UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM 6-K
REPORT OF
FOREIGN PRIVATE ISSUER
PURSUANT TO
RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES
EXCHANGE ACT OF 1934
For September
2014
Commission
File No. 001-36488
MOKO Social
Media Limited
200 Park Avenue
South, Suite 1301
New York,
New York 10003 |
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES.) |
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-F x
Form 40-F ¨
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
Indicate by check mark whether
the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨
No x
If “Yes” marked, indicate below the file number assigned
to the registrant in connection with Rule 12g3-2(b): 82-___
Exhibits
99.1 |
Final Report for the year ended June 30, 2014 |
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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MOKO Social Media Limited |
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By: |
/s/ Ian Rodwell |
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Name: Ian Rodwell |
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Title: Chief Executive Officer |
Dated: September 30, 2014
Exhibit
99.1
MOKO SOCIAL MEDIA LIMITED
ABN 35 111 082 485
Annual Financial Report
For the year ended 30
June 2014
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
1 |
Contents
CORPORATE DIRECTORY |
3 |
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CHAIRMAN’S REPORT |
4 |
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DIRECTORS’ REPORT |
10 |
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AUDITOR’S
INDEPENDENCE DECLARATION |
29 |
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CORPORATE GOVERNANCE STATEMENT |
30 |
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INDEPENDENT
AUDITOR’S REPORT |
37 |
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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME |
39 |
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
41 |
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
42 |
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CONSOLIDATED STATEMENT OF CASH FLOWS |
43 |
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NOTES TO THE FINANCIAL STATEMENTS |
44 |
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DIRECTORS’ DECLARATION |
92 |
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SHAREHOLDER INFORMATION |
93 |
2 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CORPORATE DIRECTORY
Directors |
Ian Rodwell |
- Managing Director and Chief Executive Officer |
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Greg McCann |
- Non-Executive Chairman |
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Peter Yates |
- Non-Executive Director |
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Johannes De Back |
- Non-Executive Director |
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Mark Hauser |
- Non-Executive Director |
Company secretary |
Andrew Bursill |
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Registered office |
Suite 4, Level 9, |
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341 George Street, |
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SYDNEY NSW 2000 |
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Telephone (02) 9299 9690 |
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Fax (02) 9299 9629 |
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Principal place of business |
Australia:
Suite 5, Level 1,
442-446 Beaufort Street,
HIGHGATE WA 6003
Telephone +61 (08) 9227 7100
Fax +61
(08) 9227 7100 |
United States of America:
200 Park Avenue South, Suite 1301
New York, New York 10003 |
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Share registry |
Link Market Services Limited, |
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Level 9, 333 Collins Street, |
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Melbourne VIC 3000 |
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Auditor |
BDO East Coast Partnership |
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Level 11, 1 Margaret Street, |
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Sydney NSW 2000 |
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Solicitor |
Addisons Lawyers |
Loeb and Loeb LLP |
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Level 12, 60 Carrington Street, |
345 Park Avenue |
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Sydney NSW 2000 |
New York, NY 10154 |
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Bankers |
Commonwealth Bank of Australia |
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48 Martin Place, |
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Sydney NSW 2000 |
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Stock exchange listings |
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Australian Securities Exchange (ASX code: MKB) |
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NASDAQ Global Market (NASDAQ code: MOKO) |
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Listed on the ASX |
27 June 2007 |
Listed on the NASDAQ |
27 June 2014 |
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Internet address |
http://mokosocialmedia.com |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
3 |
CHAIRMAN’S REPORT
CHAIRMAN’S REVIEW
HIGHLIGHTS:
| · | More
than 70,000 downloads of REC*IT in only 2 weeks since semester programming launch,
appearing in the Top 10 of the Apple App Store’s Sport Category |
| · | Native iOS Blue Nation Review (BNR)
App launched |
| · | BNR reaches more than 3.2 million unique
visitors in August, 52% from mobile devices |
| · | VOYCIT non-partisan political community
App set to launch Q4 2014 |
| · | New Speakiesy college social/community
App to launch in December 2014 |
| · | New RunHaven and RaceAdvizor Apps to
debut December 2014 and January 2015 |
| · | Acquisition of Tagroom.com |
MOKO is a Community
Builder.
We develop and brand
mobile social networks for tailored audiences.
We provide a mobile
community to large, like-minded groups of people to socialize and communicate around their common interests.
Introduction
The past year has been a transformational
year in the development of your company. We have launched products into the US market, initiated new product development for near
term launches, formed significant relationships with key content, sales and marketing partners, expanded our team, opened two new
US offices (New York City and Alexandria, near Washington DC) and listed the Company on NASDAQ. In February, our first US based
Non Executive Director, Mark Hauser, joined the board. I welcome Mark to the board and especially thank him for his contribution
throughout the NASDAQ listing process.
Although we still retain a technical development
and R&D team in Perth, Western Australia, the majority of staff are now American and will be headquartered in the new Alexandria
office. This is the main hub of operations and the new location of our CEO Ian Rodwell.
MOKO’s product development now has
three core areas of focus including several “pods”. These core areas are:
| · | College & university students and student
athletes |
| · | Running, health and fitness |
Product Strategy – owning a targeted
monthly active user (MAU)
MOKO identified three heavily populated categories
and has developed a suite of digital assets consisting of websites, mobile sites, and mobile apps designed to offer unequalled
user engagement amongst likeminded individuals. To address these target markets and sectors, MOKO’s portfolio will include,
by the end of Q1 2015, seven standalone platforms and apps dedicated to these targeted audiences.
MOKO has launched, is beta testing, or is
in the final development phase of the following platforms:
| · | REC*IT – a college intramural sports,
fitness and leisure app |
| · | RunHaven/RaceAdvizor – a web/ mobile
site and app designed for the US running community |
| · | Blue Nation Review (BNR) – a web/mobile
site and app for progressive politics commentary |
| · | VOYCIT – a community-based user generated
content app |
| · | Speakiesy – a campus-specific collegiate
social community app |
| · | Tagroom.com – news and entertainment
app |
In addition to the existing digital products,
MOKO is set to announce the expansion of products and activities in these defined markets in a manner that enables the company
to fully complete, market and successfully launch the seven apps through 2015. The company’s 2015 core objective is to leverage
these destinations and actively engage multiple millions of monthly users.
4 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CHAIRMAN’S REPORT
Key
REC*IT statistics
Although
it has only been a couple of weeks since the formal launch of on-campus activities to fewer than 50% of the universities under
contact, the REC*IT App has already ranked in the top 10 of the Apple App Store’s Sports category.
The initial
data is solid and we are seeing activity levels where the average user is visiting the app at least daily and have already generated
over 100 page views per user so far per month. October and November are expected to be the initial peak months for REC*IT growth,
before a dip in December due to the holiday period, and then ramping up again in late January as the second (Spring) semester unfolds.
We are confident that adoption will increase due to further rollouts and the announcement of the tuition sweepstakes.
REC*IT
Marketing
MOKO’s
first collegiate app has now been officially launched and is being rolled out across more than 850 US universities. Further, the
intramural or recreational programs start progressively throughout the year with some key programs starting in the second half
of the semester.
As part
of REC*IT’s marketing, MOKO has planned several initiatives to run in sequence or in parallel to each school’s own
academic or sporting program calendars. The first of these marketing activities was the delivery of physical collateral such as
banners, brochures and merchandise – our starter kits. These were delivered to REC directors and campus administrators, who
in turn, placed the items around their REC centers, gymnasiums and other venues for the various student registration events.
In September
we launched the first of the digital marketing initiatives with pleasing results. These were a series of email blasts and IMLeagues
“message center” notifications that were either sent from the REC departments or from the IMLeagues database. These
resulted in a better than 50% conversion rate and these communications will be structured and sent periodically in October and
November to coincide with each school’s programing schedules.
MOKO has
also organized a series of on-campus initiatives where students recruited and trained by our marketing team will set up stands
and REC*IT kiosks in high traffic areas. These will actively promote the REC*IT app and link it to the “Win Your Tuition”
sweepstakes competition. This activity will run through Thanksgiving and the end of November return to campus.
Speakiesy
MOKO is currently finalizing the planned launch of its Speakiesy
social app, specifically focused on the college market. The design and rationale for the app comes as a result of student focus
group data received during the initial development and pilot phase of REC*IT. Speakiesy draws comparisons to the original launch
of Facebook, which then was school specific. The only way a student will be able to join their specific college’s community
is with an official university email account (.edu), thus preventing outsiders from access to the app’s content.
The deliberate design of a “closed
circuit” app means that users can only engage within their own college community without interference from unwanted non-student
body interactions. The app will also feature the ability to follow and post content anonymously, as well as from established profiles.
The app will be closely monitored with all visual content being screened via the MOKO moderation system as a failsafe to protect
students and schools from undesirable content.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
5 |
CHAIRMAN’S REPORT
BNR
and VOYCIT
MOKO’s political group, under the BNR platform, is witnessing
a rapidly growing and engaged audience created from the emergence of BlueNationReview.com. The September launch of the first native
iOS BNR App will be followed by an Android version due for release at the end of October.
The positive growth of BNR has led to the development of VOYCIT,
the non-partisan political group and community app. The creation of the app is well underway and on track for launch mid Q4 2014;
perfectly timed for the heightened 2015 political US cycle featuring the Presidential election buildup to the primary races. VOYCIT
is designed to be a non-partisan, user-generated content app that empowers users to create and/or choose to follow “Groups”
devoted to specific issues, candidates or causes. VOYCIT is designed to enable both active office holders and aspiring candidates
to create customized content channels within the VOYCIT platform. This will enable them to engage and interact with other members/users.
In addition to message propagation, the app can dramatically impact local and national fundraising, petition awareness, the establishment
of localized activist groups and/or the organizing of local protests and rallies.
Since launching in May, BNR has grown to attract over 3.2 million
unique visitors a month, making it one of the top political news and commentary sites in the US. The BNR Facebook page (and its
sister page “Progressive America”) now has over 600,000 fans combined and our content reaches more than 16 million
people every week, with 62% of our fans being women.
BNR is also being quickly recognized by key political groups and
operatives as a hub for relevant media and the go-to community representing today’s progressive agenda. In September BNR’s
Executive Editor Jimmy Williams was invited to participate in the important Democratic event – the “Harken Steak-Fry”
– in Iowa, where Hillary and Bill Clinton headlined.
