provided in the
Stock Option Grant agreement. However, in the case of options granted to an Optionee who, at the time the
options is granted, owns stock representing more than 10% of the voting power of all classes of stock of
the Company, the term of the Option Grant shall be 5 years from the grant date or such shorter term as may be
provided in the Stock Option Grant agreement.
- each option entitles the holder to one ordinary share.
- All awards granted under the MoneySwitch Stock Option Plans are equity-settled.
(b) Fair value of options
The weighted average fair value of the share options granted during the financial year is 24c (2004/05: 10c).
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes Option
Valuation Model. The following table lists the assumptions used in determining the fair value of the options granted
in the years ended 30 June 2006 and 30 June 2005:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
2006
0%
74%
5.34%
2005
0%
74%
5.16%
A zero dividend policy assumption is used for valuing all option grants. This is in line with the Company's
development status and growth strategy.
31
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
7.SHARE BASED PAYMENTS (cont'd)
(b) Fair value of options (cont'd)
Expected volatility used is the historical volatility of the peer group. The expected volatility reflects the
assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual
outcome.
The average expected life for 10 year options is assumed to be 8 years from the grant date. For all other
options with a contractual life of 5 years or less, the expected life is assumed to be total years from grant date
to expiration date.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements
in share option issued during the year:
30-Jun-06
No
30-Jun-06
WAEP
30-Jun-05
No
30-Jun-05
WAEP
Linear vesting schedule
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited/Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
Fully vested at time of grant
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited/Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
Service vesting schedule
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited/Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
3,673,977
1,717,449
-
(88,438)
5,302,988
2,362,697
3,222,521
3,333,333
(555,555)
-
6,000,299
6,000,299
4,837,778
-
-
-
4,837,778
4,837,778
Total Outstanding at the end of the year
Total Exercisable at the end of the year
16,141,065
13,200,774
16c
47c
-
45c
26c
25c
10c
45c
45c
-
26c
26c
13c
-
-
-
13c
13c
22c
21c
2,525,000
1,413,443
-
(264,466)
3,673,977
783,031
3,151,410
3,413,333
(3,333,333)
(8,889)
3,222,521
3,222,521
2,560,000
2,277,778
-
-
4,837,778
3,708,889
11,734,276
7,714,441
10c
26c
-
10c
16c
16c
10c
15c
15c
45c
10c
10c
10c
16c
-
-
13c
12c
13c
13c
Included within this balance are options over 8,920,165 shares (2005: 8,920,165 shares) that have not been
recognised in accordance with AASB 2, as the options were granted and vested before 1 January 2005.
These options have not been subsequently modified and therefore do not need to be accounted for in
accordance with AASB 2.
The above balance does not include 681,013 fully vested options approved on 18/07/2006 as 2005/2006 financial
year's annual bonuses for executives and employees of the Company. The fair value of the above options,
estimated on the balance sheet date, has been recognized as an expense in the income statement in accordance
with AASB 2, as the options were granted in respect of services rendered in 2005/2006 financial year.
The expense recognised in the income statement in relation to share-based payments is disclosed in note 2.
32
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
7.SHARE BASED PAYMENTS (cont'd)
The average share price at the date of exercise for the options exercised in 2005/06 is 45c (2004/05: 15c).
The weighted average remaining contractual life for the share options outstanding as at 30 June 2006 was 4.4
years (2005: 5.7 years).