6 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CHAIRMAN’S REPORT
RunHaven
and RaceAdvizor
MOKO recognized that the general endurance sports, health and
fitness category is a major market opportunity in the US, and is underserved by current mobile and web-based technologies. Currently,
there are more than 30,000 running races or events in the US each year, which draw over 50 million participants.
RunHaven was developed for this audience and has successfully
attracted an audience of 360,000 (Likes) Facebook followers. Harnessing the feedback and our knowledge of the market, a redesigned
web and mobile platform re-launch, as well as the launch of an app of the same name, is set for Q4 2014. In addition to RunHaven,
MOKO will rollout a new sister app called RaceAdvizor in Q1 2015.
RunHaven is set to be the go-to online and mobile destination
for users passionate about running. The app is designed to be a complete one-stop destination for all things running; with significant
digital touch points dedicated to Reading, Racing, Shopping and Sharing.
RunHaven currently delivers daily content (Read) produced by
32 contributing runners representing 21 States in the US, Canada and Australia. RaceAdvizor will be one of the country’s
largest online databases with over 30,000 events (Race). Through RaceAdvizor, runners will be able to search and choose their
next race, whether it is across town or across the country. Runners will also be able to read/write race reviews and view/share
race photos. MOKO is partnering with Pacers Running Stores with the goal of creating a dedicated RunHaven online Store (Shop).
This will enable our community to get all of their running products without ever leaving our site. The new sites will include
a Forum and Photo Albums (Share) to allow runners to interact with one another as a community.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
7 |
CHAIRMAN’S REPORT
Tagroom.com
Tagroom is a news and entertainment service that harnesses social,
mobile and visual technologies used by contemporary consumers. Tagroom publishes popular leisure content from across the internet
such as viral and trending news, product discoveries and engaging videos. The beta launch has generated upwards of 5 million monthly
page views. According to Alexa.com (an Amazon company that measures global internet traffic and user engagement), Tagroom.com is
also experiencing exceptional user engagement; average daily users spend more than 11 minutes on the site.
The addition of Tagroom.com to MOKO’s portfolio is synergistic
with the company’s overall audience profile and provides marketers and brands with direct access to coveted hard to reach
audiences. Brands and agencies seeking to engage with young adults will find Tagroom complete with a host of native advertising
offerings.
MOKO is in the process of developing a dedicated native mobile
app for Tagroom with the intention of cross-promoting it across its other properties. The acquisition of Tagroom also brings with
it three new senior team members experienced in the creation of viral media and shareable entertainment content for the important
18-30 year-old demographic.
8 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CHAIRMAN’S REPORT
MISSION
FOR 2015
During the past 12 months MOKO has grown well beyond just REC*IT.
As I mentioned in the opening, by the end of the first quarter 2015, the Company will have multiple products operating in key US
demographic markets. The company’s mission for the next 12 months is to build a combined monthly active user base in the
multiples of millions. We believe that this will build substantial overall value in MOKO and provide a basis to grow revenues into
a profitable business. The key point is the objective for MOKO to grow, control and monetise a highly targeted and engaged user
base, but with sufficient diversity to alleviate seasonality and have multiple shots at goal.
Yours sincerely
Greg McCann
Chairman
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
9 |
DIRECTORS’ REPORT
The directors present their report together with the financial
statements, on MOKO Social Media Limited, and its controlled entities (Consolidated Entity or MOKO), for the year ended 30 June
2014 and the auditor’s report thereon.
Directors
The following persons were directors of MOKO Social Media Limited
during the whole of the financial year and up to the date of this report, unless otherwise noted:
Ian Rodwell |
- |
Chief Executive Officer and Managing Director |
Greg McCann |
- |
Non-Executive Chairman |
Johannes De Back |
- |
Non-Executive Director |
Peter Yates |
- |
Non-Executive Director |
Mark Hauser |
- |
Non-Executive Director (joined 1st February, 2014) |
Principal
activities
During the year the principal continuing
activity of the Consolidated Entity was the development and branding of mobile social networks for tailored audiences to enable
mobile communities of large, like-minded groups of people to socialize and communicate around their common interests.
Dividends
No dividends were paid or declared during
the year (2013: $nil).
Review
of operations
MOKO Social Media Limited is organized into
four operating segments: Mobile Social, Mobile Advertising, Mobile Content and Mobile Commerce and during the fiscal 2014 year,
the principal products and services of each of these operating segments were as follows:
Mobile Social |
MOKO’s proprietary mobile social networks and community/chat product business which currently represents legacy activities of our initial platform monetization efforts and is of less significance and priority than it has been historically. |
Mobile Advertising |
MOKO’s proprietary performance based, U.S. mobile ad network which more recently has been transitioning its business strategy to work directly with advertisers and targeting specific industry sectors (or verticals) including Mobile Games, Mobile Apps, Financial Services and Digital Publishing to allow it to provide advertisers with direct opportunities to place ads in MOKO properties such as REC*IT, Blue Nation Review, RunHaven and others. This segment represents MOKO’s core operating segment and contains the mobile community development business to be monetized via customized mobile social advertising. |
Mobile Content |
MOKO’s inactive UK division that historically bundled and sold mobile content and entertainment products direct to mobile consumers and which represents the discontinued operations reported in the fiscal 2013 prior year results; and |
Mobile Commerce |
MOKO’s
Australian based, online, flash sales and aspiring e-commerce product sales business, Deals I Love (Australia) Pty Ltd, which
sells merchant products to customers through its website, www.dealsilove.com.au and
was acquired in July 2013. |
Further Details in relation to the review
of operations are contained within the Chairman’s report on page 4 to 9 and a financial overview commentary follows.
Financial
overview
MOKO earned total revenue for the year ended
30 June 2014 (‘2014’) of $8,228,151 versus $15,149,480 in the prior year ended 30 June, 2013 (‘2013’)
and the comparative year included $9,128,887 from discontinued operations. The 2014 revenues from continuing operations increased
by 37% to $8,228,151 (2013: $6,020,593). The loss for the 2014 year was $13,596,459 compared with a 2013 loss of $6,278,079
and the comparative year included a loss of $1,566,785 from discontinued operations. The 2014 loss from continuing operations
increased by 189% to $13,596,459, (2013: $4,711,294).
10 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
MOKO’s net asset position at 30 June
2014 was $11,616,698, an increase of 304.3% over the prior year, at $2,873,372 and largely reflecting the increased cash and equivalent
assets of $9,878,011 up from $2,519,186.
Comparison of Twelve Months Ended June 30, 2014 to Twelve Months
Ended June 30, 2013 for continuing operations
Revenue
Twelve Months
Ended June 30, 2014 |
Twelve Months Ended
June 30, 2013 |
Increase (Decrease) |
% Change |
$8,228,151 |
$6,020,593 |
$2,207,558 |
36.7 |
For 2014, revenue from continuing operations
was represented by Mobile Social of $882,393, Mobile Content of ($30,945), Mobile Advertising of $3,102,132 and Mobile Commerce
of $4,274,571.
Mobile Social decreased its revenue to $882,393
(2013: $1,251,864) given its decreasing focus within our activities and the continuation of divesting of products and services
within this operating segment during the year, including the sale of m-Buzzy, which was sold in August 2013. Ongoing revenues are
earned within this segment from our MOKO-CHAT product in Australia.
The Mobile Content segment did not operate
during the period, although a minor negative revenue adjustment of ($30,945) was recognised after the sale and cessation of MOKO’s
U.K. operations in the fourth quarter of 2013 (2013: $368,118). There are presently no active plans to re-activate this operating
segment.
Mobile Commerce became active on 1 July
2013 when MOKO completed a business combination by acquiring a controlling 51% share interest in a Sydney based e-commerce business,
Deals I Love (Australia) Pty Ltd (“DIL”) for the purpose of expanding into the growing mobile commerce sector.
This acquisition represents the Mobile Commerce segment. During the fiscal year, DIL contributed consolidated revenue of $4,274,571
(2013: nil). The second half of fiscal 2014 underperformed the first half due to seasonality fluctuations and challenging competitive
conditions.
Mobile Advertising revenue for the 2014 fiscal
year was $3,102,132 (2013: $4,400,611). The decrease reflected dampening market conditions for the historical business activities
of OfferMobi (OM) and a re-positioning by the Board to focus OM as a service provider to customized mobile social advertising projects
such as REC*IT, Run-Haven and Blue Nation Review, which are on the cusp of being monetised. Pleasingly, the second half of the
fiscal year outperformed the first half as a result of new management and a renewed business model.
We expect consolidated revenues to increase
upon commercialization of the customized mobile social advertising projects such as REC*IT, RunHaven and Blue Nation Review towards
the end of calendar 2014 and into early 2015, but because these projects are not yet commercialized there remains a material uncertainty
over this expectation.
Other income and revenue
Twelve Months
Ended June 30, 2014 |
Twelve Months Ended
June 30, 2013 |
Increase (Decrease) |
% Change |
$386,998 |
$8,813 |
$378,185 |
4,291.2 |
For 2014, Other income and revenue comprises
$172,655 of government grant revenue for Mobile Social (2013: nil), $109,493 proceeds and gain from the sale of a Mobile Social
business, mBuzzy in August 2013 (2013: nil), and interest income of $104,850 (2013: $8,813) which reflects higher average cash
and cash equivalent balances held during the year.
Fair value gained on deferred contingent consideration
Twelve Months
Ended June 30, 2014 |
Twelve Months
Ended June 30, 2013 |
Increase (Decrease) |
% Change |
$383,933 |
$1,829,653 |
($1,445,720) |
(79.0) |
For 2014, the fair value gain on deferred
contingent consideration of $383,933 is the reversal, due to early settlement in October 2013 of previously recognised
deferred contingent consideration payable to Howmark Mobile, LLC (‘Howmark’) shareholders in relation to the August
2012 acquisition of the Mobile Advertising business, OfferMobi. For 2013, this comprised the reversal of previously recognised
deferred contingent acquisition consideration payable as a result of being unearned. For OfferMobi, $1,123,843 was unearned consideration
which resulted from certain financial performance results in fiscal 2013 being less than required maximum hurdle rates; and for
All Night Media Limited (Mobile Content), $631,572 deferred contingent consideration was cancelled and $74,238 initial
consideration was reimbursed as a result of a post-acquisition agreement with the seller.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
11 |
DIRECTORS’ REPORT
Expenses
Twelve Months
Ended June 30, 2014 |
Twelve Months Ended
June 30, 2013 |
Increase (Decrease) |
% Change |
$23,649,446 |
$13,560,947 |
$10,088,499 |
74.4 |
Expenses are classified, discussed and
analysed below in four sections as (i) costs of providing goods and services, (ii) selling, general and administrative
expenses, (iii) depreciation and amortisation, and (iv) impairment of goodwill.