The following table summarizes further details of the stock options outstanding at 30 June 2006:
Range of Exercise Prices Contractual life
Vesting conditions
10c to 55c
10c to 45c
10c to 55c
10c to 45c
Total
10 years
5 years
5 years
2 years or less
5 year - linear vesting
12 months - service vesting
12 months - linear vesting
Fully vested at time of grant
No: of
Outstanding
Options
4,632,295
4,837,778
670,693
6,000,299
16,141,065
Share options granted under the MoneySwitch Stock Option Plan and outstanding at the end of the year
have the following exercise prices:
Expiry
Date
31-Dec-06
31-Mar-07
31-Dec-07
19-Apr-08
15-Jun-08
01-Apr-09
21-Nov-09
15-Dec-09
15-Jun-10
17-Aug-10
08-Feb-11
08-Mar-11
01-Apr-14
13-Apr-14
28-Jul-14
15-Sep-14
17-Nov-14
06-Feb-15
17-May-15
15-Jun-15
17-Aug-15
21-Oct-15
16-Nov-15
08-Feb-16
08-Mar-16
05-Apr-16
10-May-16
Exercise
Price
10c
10c
45c
10c
45c
10c
15c
15c
45c
45c
45c
45c
10c
10c
15c
15c
15c
15c
30c
45c
45c
45c
45c
45c
45c
55c
55c
2006
No
120,000
216,410
2,777,778
85,534
4,444
4,975,000
886,667
1,280,000
111,111
77,778
512,821
66,667
2,175,000
400,000
122,333
183,333
333,333
250,000
66,667
524,444
105,556
133,333
11,562
211,111
208,120
13,427
288,636
16,141,065
2005
No
120,000
216,410
-
85,534
4,444
4,975,000
886,667
1,280,000
111,111
-
-
-
2,175,000
400,000
122,333
183,333
333,333
250,000
66,667
524,444
-
-
-
-
-
-
-
11,734,276
33
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
8. PAYABLES (CURRENT)
Due to other financial institutions
Bills payable
Accruals and other liabilities
Items in suspense
9. PROVISIONS
Accrued annual leave
Balance at the beginning of the year
Additional provision recognised during the year
Balance at the end of the year
Current
Non-current
10. CONTRIBUTED EQUITY & RESERVES
(i) Ordinary Shares
Issued and fully paid
- 3,000,000 Ordinary shares paid at 10c each
- 10,333,333 Ordinary shares paid at 15c each
- 10,000,000 Ordinary shares paid at 30c each
- 8,111,112 Ordinary shares paid at 45c each
- 10,909,091 Ordinary shares paid at 55c each
30-Jun-06
30-Jun-05
$
$
730
74,102
63,647
5,692
144,171
23,399
57,137
80,536
80,536
-
80,536
-
28,077
-
-
28,077
9,260
14,139
23,399
23,399
-
23,399
300,000
1,550,000
3,000,000
3,650,000
6,000,000
14,500,000
300,000
1,550,000
3,000,000
-
-
4,850,000
Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the Company,
to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts
paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting
of the Company.
Movement in ordinary shares on issue
At 1 July 2004
Shares issued during the year:
- 24 December, 2004, equity raising at 15c each
- 5 April, 2005 for cash on exercise of share options at 15c each
- 5 April, 2005, equity raising at 30c each
At 1 July 2005
Shares issued during the year:
- 28 November, 2005, equity raising at 45c each
- 19 December, 2005, equity raising at 45c each
- 31 March, 2006, equity raising at 55c each
- 06 April, 2006, equity raising at 55c each
At 30 June 2006
No:
Shares
$
7,000,000
900,000
3,000,000
3,333,333
10,000,000
23,333,333
7,555,557
555,555
10,563,636
345,455
42,353,536
450,000
500,000
3,000,000
4,850,000
3,400,001
250,000
5,810,000
190,000
14,500,001
34
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
10. CONTRIBUTED EQUITY & RESERVES (cont'd)
(ii) Share-based payments reserve
Balance at the beginning of the year
Share-based payments during the year
Balance at the end of the year
30-Jun-06
30-Jun-05
$
$
332,605
1,392,823
1,725,428
30,764
301,841
332,605
Nature and purpose of reserve
The share-based payments reserve is used to record the value of equity benefits provided to employees and
directors as part of their remuneration. Refer to note 7 for further details of these plans.
(iii) Retained earnings
Movements in retained earnings were as follows:
Retained profits at the beginning of the financial year
Net Profit attributable to the shareholders of the entity
Retained profits at the end of the financial year
(1,632,269)
(4,386,098)
(6,018,367)
(369,187)
(1,263,082)
(1,632,269)
11. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
Credit risk
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
The credit risk on financial assets of the Company which have been recognised on the statements of financial
position, is the carrying amount, net of any impairment losses.
Interest rate risk
The entity's financial assets and liabilities are subject to interest rate risk. These will fluctuate in accordance with
movements in the market interest rates. The exposure to interest rate risk and the weighted average effective
interest rates on the interest-bearing financial assets and liabilities of the Company are summarised in the table
below. All other assets and liabilities disclosed on the statement of financial position are non-interest bearing.