Costs of providing goods and services
Twelve Months
Ended June 30, 2014 |
Twelve Months Ended
June 30, 2013 |
Increase (Decrease) |
% Change |
$6,536,820 |
$4,330,167 |
$2,206,653 |
51.0 |
For 2014, costs of providing goods and services
related to the operating segments of Mobile Social of $403,260 (2013:$578,571), Mobile Content of ($24,974) (2013:$321,046) , Mobile
Commerce of $3,092,258 (2013: nil) and Mobile Advertising of $3,066,276 (2013:$3,430,550). The movement in costs was commensurate
with the movement in revenues for Mobile Social and Mobile Advertising. Mobile Commerce had no prior comparative costs as it was
acquired on 1 July 2013 and Mobile Content was inactive.
Selling, general and administrative expense
Twelve Months
Ended June 30, 2014 |
Twelve Months Ended
June 30, 2013 |
Increase (Decrease) |
% Change |
$15,888,388 |
$6,676,120 |
$9,212,268 |
138.0 |
For 2014, MOKO’s selling, general and
administrative expenses increased as a result of a general expansion in MOKO’s business operations within the Mobile Advertising
segment and in the US particularly and the Mobile Commerce segment in Australia as a result of an acquisition. The corporate expenses
of the recent NASDAQ listing and share based payments expense, also contributed.
Particularly large increases in expenses
for 2014 versus 2013 year were as follows:
—Legal and professional fees: an increase
of $1,583,476 or 96.5% from $1,640,327 in fiscal 2013 to $3,223,803 in 2014 due primarily to one-off legal and advisory fees in
relation to NASDAQ as well as increased accounting, audit and company secretarial fees, share registry fees and a general increase
in communications, financial and investment community engagement fees (particularly from within the United States of America).
—Share based payments: an increase
of $4,710,225 or 1,083.5% from $434,743 in 2013 to $5,144,968 in 2014 due principally to Director and American employee and contractor
option issuances as a substitute for cash based remuneration.
—Marketing expenses: an increase of
$988,478 or 308.4% from $320,481 in 2013 to $1,308,959 in 2014 due mostly to the acquisition of Deals I Love which operated as
MOKO’s subsidiary for the whole of 2014 (2013: nil) as well as an increase in Mobile Advertising User acquisition costs for
the customised mobile social advertising business of $471,691 (2013: nil).
—Administration expenses: an increase
of $695,010 from $332,800 in 2013 to $1,027,810 in 2014 mostly due to one-off listing and printing fees in relation to NASDAQ and
a general increase in insurance costs for US coverage.
The largest cash component of selling, general
and administrative expense (employee benefits expenses) increased by $1,286,074 or 51.2% from $2,510,446 to $3,796,520 in 2014
due to a large increase in average headcount as a result of the expansion in the Mobile Advertising segment (and particularly in
the US) and the Mobile Commerce business segment, via the Deals I Love acquisition. The employee benefits expenses incurred in
Mobile Social operating segment declined in 2014 versus 2013 as there was a higher segment cost base for part of 2013 that was
subsequently reduced via terminations and re-allocation of remaining costs into Mobile Advertising.
Depreciation and amortisation
Twelve Months
Ended June 30, 2014 |
Twelve Months Ended
June 30, 2013 |
Increase (Decrease) |
% Change |
$1,224,238 |
$1,067,523 |
$156,715 |
14.7 |
Depreciation decreased by $185,063 in 2014
to $42,475 due to decreased levels of computer equipment depreciation associated particularly with the m-Buzzy disposition. Amortization
increased by $341,778 above the prior year to $1,181,763 due to greater values of finite life intangible assets being held and
periodically amortized as a result of the Deals I Love and OfferMobi acquisitions.
12 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
Impairment of goodwill
Twelve Months
Ended June 30, 2014 |
Twelve Months Ended
June 30, 2013 |
Increase (Decrease) |
% Change |
$- |
$1,487,137 |
($1,487,137) |
(100.0) |
Impairment of goodwill for 2014 was nil and
for 2013 was $1,487,137 which related to the write-down of the previously unrecoverable carrying value of assets for mBuzzy of
$772,675 (which has been subsequently disposed) and All Night Media Limited of $714,462 after the business reflected post-acquisition
underperformance and was legally claimed on by MOKO’s against the seller before being closed down.
Income tax benefit
Twelve Months
Ended June 30, 2014 |
Twelve Months Ended
June 30, 2013 |
Increase (Decrease) |
% Change |
$1,053,905 |
$990,594 |
$63,311 |
6.4 |
For 2014, the income tax benefit from continued
operations increased by $63,311 above 2013 to $1,053,905 as a result of the increase in MOKO’s Research and Development
tax offset (cash rebate) received from the Australian Taxation Office from $1,082,953 in 2014 versus $1,008,231 in 2013 and a
small offsetting current tax expense of $29,048 in 2014, versus $17,637 for US state taxes. MOKO has not and does not recognize
the carry forward of unused tax losses and unused tax credits and given it has historically traded unprofitably, it is currently
less than probable that future taxable profit will be available against which the unused tax losses and unused tax credits
can be utilized. Subject to continuing to satisfy AusIndustry and Australian Taxation Office regulations and laws, we currently
expect to receive concessional income tax treatment in the current financial year similar to that which we have had historically.
Liquidity and Financial Position
MOKO’s 30 June 2014 reporting date
cash and cash equivalents (‘cash’) was $9,878,011 (2013: $2,519,186) and the net assets were $11,616,698 (2013: $2,873,372).
Working capital, (defined as current assets less current liabilities) increased to $7,523,168 (2013: ($1,563,634)) and pertained
largely to the increase in balance date cash and to a lesser extent, lower current liabilities.
The operating cash outflow for the year increased
by 300% to $7,067,727 (2013: $1,768,876) reflecting the increased losses. Investing cash outflows decreased by 61% to $699,506
(2013: $1,785,110) due primarily to reduced payments for the acquisition of the OfferMobi business in this year, compared to 2013.
The financing cash inflows increased by 237% to $15,151,403 (2013: $4,496,858) courtesy of net share issue proceeds of $16,269,600
(2013: $3,227,293) and net debt repayment of $1,118,197 (2013: net debt proceeds of $1,269,565).
In addition, as part of its U.S. Initial
Public Offering (‘U.S. IPO’), on 27 June 2014, MOKO listed 1,100,000 American Depositary Shares (“ADSs”)
on NASDAQ where each ADS represents forty fully paid ordinary shares of MOKO. The public offering price was USD$7.50 per ADS, representing
a total amount raised of US$8,250,000 before underwriting commissions and transaction costs.
The cash proceeds from the U.S. IPO was received
subsequent to year end and does not form part of the cash, net asset or working capital figures noted above.
Outlook
The results of the revised strategy implementation
for Mobile Advertising are not yet reflected in MOKO’s operating results or cash flows and these are expected to formulate
during the latter part of calendar 2014 year and more fully into 2015.
Significant
changes in the state of affairs
On 1 July 2013 MOKO Social Media Ltd acquired
a 51% controlling equity interest in Sydney based e-commerce business, Deals I Love (Australia) Pty Ltd (DIL), for total consideration
of $40,000. The fair value consideration was settled by way of issue of 400,000 unlisted options over fully paid ordinary shares
on 15 May 2014, exercisable at $0.10 each on or before 28 November 2015. The acquisition represents a business combination and
was made for the purpose of MOKO expanding into the growing mobile commerce sector and enhancing its mobile revenue streams. The
DIL acquisition formed MOKO’s Mobile Commerce segment.
During the quarter ended 30 September 2013
and including a settlement in lieu of services on 31 October 2013, MOKO issued a total of 54,250,000 fully paid ordinary shares
at an issue price of $0.04 per share to raise proceeds of $2,170,000 before transaction costs.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
13 |
DIRECTORS’ REPORT
On 4 April 2014 MOKO issued 38,100,000 fully
paid ordinary shares at an issue price of $0.21 per share which raised proceeds of $8,001,000 before transaction costs.
On 27 June 2014 and as part of its U.S. Initial
Public Offering, MOKO listed 1,100,000 American Depositary Shares (“ADSs”) on NASDAQ where each ADS represents forty
fully paid ordinary shares of MOKO. The public offering price was USD$7.50 per ADS, representing a total amount raised of US$8,250,000
before underwriting commissions and transaction costs.
Matters
subsequent to the end of the financial year
Other than the matters described in Note 31 to these financial
statements, there has not arisen in the interval between the end of financial year and the date of this report any item, transaction
or event of a material and usual nature likely, in the opinion of the directors, to affect significantly the operations of the
Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future financial years.
Likely
developments and expected results of operations
Comments on expected results of certain operations
of the Consolidated Entity are included in this annual report under the Chairman’s report.
Further information on likely developments
in the operations of MOKO Social Media and the expected results of operations have not been included in this annual financial report
because the directors believe it would be likely to result in unreasonable prejudice.
Environmental
regulation
The Consolidated Entity is not subject to
any significant environmental regulation under Australian or international laws
Greenhouse, gas and energy data
The Consolidated Entity is not subject to
the reporting requirements of either the Energy Efficiency Opportunities Act 2006 or the National Greenhouse and Energy Reporting
Act 2007 due to size and scale of its operations.
Information
on directors
Gregory
Ronald McCann (Non-Executive Chairman)
61 years.
Director since 24 April 2007.
Experience and expertise
Mr McCann
is currently the Managing Director and principal of the Excentor Group of companies, an independent software and consulting services
supplier to the Asia Pacific region. Greg was previously a partner with Deloitte for 24 years and has held a number of senior leadership
roles, including Managing Director for Deloitte Consulting/ICS in Australia, a systems integrator specialising in the implementation
of enterprise applications.
Mr McCann
is also Chairman of Tel.Pacific Limited, former Chairman of NBN Tasmania Limited, and on the Board of the law firm, Lander and
Rogers. He is a fellow of the Institute of Chartered Accountants in Australia and a Fellow of the Australian Institute of Company
Directors.
Other current directorship
Tel.Pacific
Limited
Former directorships in the last 3 years
NBN Tasmania
Limited
Special responsibilities
For the majority of the financial year, Mr
McCann’s role progressively built into an Executive Chairman position for the purposes and completion of the NASDAQ listing,
which occurred on 27 June 2014, and where-after he resorted to his usual Non-Executive Director position.
Non-Executive
Chairman of the Board of Directors and Member of the compensation committee
Interest in shares and options at date
of this report
Shares: |
13,444,444 |
fully
paid ordinary shares – Indirectly held |
|
20,000,000 |
performance
shares – Indirectly held |
Options: |
12,500,000 |
(5,000,000
options expiring 30 July 2016, exercisable at $0.042 each) – Indirectly held |
|
|
(2,500,000
options expiring 13 June 2015, exercisable at $0.05 each) – Indirectly held |
|
|
(5,000,000
options expiring 28 Nov 2015, exercisable at $0.40 each) – Indirectly held |
14 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
Ian
Michael Rodwell (Managing Director and Chief Executive Officer)
52 years.
Director since 18 August 2008.
Experience and expertise
Mr Rodwell
is the founder of MOKO Social Media. He has over 23 years of experience in corporate and consumer design and multimedia and has
owned and operated several businesses specialising in this field. He has worked in Australia, Singapore, UK and the US, managing
projects for many international companies including McKinsey, BMW, UniLever, and MTV. In the consumer area, Mr Rodwell led projects
for several of the world’s biggest names in sport including Manchester United FC; The All Blacks; Adidas; and several top
tennis stars such as Anna Kournikova and Lleyton Hewitt. His role includes the oversight of all MOKO’s strategic planning
and product development.
Other current directorships
None
Former
directorships in the last 3 years
None
Special
responsibilities
Chief Executive
Officer and Member of the audit committee
Interest
in shares and options at date of this report
Shares: 132,917 fully paid
ordinary shares – Directly held
5,575,000
fully paid ordinary shares – Indirectly held
Options: 10,325,000
(325,000
options expiring 13 June 2015, exercisable at $0.05 each) – Indirectly held
(10,000,000
options expiring 28 November 2015, exercisable at $0.40 each) – Indirectly held
Johannes
Rudolf De Back (Non-Executive Director)
45 years.
Director appointed 1 April 2010.
Experience
and expertise
Mr De Back
was formerly the CEO of Cliq Digital and co-founder and CEO of Triscreen Media Group, managing a number of companies providing
interactive media solutions. Mr De Back previously worked as a lawyer for several international firms, specialising in mergers
and acquisitions with a focus on telecom, media and entertainment. In 1999 he co-founded Telitas Benelux, one of the first and
most successful mobile content providers in Europe. In 2002 Telitas was sold to Index for €50 million, and Johannes went on
to form the Triscreen Media Group, which has built six offices worldwide with activity in over 35 countries. In 2010, Triscreen
Media merged with Blinck International B.V. to form Cliq Digital.
Other current directorship
Nil
Former
directorships in the last 3 years
Cliq Digital
AG (Frankfurt Stock Exchange)
Special responsibilities
Nil
Interest in shares and
options at date of this report
Shares: 40,297,710
fully paid ordinary shares – Indirectly held
Options: 16,400,000
(6,000,000
options expiring 28 November 2015, exercisable at $0.10 each) –Directly held
(5,000,000
options expiring 30 July 2016, exercisable at $0.042 each) – Indirectly held
(400,000
options expiring 28 November 2015, exercisable at $0.10 each – Indirectly held
(5,000,000
options expiring 13 June 2015, exercisable at $0.05 each) – Indirectly held
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
15 |
DIRECTORS’ REPORT
Peter
Yates (Non-Executive Director)
54 years.
Director appointed 14 October 2008.
Experience
and expertise
Peter is Deputy Chairman of The Myer Family Investments Pty Ltd,
a Director of AIA Australia Limited and MOKO.mobi. He is Chairman of the Royal Institution of Australia, the Australian Science
Media Centre, the Faculty of Business and Economics at Melbourne University, the Royal Children’s Hospital Foundation and
the Shared Value Project and Deputy Chairman of Asialink.
Peter is a Director of the Royal Children’s Hospital, the
Centre of Excellence for Quantum Computation and Communication Technology and the Centre for Independent Studies.
From 2004-2007 Peter was Managing Director of Oceania Capital
Partners and held the position of Chief Executive Officer of Publishing and Broadcasting Limited from 2001-2004. Until 2001 he
worked in the Investment Banking industry including 15 years with Macquarie Bank. He holds a Doctorate of the University from Murdoch
University, a Masters degree from Stanford University Graduate School of Business and a Commerce degree from Melbourne. He speaks
Japanese, having studied at Keio University in Tokyo.
Peter has been a director of Publishing and Broadcasting, Crown
Ltd, Foxtel Ltd, The Nine Network, Ninemsn, ticketek, Veda Ltd, Oceania Capital Partners Ltd, the National Portrait Gallery, The
Melbourne International Arts Festival, the Australian Chamber Orchestra and the Australia-Japan Foundation.
In the June 2011 Queen’s Birthday Honours, Peter was awarded
a Member of the Order of Australia for service to education, to the financial services industry and to a range of arts, science
and charitable organisations.
Other current directorships
AIA Australia Limited
Former directorships in the last 3 years
Nil
Special responsibilities
Chairman of the compensation committee and Member of the audit
committee
Interest in shares and options at date of this report
Shares: 48,163,402 fully paid ordinary shares – Indirectly
held
Options: 7,164,555
(6,164,555 options expiring 13 June 2015,
exercisable at $0.05 each) – Indirectly held
(1,000,000 options expiring 28 November, exercisable
at $0.40 each) – Indirectly held
Mark
Hauser (Non-Executive Director)
56 years.
Director appointed 1 February 2014.
Experience
and expertise
Mr. Hauser
is a Senior Managing Director of OFS Management, the manager of OFS Capital Corp., a publicly listed business development company.
Mr. Hauser founded and leads the firm’s small business investment fund which makes loans and structured equity investments
to private family businesses.
Mr. Hauser
is also the founder and Managing Director of Tamarix Capital Corporation. Tamarix invests in private, family-owned businesses assisting
them in their growth strategies, both in the United States and internationally.
Previously,
he was a Senior Managing Director at Sandell Asset Management, a multi-strategy fund where he headed the global private equity
business. Prior to Sandell, Mr. Hauser was a Managing Director at FdG Associates, a private equity fund focused on investing in
family-owned businesses.
He has
served as an officer and on the boards of directors of numerous public and private companies and he has been a guest speaker and
participated on panels involving global middle-market private equity investing and issues facing family businesses.
Mr. Hauser
began his career as a corporate attorney, practicing with Rogers & Wells in New York, Simons & Baffsky in Sydney, and Simmons
& Simmons in London.
He holds
a Bachelor of Economics Degree and a Bachelor of Law Degree from Sydney University and a Master of Law Degree from the London School
of Economics & Political Science.
He has
served on the boards of various philanthropic organizations and is a member of various clubs and societies including Young Presidents
Organization/World Presidents Organization and The Economic Club of New York.
16 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
Other current directorships
Nil
Former directorships in the last 3 years
Nil
Special responsibilities
Chairman of audit committee and Member of compensation committee
Interest in shares and options at date of this report
Shares: Nil
Options: 8,000,000
Options held on appointment (1 February 2014)
(2,000,000 options expiring 30 June 2015,
exercisable at $0.04 each) – Directly held
(1,000,000 options expiring 30 June 2015,
exercisable at $0.03 each) – Directly held
(1,000,000 options expiring 30 June 2015,
exercisable at $0.04 each) – Directly held
(1,000,000 options expiring 30 June 2015,
exercisable at $0.02 each) – Directly held
(1,000,000 options expiring 30 June 2015,
exercisable at $0.11 each) – Directly held
Options granted during the period
(2,000,000 options expiring 31 January 2016,
exercisable at $0.20 each) – Directly held
Company
Secretary
The Company Secretary is Mr A W Bursill. Mr Bursill was appointed
to the position of Company Secretary on 24 April 2007. Mr Bursill holds the position of company secretary for a number of other
listed and non-listed entities. Mr Bursill is a member of the Institute of Chartered Accountants in Australia.
Meetings
of directors
The number of meetings of the Company’s Board of Directors
(including meetings of committees of directors) held during the year ended 30 June 2014, and the numbers of meetings attended by
each director were as follows:
|
Director meetings |
Meetings of committees |
Audit (1) |
Compensation (2) |
Meetings held |
12 |
1 |
1 |
Meetings attended |
|
|
|
G McCann |
12 |
- |
1 |
I Rodwell |
12 |
1 |
- |
J De Back |
9 |
- |
- |
P Yates |
10 |
1 |
1 |
M
Hauser (3) |
3 |
1 |
1 |
| (1) | The committee was formed on 28 February,
2014. |
| (2) | The committee was formed on 28 February,
2014. |
| (3) | Represents the number of meetings held and attended during the time the director held office or
was a member of the relevant committee, between appointment date of 1 February 2014 and the year end. |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
17 |
DIRECTORS’ REPORT
Remuneration report (Audited)
The Remuneration
Report, which has been audited, outlines the director and executive remuneration arrangements for the Consolidated Entity and the
Company, (MOKO), in accordance with the requirements of the Corporations Act 2001 and its Regulations.
The Remuneration Report is set out under the following headings:
| A | Principles used to determine the nature and amount of remuneration |
| D | Share-based compensation. |
| A. | Principles used to determine the nature and amount of remuneration |
The objective
of the Consolidated Entity’s executive reward framework is to ensure reward for performance is competitive and appropriate
for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation
of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward
satisfies the following criteria for good reward governance practices:
| · | competitiveness and reasonableness |
| · | acceptability to shareholders |
| · | performance linkage / alignment of executive
compensation |
Remuneration
structure
In accordance
with best practice corporate governance, the structure of non-executive directors’ remuneration is clearly distinguished
from that of executives. Remuneration is determined by the Compensation committee.