Liquidity risk
Liquidity risk is the risk that the Company will have insufficient liquidity to meet its obligations as they fall due. This
risk is managed by maintaining adequate cash resources for future expenditure and other financial commitments.
At balance sheet date, the board of directors determined that there was sufficient cash resources available to
meet its anticipated expenditure and other financial liabilities.
Foreign Currency risk
All foreign-currency denominated receivables and payables are translated at the exchange rate as at the balance
sheet date.
Amounts receivable and payable in foreign currency that are not effectively hedged (denominated in Australian
dollars) and will be affected by future currency movements:
Bills payable
- Visa International
- Banksys
30-Jun-06
30-Jun-05
U.S. Dollar
Euro
$
€
24,180
15,250
-
-
All other assets and liabilities of the Company are held in its functional currency, being the Australian dollar.
35
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
11. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES (cont'd)
30 June 2006
FINANCIAL ASSETS
Floating rate
Cash & cash equivalents
Fixed rate
Investment securities
30 June 2005
FINANCIAL ASSETS
Floating rate
Cash & cash equivalents
< 1 year
Total
$
$
Weighted
average
interest
rate (%)
7,903,263
7,903,263
1,553,677
1,553,677
5.06%
4.92%
< 1 year
Total
$
$
Weighted
average
interest
rate (%)
3,154,563
3,154,563
5.17%
Interest on financial assets classified as floating rate is repriced at intervals of less than one year. Interest on
financial assets classified as fixed rate is fixed until maturity of the asset. The other financial assets and liabilities
not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk.
Pre Establishment
There were no entity financial assets or liabilities prior to the formation of the company on 3 February, 2003.
Net fair values
The aggregate net fair values of financial assets and financial liabilities, both recognised and unrecognised at the
reporting date, are as follows:
Net fair values of financial assets are:
Financial Assets
Cash & cash equivalents
Receivables
Investment securities
Financial Liabilities
Payables
Provisions
Off balance sheet
Contingencies
Carrying value
Fair value
30-Jun-06
$
30-Jun-05
$
30-Jun-06
30-Jun-05
$
$
7,903,263
393,077
1,553,677
9,850,017
3,154,563
361,240
-
3,515,803
7,903,263
393,077
1,544,664
9,841,004
3,154,563
361,240
-
3,515,803
144,171
80,536
224,707
1,540,000
1,540,000
28,077
23,399
51,476
-
-
144,171
80,536
224,707
1,540,000
1,540,000
28,077
23,399
51,476
-
-
Contingencies
The Company has potential financial liabilities that may arise from certain contingencies disclosed in note 12.
No material losses are anticipated in respect of any of those contingencies and the fair value disclosed above is
the directors' estimate of amounts that would be payable by the Company in the event of a default.
36
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
12. COMMITMENTS AND CONTINGENCIES
(a) Contingent liabilities to other entities
- Irrevocable standby letters of credit provided by the Company
(b) Assets pledged as security to other entities
Off-balance sheet facilities in respect of the above are secured by a fixed equitable
mortgage over the Company's asset, the carrying amount of which is:
- Investment securities (mature on 15 November 2006)
30-Jun-06
30-Jun-05
$
1,540,000
1,540,000
1,553,677
1,553,677
$
-
-
-
-
The contingent liabilities relates to the irrevocable standby letters of credit provided to MasterCard International
for $1,400,000 and Visa International for $140,000. These are one-year arrangements that are automatically
renewed on a yearly basis. MasterCard International and Visa International may, at their discretion, increase
the required amounts of the standby letters of the credit upon written request to the Company. The required
amounts of the standby letters of credit are dependent on MasterCard International's and Visa International's
view of their exposure to the Company.
The standby letters of credit were issued by the Commonwealth Bank of Australia to MasterCard International and
Visa International on behalf of the Company and are secured by a equitable mortgage over the Company's
investment securities detailed above. Under the arrangement, the company has the contractual obligation to
issue the Commonwealth Government bonds to the Commonwealth Bank of Australia, if the Company defaults on
its obligations to MasterCard International and/or Visa International.