The remuneration
structure for directors, company secretary and senior managers is based on the following factors:
| · | experience of the individual concerned |
| · | the overall performance of the market in
which the Consolidated Entity operates |
| · | the overall performance of the Consolidated
Entity. |
Non-executive
director remuneration
The ASX
Listing Rules requires that the aggregate non-executive directors’ remuneration shall be determined periodically by a general
meeting. Aggregate fixed remuneration for all non-executive directors as determined by the Board is not to exceed $250,000 per
annum. Directors’ fees cover all main board and committee activities.
The level
of non-executive directors’ fixed fees as at the reporting date is as follow:
Name |
Non-executive directors’ fees |
G McCann |
$100,000 per annum |
J De Back |
$30,000 per annum |
P Yates |
$30,000 per annum |
M Hauser |
USD$40,000 per annum |
Non-executive directors receive
performance related compensation, via options and Performance Shares following receipt of shareholder approval. The issue of share
based payments as part of director remuneration ensures that director remuneration is competitive with market standards as well
as providing an incentive to pursue longer term success for the Company. It also reduces the demand on the cash resources of the
Company, and assists in ensuring the continuity of service of directors who have extensive knowledge of the Company, its business
activities and assets and the industry in which it operates. Details of share-based compensation is contained in section
D - Share-based compensation
of this report.
Non-executive directors do not
receive any retirement benefits, other than statutory superannuation.
18 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
Executive remuneration
Remuneration for executives
is set out in employment agreements. Details of employment agreements with executives are provided below, in section C of this
Remuneration Report.
Executive directors may receive
performance related compensation but do not receive any retirement benefits, other than statutory superannuation.
Fixed remuneration
Fixed remuneration consists
of base compensation (which is calculated on a total cost basis and includes any FBT charges related to employee benefits including
motor vehicles) as well as employer contributions to superannuation and healthcare funds.
Fixed remuneration will be reviewed
at least annually by the Compensation committee through a process that considers individual and overall performance of the Company.
During the 2014 fiscal year, this process was undertaken by the Board of Directors as a whole.
Short-term incentive
The Company
has performance based, cash bonus opportunities in place as short-term incentives (STI) for key management personnel and certain
other employees. The performance based conditions are chosen to incentivise and reward staff in delivering challenging yet critical,
short term outcomes that enable the business plan and longer term objectives. The Compensation Committee will periodically determine
the STI for the Chief Executive Officer (CEO) and for other staff, in conjunction with the CEO. During the 2014 fiscal year, the
CEO and other senior manager’s STI was determined by the Board of Directors as a whole, excluding the CEO, as described at
section C – Service Agreements.
Long-term incentives
Long-term
incentives (LTI) may be provided to key management personnel and certain other employees in the form of options over ordinary shares
of the Company or Performance Shares.
LTI are
considered to promote continuity of employment and provide additional incentive to recipients to increase shareholder wealth. Options
and Performance Shares may only be issued to directors subject to approval by shareholders in a general meeting.
Options
and Performance Shares issued as LTI are set out under section D of this Remuneration Report.
Consequences of performance on shareholder
wealth
In considering the Consolidated
Entity’s performance and benefits for shareholder wealth, the directors have regard to the following indices in respect of
the current financial year and the previous four financial years:
|
2014 |
2013 |
2012 |
2011 |
2010 |
Sales revenue |
|
|
|
|
|
- Continuing operation |
8,228,151 |
6,020,593 |
1,722,484 |
1,558,636 |
447,504 |
- Discontinuing operation |
- |
9,128,887 |
10,909,809 |
- |
- |
Loss after income tax |
(13,596,459) |
(6,278,079) |
(2,432,246) |
(3,338,861) |
(2,772,982) |
Dividends paid |
Nil |
Nil |
Nil |
Nil |
Nil |
Share price at end of the year |
0.19 |
0.04 |
0.04 |
0.05 |
0.06 |
Basic loss per share |
(2.85) |
(2.05) |
(1.88) |
(2.60) |
(2.59) |
In assessing
the above indices, the directors note that the Consolidated Entity has yet to record a sustainable net profit or pay a dividend.
Consequently, as the overall level of key management personnel’s compensation takes into account the performance of the Consolidated
Entity, that overall level has remained relatively unchanged, other than for the increase or decrease to compensation levels due
to the appointment or resignation of key management personnel and the increase of the CEO’s compensation during the year,
following his relocation to the USA. Furthermore, total fixed remuneration for all non-executive directors has remained unchanged
since determined by the Board in 2007.
During
the 2014 financial year, a 20,000,000 Performance Share grant was made as a performance related remuneration transaction to MOKO’s
Non-Executive Chairman (2013: nil).
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
19 |
DIRECTORS’ REPORT
The key performance
condition of this instrument is share price related, as a 90 day Volume Weighted Average Price (VWAP) barrier to vary to ordinary
shares. Further details of Performance Shares are noted in section D – Share Based Compensation.
Use of
remuneration consultants
The Board
Committee did not engage the services of remuneration consultants during the year.
Voting
and comments made at the Company’s 2013 Annual General Meeting
The Company
received 75% of “for” votes on its Remuneration Report for the year ended 30 June 2013. The Company did not receive
any specific feedback at the AGM or throughout the year on its remuneration practices
| B. | Details of remuneration |
Amounts of remuneration
Details of the remuneration of the directors
and any other key management personnel (defined as those who have the authority and responsibility for planning, directing and
controlling the major activities of the Consolidated Entity) and specified executives of Moko Social Media Limited and the Group
are set out in the following tables.
Key management personnel of the Consolidated Entity consisted of
the directors and Managing Director of MOKO Social Media Limited:
| · | Greg
McCann – Non-Executive Chairman |
| · | Ian
Rodwell - Chief Executive Officer and Managing Director |
| · | Johannes
De Back - Non Executive Director |
| · | Peter
Yates - Non Executive Director |
| · | Mark
Hauser - Non Executive Director |
| · | Andrew
Bursill - Company Secretary |
|
SHORT-TERM |
POST-EMPLOYMENT |
SHARE-BASED |
|
|
2014 |
Salary
& Fees |
Consultancy
Fees |
Bonus |
Other |
Super-
annuation |
Retirement
benefits |
Performance
Shares |
Options |
Total
$ |
|
|
Non-Executive
Directors |
|
G
McCann 1 |
91,533 |
- |
- |
- |
8,467 |
- |
493,205 |
459,046 |
1,052,251 |
|
P
Yates |
30,000 |
- |
- |
- |
- |
- |
- |
91,809 |
121,809 |
|
J
De Back 2 |
22,500 |
39,000 |
- |
- |
- |
- |
- |
1,154,571 |
1,216,071 |
|
M
Hauser 3 |
18,094 |
- |
- |
- |
- |
- |
- |
99,519 |
117,613 |
|
Executive
Directors |
|
I
Rodwell 4 |
300,387 |
- |
45,767 |
4,419 |
28,309 |
- |
- |
918,092 |
1,296,973 |
|
Other
Key Management Personnel |
|
A
W Bursill 5 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
TOTAL |
462,514 |
39,000 |
45,767 |
4,419 |
36,775 |
- |
493,205 |
2,723,037 |
3,804,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SHORT-TERM |
POST-EMPLOYMENT |
SHARE-BASED |
|
|
2013 |
Salary
& Fees |
Consultancy
Fees |
Bonus |
Other |
Super-
annuation |
Retirement
benefits |
Performance
Shares |
Options |
Total
$ |
|
|
Non-Executive
Directors |
|
G
McCann |
91,743 |
- |
- |
- |
8,257 |
- |
- |
44,000 |
144,000 |
|
P
Yates |
25,000 |
- |
- |
- |
- |
- |
- |
8,800 |
33,800 |
|
J
De Back 2 |
- |
156,045 |
- |
- |
- |
- |
- |
44,000 |
200,045 |
|
|
|
|
|
|
|
|
|
|
|
|
20 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
|
SHORT-TERM |
POST-EMPLOYMENT |
SHARE-BASED |
|
|
2013 |
Salary
& Fees |
Consultancy
Fees |
Bonus |
Other |
Super-
annuation |
Retirement
benefits |
Performance
Shares |
Options |
Total
$ |
|
|
Executive
Directors |
|
I
Rodwell 4 |
299,196 |
- |
- |
- |
26,928 |
- |
- |
44,000 |
370,124 |
|
|
|
|
|
|
|
|
|
|
|
|
Other
Key Management Personnel |
|
A
W Bursill 5 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
TOTAL |
415,939 |
156,045 |
- |
- |
35,185 |
- |
- |
140,800 |
747,969 |
|
| 1. | G McCann’s remuneration was paid in his capacity as a Non-Executive
Director and did not change during his temporary occupation as Executive Chairman in
2014 for the purposes and completion of the NASDAQ listing. |
| 2. | J De Back, director, is a director of Dutchman Capital who provided
consulting services to MOKO until 30 September 2013. The contract between MOKO and Dutchman
Capital was based on normal commercial terms. |
| 3. | Mark Hauser was appointed as a Non-Executive Director on 1 February
2014 and prior to which, he provided consulting services to MOKO for two years until
31 January 2014. The consulting contract between MOKO and Mark Hauser was based on normal
commercial terms and this remuneration is not included. |
4. |
I Rodwell was paid STI of $22,883 excluding superannuation in June 2014 upon Rec*IT launch and $22,884 excluding superannuation in June 2014 upon NASDAQ listing. In 2013 year, I Rodwell was paid $49,196 to reduce leave entitlements. |
| 5. | A W Bursill, company secretary, is an associate of Franks &
Associates Pty Ltd who provides Company secretarial services to MOKO. The contract between
MOKO and Franks & Associates is based on normal commercial terms. A total of $97,793
(2013: $49,892) was received by Franks & Associates in relation to this contract
for the year. Further information is contained in Note 25(d). |
The performance linked and fixed proportions of remuneration are
as follows:
|
Fixed
remuneration |
STI |
LTI |
Name |
2014 |
2013 |
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
|
|
Non-Executive
Directors |
|
|
|
|
|
|
G
McCann |
10% |
69% |
- |
- |
90% |
31% |
P
Yates |
25% |
74% |
- |
- |
75% |
26% |
J
De Back |
5% |
78% |
- |
- |
95% |
22% |
M
Hauser |
15% |
- |
- |
- |
85% |
- |
|
|
|
|
|
|
|
Executive
Directors |
|
|
|
|
|
|
I
Rodwell |
26% |
88% |
4% |
- |
70% |
12% |
|
|
|
|
|
|
|
Other
Key Management Personnel |
|
|
|
|
|
|
A
W Bursill |
- |
- |
- |
- |
- |
- |
Remuneration and other terms of employment for key management personnel
are formalised in service agreements, Details of the agreement is as follows:
Name: |
Ian Rodwell |
Title: |
Chief Executive Officer and Managing Director |
Agreement commenced: |
15 January 2007 |
Term of agreement: |
Open |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
21 |
DIRECTORS’ REPORT
Details: |
Base annual
package * and discretionary options remuneration, subject to a performance review at the conclusion of each financial year.
6 month termination notice by either party. 6 month non-solicitation clause after termination. The Company may terminate the
agreement with cause in certain circumstances such as gross misconduct. |
|
|
* Base annual package: |
Before 1 December
2013: |
|
Base salary $250,000
per annum plus statutory superannuation. |
|
|
|
1 December 2013 to
31 March 2014: |
|
The annual base salary
$325,000 per annum plus statutory superannuation and a bonus opportunity up to $50,000 ($25,000 payable upon a NASDAQ listing
and $25,000 payable upon successful completion of the 20 college Pilot Testing Phase of the company’s Rec*IT product) |
|
|
|
1 April 2014 and onwards: |
|
The annual base salary
U$325,000 per annum; and rental assistance of U$5,000 per month to be reviewed in two years. Healthcare is paid at approximately
USD$20,000 per annum. |
| D. | Share-based compensation |
Options
The terms and conditions of each grant of options affecting remuneration
of directors and any other key management personnel in this financial year or future reporting years are as follows:
Option series |
Numbers of
options
issued |
Grant date |
Vesting
date and
exercisable
date |
Expiry date |
Exercise
Price |
Fair value
per option
at grant
date |
Director |
16,000,000 |
28-Nov-13 |
28-Nov-13 |
28-Nov-15 |
$0.40 |
$0.29 |
Director |
6,000,000 |
28-Nov-13 |
28-Nov-13 |
28-Nov-15 |
$0.10 |
$0.29 |
Director |
2,000,000 |
05-May-14 |
05-May-14 |
31-Jan-16 |
$0.20 |
$0.17 |
Total |
24,000,000 |
|
|
|
|
|
Options granted carry no dividend
or voting rights.
Details of options over ordinary shares issued
to directors and any other key management personnel as part of compensation during the year ended 30 June 2014 are set out below:
Number
of options granted during the year |
Number of options
vested during the
year |
|
|
|
|
|
Name |
2014 |
2013 |
2014 |
2013 |
G
McCann |
5,000,000 |
5,000,000 |
5,000,000 |
5,000,000 |
I
Rodwell |
10,000,000 |
5,000,000 |
10,000,000 |
5,000,000 |
P
Yates |
1,000,000 |
1,000,000 |
1,000,000 |
1,000,000 |
J
De Back |
6,000,000 |
5,000,000 |
6,000,000 |
5,000,000 |
M
Hauser 1 |
2,000,000 |
- |
2,000,000 |
- |
Total |
24,000,000 |
16,000,000 |
24,000,000 |
16,000,000 |
| 1. | A total of 4,000,000 options granted to M Hauser during the 2013
year and 4,000,000 options granted during the 2014 year are excluded as they were not
granted to him in his capacity as a Director of MOKO. |
Performance Shares
The terms and conditions of each grant of Performance Shares affecting
remuneration of directors and other key management personnel in this financial year or future reporting years are as follows:
22 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
|
Numbers of
Performance
Shares |
Grant
date |
Vesting
date |
Expiry
(End) date |
Issue
Price |
Exercise
(Variation)
Price |
Fair value per
Performance
Share at
grant date |
Director |
20,000,000 |
28-Nov-13 |
28-Nov-15 |
28-Nov-16 |
$0.00001 |
$0.10 |
$0.078 |
Performance Shares granted carry
no dividend or voting rights.
Details of Performance Shares issued to directors
and other key management personnel as part of compensation during the year ended 30 June 2014 are set out below:
Number of Performance
Shares granted during the
year |
Number of Performance
Shares vested during the
year |
|
|
|
|
|
Name |
2014 |
2013 |
2014 |
2013 |
G
McCann |
20,000,000 |
- |
- |
- |
Mr.
McCann was issued 20.0 million Performance Shares at an Issue Price of $0.00001 per ordinary share with End Date of the third
anniversary of issuance, Variation Payment of $0.10 per ordinary share and the Variation Event being the 90 day VWAP of our ordinary
shares exceeding $0.40 per share.
Performance
Shares remain outstanding for a period equal to earlier of 3 years from the date of original purchase or the occurrence of the
relevant Performance Event (such earlier date, the “End Date”). If the Performance Shares have not been ‘varied’
by the End Date, which can include events such as termination, the VWAP share price hurdle having been met, a takeover offer among
others (any such event, a “Variation Event”) then the Performance Shares will be redeemed by the Company for their
Issue Price. If a Variation Event does occur prior to the End Date, the holder has twelve months from the date of the Variation
Event to provide notice and payment (a “Variation Payment”) to the Company. Upon payment of the Variation Payment
to the Company, the relevant Performance Shares will rank pari passu all with existing ordinary shares of the Company and trade
together in the public market. On the other hand, at no time prior to a Variation Event will the holder be permitted to transfer
any Performance Shares, and no dividend or voting rights will attach to any Performance Shares unless and until varied. In the
event that the Variation Event does not occur prior or upon to the End Date, the Company will pay the Issue Price that it received
from the holder for the applicable Performance Shares and then redeem and cancel those Performance Shares.
The
total number of Performance Shares issued under the Performance Share Plan, taken together with Performance Shares and options
issued during the previous five years pursuant to an employee share plan extended to directors, employees or eligible contractors
of the Company, may not exceed five percent of the total number of outstanding ordinary shares.
The values of options over ordinary shares granted,
exercised and lapsed and of Performance Shares for directors and any other key management personnel during the year ended 30 June
2014 are set out below:
|
Value of
options
granted
during the
year |
Value of
options
exercised
during the
year |
Value of
options
lapsed
during the
year |
Value of
Performance
Shares
granted
during the
year |
Remuneration
consisting of
options during
the year |
Name |
$ |
$ |
$ |
$ |
% |
G
McCann |
459,046 |
163,711 |
45,900
|
493,205 |
90% |
I
Rodwell |
918,092 |
315,422
|
64,526
|
- |
70% |
P
Yates |
91,809 |
155,274 |
45,900
|
- |
75% |
J
De Back |
1,154,571 |
8,474
|
- |
- |
95% |
M
Hauser |
99,519 |
- |
- |
- |
85% |
Total |
2,723,037 |
642,881
|
156,326
|
493,205 |
|
The share based LTI compensation is issued to
Directors
This concludes the Remuneration Report, which
has been audited.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
23 |
DIRECTORS’ REPORT
Options
Options granted
During or since the end of the year, the Consolidated
Entity granted the following options over unissued ordinary shares:
Table A – Options granted over unissued
ordinary shares
Class |
Grant
Date |
Expiry
Date |
Exercise
Price |
Number of
Options |
(MKBAO)
Employee Unlisted Options |
13-Sep-13 |
31-Jul-16 |
$0.17 |
3,850,000 |
(MKBAO)
Unlisted Options |
24-Oct-13 |
24-Oct-15 |
$0.155 |
4,000,000 |
Unlisted
Options |
13-Nov-13 |
31-Dec-14 |
$0.10 |
200,000 |
Unlisted
Options |
28-Nov-13 |
28-Nov-15 |
$0.40 |
16,000,000 |
Unlisted
Options |
28-Nov-13 |
28-Nov-15 |
$0.10 |
6,000,000 |
Unlisted
Options |
28-Nov-13 |
30-Jun-15 |
$0.03 |
1,000,000 |
Unlisted
Options |
28-Nov-13 |
30-Jun-15 |
$0.04 |
1,000,000 |
Unlisted
Options |
28-Nov-13 |
30-Jun-15 |
$0.02 |
1,000,000 |
Unlisted
Options |
28-Nov-13 |
30-Jun-15 |
$0.11 |
1,000,000 |
(MKBAW)
Director and Employer Options |
25-Feb-14 |
30-Jun-14 |
$0.12 |
400,000 |
(MKBAO)
Employee Unlisted Options |
19-Mar-14 |
31-Jul-16 |
$0.17 |
700,000 |
Unlisted
Option |
5-May-14 |
28-Nov-15 |
$0.10 |
400,000 |
Unlisted
Option |
5-May-14 |
31-Jan-16 |
$0.20 |
2,000,000 |
(MKBOA)
Listed Options |
9-Jul-13 |
13-Jun-15 |
$0.05 |
24,725,000 |
(MKBOA)
Listed Options |
12-Jul-13 |
13-Jun-15 |
$0.05 |
6,750,000 |
(MKBOA)
Listed Options |
10-Sep-13 |
13-Jun-15 |
$0.05 |
30,025,000 |
(MKBOA)
Listed Options |
12-Sep-13 |
13-Jun-15 |
$0.05 |
9,500,000 |
(MKBOA)
Listed Options |
21-Oct-13 |
13-Jun-15 |
$0.05 |
7,000,000 |
(MKBOA)
Listed Options |
31-Oct-13 |
13-Jun-15 |
$0.05 |
1,250,000 |
(MKBOA)
Listed Options |
15-May-14 |
13-Jun-15 |
$0.05 |
2,500,000 |
Total |
|
|
|
119,300,000 |
These options do not entitle the holder to participate
in any share issue of the Company or any other entity.