13. CAPITAL COMMITMENTS
The Company does not have any capital commitments as at the date of this report.
14. CONTROLLED ENTITIES
There are no controlled entities as at 30 June, 2006 nor were any acquired or sold during the period.
15. SUBSEQUENT EVENTS
There has not arisen in the interval between end of financial year and the date of this report any item, transaction
or event of a material or unusual nature, in the opinion of the directors of the Company, to affect significantly the
operation of the Company, the results of these operations or the state of affairs of the Company, in future financial
years.
16. FINANCIAL REPORTING BY SEGMENTS
The Company operates in the financial services industry in Australia.
MoneySwitch Limited is entering the market for the provision of credit and debit acquiring services to merchants.
As such, the Company is developing the necessary policies, procedures, systems, relationships and approvals for
financial transaction processing, clearing and settlement.
37
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
17. AUDITOR'S REMUNERATION
Amounts received or due and receivable by Ernst & Young:
- an audit of the financial report of the entity
- other services in relation to the entity
30-Jun-06
30-Jun-05
$
$
35,633
86,927
15,450
59,377
122,560
74,827
18. RELATED PARTY DISCLOSURES
No cash remuneration is paid to the Directors and Executives of the Company other than Mr. Peter Haig,
an Executive who received salary and superannuation contributions amounting to $132,233 during the year.
Details of Key Management Personnel
Directors
Richard Freemantle
Jost Stollmann
Paul A Wood
William J Bartlett
Denis A Calvert
Robert Ferguson
Thomas Girgensohn
Executives
Peter J Haig
Bradford L Banducci
John Hallis
Appointed
20/06/2003
5/04/2005
3/02/2003
14/04/2004
14/04/2004
14/11/2005
9/03/2006
3/02/2003
8/08/2005
14/02/2006
Compensation of Key Management Personnel
For the year-ended 30 June 2006
Directors
Richard Freemantle
Jost Stollmann
Paul A Wood
William J Bartlett
Denis A Calvert
Rob Ferguson
Thomas Girgensohn
Executives
Peter J Haig
Bradford L Banducci
John Hallis
Short-term
Benefits
Salary &
fees ($)
Post
Employment
Super-
annuation ($)
Share-based
Payments
Options
($)
Total
($)
-
-
-
-
-
-
-
-
-
33,315
-
-
-
-
-
-
-
-
-
98,918
7,727
77,603
77,603
7,727
7,727
9,511
5,656
7,727
77,603
77,603
7,727
7,727
9,511
5,656
46,128
735,549
73,727
178,361
735,549
73,727
33,315
98,918
1,048,958
1,181,191
38
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
18. RELATED PARTY DISCLOSURES (cont'd)
Compensation of Key Management Personnel
For the year-ended 30 June 2005
Directors
Richard Freemantle
Jost Stollmann
Paul A Wood
William J Bartlett
Denis A Calvert
Executives
Peter J Haig
Short-term
Benefits
Salary &
fees ($)
Post
Employment
Super-
annuation ($)
Share-based
Payments
Options
($)
Total
($)
-
-
-
-
-
-
-
-
-
-
12,733
70,780
63,663
12,733
12,733
12,733
70,780
63,663
12,733
12,733
121,565
10,941
-
132,506
121,565
10,941
172,642
305,148
Shareholdings of Key Management Personnel & Related Parties
30 June 2006
Directors
Cazalla Developments Pty. Limited
Richard Freemantle
Jost Stollmann
Paul Wood
Pamela Wood
Mark Wood
Tamoda Pty Ltd
William and Delwyn Bartlett
Robert Alexander Ferguson
Darcroft Pty Ltd
Outstanding
at start
of period
1-Jul-05
Shares
Issued
2005
On exercise Outstanding
of
options
at end
of period
30-Jun-06
5,000,000
-
6,507,261
3,253,630
3,253,631
-
2,500,000
654,525
-
-
-
1,111,112
5,173,738
1,245,454
1,245,454
666,667
331,313
269,697
2,949,495
1,818,182
-
-
-
-
-
-
-
-
-
-
5,000,000
1,111,112
11,680,999
4,499,084
4,499,085
666,667