24 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
Table B - Options granted American Depositary
Shares (where one ADS = 40 Ordinary shares)
Class |
Grant
Date |
Expiry
Date |
Exercise
Price (per
ADS in
US$) |
Number
granted
(in ADSs) |
Number
granted (in
ordinary
shares) |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$2.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$3.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$2.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$4.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-15 |
$6.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$7.50 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$3.70 |
5,000 |
200,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$1.85 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-15 |
$4.07 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-16 |
$6.29 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$7.50 |
41,750 |
1,670,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$6.29 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$6.66 |
2,500 |
100,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$7.50 |
11,250 |
450,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$6.80 |
6,250 |
250,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$5.55 |
7,500 |
300,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$5.55 |
7,500 |
300,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-15 |
$5.55 |
7,500 |
300,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$4.00 |
25,000 |
1,000,000 |
Total |
|
|
|
364,250 |
14,570,000 |
These options do not entitle the holder to participate
in any share issue of the Company or any other entity.
Unissued shares under option
At the date
of this report, unissued ordinary shares of the Company under option are:
Table C – Unissued ordinary shares
under option
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Unlisted
Options |
30-Jun-15 |
$0.04 |
2,000,000 |
Unlisted
Options |
30-Nov-15 |
$0.10 |
500,000 |
Unlisted
Director Options |
30-Jul-16 |
$0.042 |
10,000,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.06 |
750,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.17 |
4,250,000 |
Unlisted
options |
24-Oct-15 |
$0.155 |
3,450,000 |
Unlisted
Director Options |
28-Nov-15 |
$0.40 |
16,000,000 |
Unlisted
Director Options |
28-Nov-15 |
$0.10 |
6,400,000 |
Unlisted
options |
30-Jun-15 |
$0.03 |
1,000,000 |
Unlisted
options |
30-Jun-15 |
$0.04 |
1,000,000 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
25 |
DIRECTORS’ REPORT
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Unlisted
options |
30-Jun-15 |
$0.02 |
1,000,000 |
Unlisted
options |
30-Jun-15 |
$0.11 |
1,000,000 |
Unlisted
options |
31-Jan-16 |
$0.20 |
2,000,000 |
Listed
Options (MKBOA) |
13-Jun-15 |
$0.05 |
144,107,974 |
Unlisted
Options over American Depositary Shares |
Refer
to table B |
|
14,570,000 |
Total |
|
|
208,027,974 |
These options do not entitle the holder to participate
in any share issue of the Company or any other entity.
Lapse of options
During or since the end of the financial year, the following options
were lapsed:
Table D – lapsed options
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Employee
Options |
25-Jul-13 |
$0.10 |
1,800,000 |
Director
Options |
25-Jul-13 |
$0.10 |
3,000,000 |
Employee
Options |
25-Jul-13 |
$0.12 |
1,950,000 |
Director
Options |
25-Jul-13 |
$0.12 |
2,500,000 |
Unlisted
Options |
25-Jul-13 |
$0.20 |
2,916,668 |
Listed
Options (MKBO) |
25-Jul-13 |
$0.10 |
57,314,138 |
Total |
|
|
69,480,806 |
Cancellation of options
During or since the end of the financial year, the following options
were cancelled:
Table E – cancelled options
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Unlisted
Employee Options |
30-Jun-14 |
$0.12 |
3,050,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.06 |
500,000 |
Total |
|
|
3,550,000 |
Shares issued on the exercise of options
During or since the end of the financial year,
the Consolidated Entity issued ordinary shares of the Company as a result of the exercise of options as follows (there are no
amounts unpaid on the shares issued):
26 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
DIRECTORS’ REPORT
Table F – Shares issued on exercise
of options
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Unlisted
Employee Options |
30-Jun-14 |
$0.12 |
21,650,000 |
Unlisted
Options |
30-Jun-14 |
$0.03 |
2,000,000 |
Unlisted
Options |
31-Dec-14 |
$0.10 |
200,000 |
Unlisted
Options |
30-Jun-15 |
$0.05 |
2,593,750 |
Unlisted
Options |
24-Oct-15 |
$0.155 |
550,000 |
Unlisted
Options |
6-Nov-15 |
$0.0477 |
1,515,152 |
Unlisted
Director Options |
30-Jul-16 |
$0.042 |
6,000,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.06 |
500,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.17 |
300,000 |
Listed
Options |
25-Jul-14 |
$0.10 |
1,440 |
Listed
Options (MKBOA) |
13-Jun-15 |
$0.05 |
7,386,047 |
Total |
|
|
42,696,389 |
Performance shares
Table G – Performance Shares issued
Class |
Grant
date |
Vesting
date |
Expiry (End)
date |
Issue
Price |
Exercise
(Variation)
Price |
Number of
Performance
Shares |
Director |
28-Nov-13 |
28-Nov-15 |
28-Nov-16 |
$0.00001 |
$0.10 |
20,000,000 |
Indemnity and insurance
of officers
The
Company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive,
for which they may be held personally liable, except where there is a lack of good faith.
During
the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the company
against a liability to the extent permitted by the Corporations Act 2001. The contract
of insurance prohibits disclosure of the nature of liability and the amount of the premium.
Indemnity and insurance
of auditor
The
Company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the Company or any related
entity against liability incurred by the auditor.
During
the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related
entity.
Proceedings
on behalf of the Company
No person
has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company,
or to intervene in any proceedings to which the Company is a party for the purposes of taking responsibility on behalf of the
Company for all or part of those proceedings.
Non-audit services
Details
of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined
in note 32 to the financial statements.
The
directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person
or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
27 |
DIRECTORS’ REPORT
The
directors are of the opinion that the services as disclosed in note 32 to the financial statements do not compromise the external
auditor's independence requirements of the Corporations Act 2001 for the following reasons:
| · | all
non-audit services have been reviewed and approved to ensure that they do not impact
the integrity and objectivity of the auditor; and |
| · | none
of the services undermine the general principles relating to auditor independence as
set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting
Professional and Ethical Standards Board, including reviewing or auditing the auditor's
own work, acting in a management or decision-making capacity for the company, acting
as advocate for the company or jointly sharing economic risks and rewards. |
There are no officers of the company
who are former audit partners of the Company.
Auditors’ independence declaration
A copy of the auditors’ independence
declaration as required under section 307C of the Corporations Act 2001 is set out on page 29.
Auditor
BDO continues in office in accordance
with section 327 of the Corporations Act 2001.
This report is made in accordance with
a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of directors:
|
|
|
Greg McCann |
|
Ian Rodwell |
Chairman |
|
Managing Director |
|
|
|
Date: 30 September 2014 |
|
Date: 30 September 2014 |
Sydney, Australia |
|
Virginia, USA |
28 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
|
Tel: +61 2 9251 4100 |
Level 11, 1 Margaret St |
Fax: +61 2 9240 9821 |
Sydney NSW 2000 |
www.bdo.com.au |
Australia |
DECLARATION OF INDEPENDENCE
BY Arthur Milner TO THE DIRECTORS OF MOKO SOCIAL MEDIA LIMITED
As lead auditor of Moko Social Media Limited for the year ended 30 June
2014, I declare that, to the best of my knowledge and belief, there have been:
| 1. | No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and |
| 2. | No contraventions of any applicable code of professional conduct in relation to the audit. |
This declaration is in respect of Moko Social Media Limited and the entities
it controlled during the period.
Arthur Milner
Partner
BDO East Coast Partnership
Sydney, 30 September 2014
BDO East Coast Partnership ABN 83 236 985 726 is a member
of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian
company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO International Ltd, a UK company
limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme
approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each
State or Territory other than Tasmania.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
29 |
CORPORATE GOVERNANCE STATEMENT
MOKO Social
Media Limited (MOKO or the Company) and its controlled entities (the Group) have adopted the corporate governance framework and
practices set out in this statement. The framework and practices have been in place throughout the financial year, and comply
with the second edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (Recommendations),
unless otherwise stated. Consistent with the Company’s approach
to sound corporate governance, opportunities for improvement are regularly considered.
Day-to-day management of the affairs of the
Company and its controlled entities are delegated by the Board to the Chief Executive Officer and other executives. The Directors
are responsible to shareholders for the performance of the Company and their focus is to enhance the interests of shareholders
and other key stakeholders and to ensure the Company is properly managed. The main processes that the Directors of the Company
use in doing so are set out in this statement.
This
statement has been approved by the Board, and the information provided remains current as at 30 September 2014.
MOKO has made its corporate governance policies and charters publicly
available on its website (www.mokosocialmedia.com).
Principle
1: Lay solid foundations for management and oversight
Recommendation 1.1 – Companies should
establish the functions reserved to the board and those delegated to senior executives and disclose those functions
The primary responsibilities of the Board include:
| · | Establishing
the strategic direction, long term goal setting and performance oversight for MOKO; |
| · | Ensuring
that the Company has implemented adequate internal controls together with appropriate
monitoring of compliance activities; |
| · | The
review and adoption of annual budgets for the financial performance of MOKO and monitoring
the results on a quarterly basis; |
| · | The
approval of the annual and half-yearly financial report, and quarterly cash statements
(as long as required); |
| · | Ensuring
that the Company is able to pay its debts as and when they fall due; |
| · | Approving
the appointment, retention and termination of the Managing Director and Company Secretary; |
| · | Monitoring
senior executives’ performance and implementation of strategy, ensuring that appropriate
resources are made available; |
| · | Reviewing,
ratifying and monitoring systems of risk management and internal control and the Code
of Conduct; |
| · | Approving
and monitoring major capital expenditure, capital management, and acquisitions and divestitures;
and |
| · | Approving
and monitoring other reporting to shareholders. |
It is the role of senior management, led by
the Chief Executive Officer and Managing Director, Ian Rodwell, to manage MOKO in accordance with the direction and delegations
of the Board and it is the responsibility of the Board to oversee the activities of management in carrying out these delegated
duties.
Recommendation 1.2 – Companies should
disclose the process for evaluating the performance of senior executives
The Company has one senior executive, who is
also the Managing Director. Given the size and the nature of the Company’s operations, the performance of the Managing Director
is normally monitored on an ongoing basis by the Non-Executive Directors. The performance evaluation takes into account
business and personal targets for the year.
Recommendation 1.3 – Companies should
provide the information indicated in the Guide to reporting to Principle 1
A performance evaluation of the Managing Director took place during a Board meeting of the
Directors during the year, in accordance with the process disclosed above. In conducting that performance review, the Board took into account a recommendation from the compensation committee.