2,831,313
924,222
2,949,495
1,818,182
Executives
Peter and Nola Haig
Bradford Leon Banducci & Anna Krystina
Mackbron Pty Ltd
1,250,000
-
-
222,222
631,313
181,818
-
555,555
-
1,472,222
1,186,868
181,818
Total
22,419,047
15,846,465
555,555
38,821,067
39
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
18. RELATED PARTY DISCLOSURES (cont'd)
Shareholdings of Key Management Personnel & Related Parties (Cont'd)
30 June 2005
Directors
Cazalla Developments Pty. Limited
Jost Stollmann
Paul Wood
Pamela Wood
Tamoda Pty Ltd
William and Delwyn Bartlett
Executives
Peter and Nola Haig
Total
Option Holdings of Key Management Personnel
Outstanding
at start
of period
1-Jul-04
Shares
Issued
2005
On exercise Outstanding
of
options
at end
of period
30-Jun-05
2,333,333
-
1,166,666
1,166,667
1,000,000
333,334
2,666,667
3,173,928
2,086,964
2,086,964
1,500,000
321,191
-
3,333,333
-
-
-
-
5,000,000
6,507,261
3,253,630
3,253,631
2,500,000
654,525
500,000
750,000
-
1,250,000
6,500,000
12,585,714
3,333,333
22,419,047
30 June 2006
Linear/Service vesting schedule
Directors
Richard Freemantle
Jost Stollmann
Paul A Wood
William J Bartlett
Denis A Calvert
Rob Ferguson
Thomas Girgensohn
Executives
Peter J Haig
Bradford L Banducci
John Hallis
Fully vested at time of grant
Directors
Richard Freemantle
Jost Stollmann
Paul A Wood
Executives
Peter J Haig
Bradford L Banducci
John Hallis
Total
Outstanding
at start
of period
1-Jul-05
Granted
as
Options
exercised
Remuneration during the
year
Outstanding
at end
of period
30-Jun-06
Exercisable
at end
of period
30-Jun-06
460,000
886,667
2,000,000
360,000
360,000
-
-
1,260,000
-
-
5,326,667
240,000
-
750,000
26,667
133,333
133,333
26,667
26,667
32,821
13,427
-
211,111
102,564
706,590
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
486,667
1,020,000
2,133,333
386,667
386,667
32,821
13,427
1,260,000
211,111
102,564
6,033,257
486,667
1,020,000
2,133,333
386,667
386,667
32,821
13,427
900,000
211,111
102,564
5,673,257
240,000
-
750,000
240,000
-
750,000
1,000,000
-
1,990,000
7,316,667
-
3,333,333
-
3,333,333
4,039,923
-
555,555
-
555,555
555,555
1,000,000
2,777,778
-
4,767,778
10,801,035
1,000,000
2,777,778
-
4,767,778
10,441,035
40
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
18. RELATED PARTY DISCLOSURES (cont'd)
Option Holdings of Key Management Personnel (cont'd)
30 June 2005
Linear/Service vesting schedule
Directors
Richard Freemantle
Jost Stollmann
Paul A Wood
William J Bartlett
Denis A Calvert
Executives
Peter J Haig
Fully vested at time of grant
Directors
Richard Freemantle
Jost Stollmann
Paul A Wood
Executives
Peter J Haig
Total
Outstanding
at start
of period
1-Jul-04
Granted
as
Options
exercised
Remuneration during the
year
Outstanding
at end
of period
30-Jun-05
Exercisable
at end
of period
30-Jun-05
300,000
-
1,200,000
200,000
200,000
160,000
886,667
800,000
160,000
160,000
1,260,000
3,160,000
-
2,166,667
-
-
-
-
-
-
-
460,000
886,667
2,000,000
360,000
360,000
380,000
486,667
1,600,000
280,000
280,000
1,260,000
5,326,667
780,000
3,806,667
240,000
-
750,000
-
3,333,333
-
-
3,333,333
-
240,000
-
750,000
240,000
-
750,000
1,000,000
1,990,000
5,150,000
-
3,333,333
5,500,000
-
3,333,333
3,333,333
1,000,000
1,990,000
7,316,667
1,000,000
1,990,000
5,796,667
Option Terms and Conditions
Stock option grants may be exercised, in whole or in part, subject to vesting terms and conditions indicated below:
Type
Linear vesting schedule
Terms and Conditions
Options may be exercised linearly during the vesting schedule as to the
shares subject to options, with vesting subject to maintaining continuos
status as an employee or consultant with the Company.
Service vesting schedule
The options with service vesting schedule may be exercised as to a set
number of shares per agreed day of consulting service, as defined in
the specific option grant.
Fully vested at time of grant
Options may be exercised as to all shares from the vesting
commencement date.
Other transactions with directors
There were no other transactions with directors.
Transactions with other related parties
None during the year.
41
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
19. TRANSITION TO AIFRS
MoneySwitch first adopted Australian equivalent of IFRSs (AIFRS) in 2005/2006 financial year, with a date of
transition to Australian equivalents to AIFRS of 1 July 2004. Its last financial report under previous AGAAP was
for the year ended 30 June 2005.
Exemptions Applied
Under AASB 2 Share-based Payment, from 1 July 2004 the Company is required to recognise an expense for
options issued under the Company's Stock Option Plan. The Company has elected to apply the exemption
under AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards,
for AASB 2 to only recognise an expense for options granted after 7 November 2002 but that had not vested
by 1 January 2005.
The impact of adopting AIFRS on the total equity and profit after tax as reported under previous Australian
Generally Accepted Accounting Principles (“AGAAP”) are illustrated below.
(a) Reconciliation of total equity as presented under previous AGAAP to that under AIFRS
Total equity under AGAAP
Adjustment to retained earnings:
Recognition of share-based payments expense (1)
Formation cost written-off (2)
Adjustment to other reserves:
Recognition of share-based payment expense (1)
Total equity under AIFRS
(b) Reconciliation of profit before tax under previous AGAAP to that under AIFRS
Profit after tax as previously reported under AGAAP
- Recognition of share-based payments expense (1)
Prior year profit before tax under AIFRS
1-Jul-04
$
30-Jun-05
$
563,204
3,551,963
(30,764)
(1,627)
(332,605)
(1,627)
30,764
332,605
561,577
3,550,336
30-Jun-05
$
(961,241)
(301,841)
(1,263,082)
42
MONEYSWITCH LIMITED
ABN 49 103 575 042
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE, 2006
19. TRANSITION TO AIFRS (Cont'd)
(1) Under AASB 2 Share based payments, the company would recognise the fair value of options
granted to employees (including directors) as an expense on a pro-rata basis over the vesting period in the
income statement with a corresponding adjustment to equity. No such expense was recognised under AGAAP.
The effect of this on the Company is:
(i) Equity at transition : 1 July 2004
A decrease in retained earnings of $30,764, and an increase in reserves of $30,764, Net effect is zero.
(i) Equity at 30 June 2005
A decrease in retained earnings of $332,605, and an increase in reserves of $332,605, Net effect is zero.
(i) Profit for 30 June 2005
An increase in share-based payments expense of $301,841.
(2) A deferred charge of $1627, relating to legal costs incurred on establishment of the Company was recognised
under previous AGAAP, but does not qualify for recognition as an asset under AIFRS.
The effect of this on the Company is:
(i) Equity at transition : 1 July 2004
A decrease in retained earnings of $ 1,627, and a corresponding decrease in non-current assets.
(c) Explanation of material adjustments to the cash flow statements
There are no material differences between the cash flow statement presented under AIFRS and the cash flow
statement presented under previous AGAAP.
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MONEYSWITCH LIMITED
ABN 49 103 575 042
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of MoneySwitch Limited, I state that:
(1) In the opinion of the directors:
a.
the financial statements and notes of the company are in accordance with the Corporations
Act 2001, including:
i. giving a true and fair view of the company’s financial position as at 30 June 2006 and
of their performance for the year ended on that date; and
ii. complying with Accounting Standards and Corporations Regulations 2001; and
b.
there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable.
(2) This declaration has been made after receiving the declarations required to be made to the directors
in accordance with section 295A of the Corporations Act 2001 for the financial period ending 30 June
2006.
On behalf of the Board
Richard Freemantle
Chairperson
Sydney, 16 August 2006
Jost Stollmann
Director and Chief Executive Officer
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