There have been no departures from Recommendations 1.1 –
1.3 during the year ended 30 June 2014.
30 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CORPORATE GOVERNANCE STATEMENT
Principle 2: Structure the board to add value
Recommendation 2.1 – A majority of
the board should be independent directors
Recommendation 2.2 – The chair should
be an independent director
The Board consists of one Executive Director,
Ian Rodwell, and four Non-Executive Directors (Greg McCann, Johannes De Back, Peter Yates and Mark Hauser). Each Director served
throughout the financial year, other than Mark Hauser, who was appointed on 1 February 2014.
The Board regularly assesses the independence of its Non-Executive
Directors. For this purpose an independent
Director is a Non-executive Director whom the Board considers to
be independent of management and free of any business or other relationship that could materially interfere with – or could
reasonably be perceived to materially interfere with - the exercise of unfettered and independent judgment, and who:
| 1. | is not a substantial shareholder of the Company, is not an officer
of, or is not otherwise associated with a substantial shareholder; |
| 2. | within the last three years, has not been employed in an executive
capacity by the Company or another Group member; |
| 3. | within the last three years, has not been a principal of a material
professional advisor or a material consultant to the Company or another Group member,
or an employee materially associated with the service provided; |
| 4. | is not a material supplier to, or customer of, the Company or another
Group member, or an officer of or otherwise associated directly or indirectly with a
material supplier or customer; and |
| 5. | has no material contractual relationship with the Company or another
Group member, other than as a Director. |
As at the date of this report, four of MOKO’s five Directors
are not considered independent. Ian Rodwell is an Executive Director of MOKO, and Peter Yates and Johannes De Back are substantial
shareholders. Furthermore Greg McCann, the Company’s Non-Executive Chairman, performed an Executive Director role for part
of the 2014 financial year in relation to the NASDAQ listing. Since 27 June 2014, he has reverted to his Non-Executive role, but
is no longer deemed independent.
Mark Hauser is deemed to be an independent Director.
It is noted that Mark Hauser has been a professional advisor to the Company within the last three years. However, the compensation
paid to him over that time as both a percentage of the Company’s total expenditure levels and of his personal income derived
from advising the Company, is deemed immaterial, at less than 10%.
Whilst MOKO does not comply with Recommendations
2.1 or 2.2, the Board notes that Peter Yates’ and Johannes De Back’s beneficial interests in the Company’s shares
help to align their interests with those of other shareholders. Furthermore, the Board believes that its current composition is
appropriate to deliver on the Company’s stated objectives, and notes that Greg McCann’s Executive role was held for
the purpose of NASDAQ listing.
Recommendation 2.3 – The roles of chair
and chief executive officer should not be exercised by the same individual
The Chairman of MOKO is Greg McCann and the
Chief Executive Officer is Ian Rodwell, therefore as required under best practice, there is a separation of these two roles.
Recommendation 2.4 – The board should
establish a nomination committee
The Company does not presently have a nomination
committee. Due to the size and nature of the activities of the Company, the nomination of new Directors is conducted by the Board
by way of ongoing review and discussion in relation to experience deficiencies that may exist within the existing board structure.
The Board considers the following factors when selecting new Directors
and when recommending Directors to shareholders for appointment or re-election:
| · | The
aim of having a majority of independent Directors on the Board and of having an independent
Non-Executive Chairman; |
| · | That
between them, the Directors have appropriate range of skills, expertise, experience and
diversity to discharge the Board’s mandate; |
| · | That
each individual Board member has sufficient time to meet his/her commitments as a Director
of the Company; |
| · | The
duration of each existing Director’s tenure, noting the retirement provisions of
the Constitution; and |
| · | Whether
the size of the Board is appropriate to facilitate effective discussions and efficient
decision making. |
New candidates to join the Board are predominantly sought through
referrals. To date, the Company has not utilised professional intermediaries to identify and assess candidates.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
31 |
CORPORATE GOVERNANCE STATEMENT
The nomination of existing Directors for re-appointment
is not automatic and is contingent on performance and the current and future needs of the Company.
Recommendation 2.5 – The Company should disclose
the process for evaluating the performance of the board, its committees and individual directors
The performance of the Board and individual Directors
is reviewed as part of the ordinary course of meetings of the Directors held during each year. The performance of the audit and compensation committees will be evaluated
annually, against the charters of those committees.
With the prior approval of the Chairman, each director has
the right to seek independent legal and other professional advice at the Company’s expense concerning any aspect of the
Company’s operations or undertaking in order to fulfill their duties and responsibilities as Directors.
MOKO’s Company Secretary is Andrew Bursill. Andrew
Bursill performs these duties pursuant to a contractual arrangement between MOKO and Franks & Associates Pty Ltd, a firm of
Chartered Accountants. All Directors have access to the Company Secretary.
Recommendation 2.6 – The Company should provide the information
indicated in the Guide to reporting on Principle 2
During the year, a performance review was made of the Board and of individual
Directors, in accordance with the process described above. Given that the formation of the Board committees only occurred on 28
February 2014, it is too early for their performance to have been evaluated. Therefore MOKO does not yet comply with Recommendation 2.6.
Further details about the Directors, including their
appointment dates, skills, experience and expertise relevant to the position of director are set out in the Director’s Report.
The skills, experience and expertise relevant to the position of director and period of office held by each director is disclosed
within the Directors’ Report of the Company’s Annual Report.
MOKO has not complied with Recommendations 2.1, 2.2, 2.4
or 2.6 during the year.
Principle 3: Promote
ethical and responsible decision making
Recommendation 3.1 – The Company should establish
a code of conduct and disclose the code
As part of the Board’s commitment to the highest standard
of conduct, MOKO has adopted a code of conduct to guide Directors, management, employees and consultants in carrying out their
duties and responsibilities.
Our Code of Business Conduct and Ethics is intended to promote
honest and ethical conduct, full and accurate reporting, and compliance with laws as well as other matters.
All Directors, executives, employees and consultants of MOKO
have the following duties:
| · | To act honestly, fairly and without prejudice
in all commercial dealings and to conduct business with professional courtesy and integrity |
| · | To work in a safe, healthy and efficient manner,
using their skills, time and experience to the maximum of their ability |
| · | To comply with applicable awards, Company
policies and job requirements |
| · | Not to knowingly make any misleading statements
to any person or to be a party to any improper practice in relation to dealings with or by MOKO |
| · | To ensure that MOKO’s resources and
property are used properly and |
| · | Not to disclose information or documents relating
to MOKO or its business, other than as required by law, not to make any unauthorised public comment on MOKO affairs and not to
misuse any information about MOKO or its associates. |
The Board endeavours to ensure that the Directors, officers
and employees of the Company act with integrity and observe high standards of behaviour and business ethics in relation to their
corporate activities.
Specifically, that Directors, officers and employees must:
| · | Act in the best interests of the Company |
| · | Be responsible and accountable for their actions,
and |
| · | Observe the ethical principles of fairness,
honesty and truthfulness, including disclosure of potential conflicts. |
32 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CORPORATE GOVERNANCE STATEMENT
Recommendation 3.2 – Companies should establish
a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the
board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and
progress in achieving them
The Company is at variance with Recommendation 3.2 in
that it has not yet established a diversity policy. The Board will give consideration to the Recommendation 3.2 as the size and
scope of the business grows.
Recommendation 3.3 – Companies should disclose
in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity
policy and progress towards achieving them
The Company is at variance with Recommendation 3.3 in that
it has not set or disclosed measurable objectives for achieving gender diversity. Due to the size of the Company and the industry
in which it operates, the Board does not deem it practical to limit the Company to specific targets for gender diversity as it
operates in a very competitive labour market where positions are sometimes difficult to fill. However, every candidate suitably
qualified for a position has an equal opportunity of appointment regardless of gender, age, ethnicity or cultural background.
Recommendation 3.4 – Companies should disclose in
each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on
the board
The proportion of women within the whole organisation as
at the date of this report are as follows:
|
2014
% |
2013
% |
|
|
|
Women employees in the whole organisation |
21% |
12% |
Women in senior executive positions |
- |
- |
Women on the Board of Directors |
- |
- |
Recommendation 3.5 – The Company should provide
the information indicated in the Guide to reporting on Principle 3
A digital copy of the Code of Business Conduct and Ethics
is available on MOKO’s website.
MOKO has not complied with Recommendations 3.2 or 3.3 during
the year.
Principle 4: Safeguard integrity in financial
reporting
Recommendation 4.1 – The board should establish
an audit committee
On 28 February 2014, the Board established
an audit committee to oversee and monitor the company’s accounting and financial reporting processes and the audit and integrity
of the Company’s financial statements.
The audit committee will be responsible for, among other
things:
| · | Selecting the independent auditors and pre-approving all
auditing and non-auditing services permitted to be performed by the independent auditors; |
| · | Reviewing and approving all proposed related-party transactions; |
| · | Discussing the annual audited financial statements with
management and the independent auditors; |
| · | Reviewing the adequacy and effectiveness of the Company’s
internal control policies and procedures; |
| · | Reviewing and discuss guidelines and policies with respect
to risk assessment and risk management; |
| · | Annually reviewing and reassessing the adequacy of our
audit committee charter; |
| · | Meeting separately and periodically with management and
the independent auditors; |
| · | Reviewing such other matters that are specifically delegated
to our audit committee by our Board of Directors from time to time; and |
| · | Reporting regularly to the full Board of Directors. |
Recommendation 4.2 – The audit committee
should be structured so that it: (i) consists only of non-executive directors, (ii) consists of a majority of independent directors;
(iii) is chaired by an independent chair, who is not the chair of the board; and (iv) has at least three members
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
33 |
CORPORATE GOVERNANCE STATEMENT
The audit committee has had the following three members since
it was formed on 28 February 2014: Mark Hauser who is the chairman and an independent Non-Executive Director, Peter Yates (non-independent
Non-Executive Director) and Ian Rodwell (CEO and Managing Director).
The audit committee does not comply with Recommendation 4.2,
as of the three members, one member is an Executive Director and two members are not independent Directors. Given that there is
only one independent Director on the Board, the Company is currently unable to comply with Recommendation 4.2.
Recommendation 4.3 – The audit committee should
have a formal charter
A digital copy of the charter of the audit committee is available
on MOKO’s website.
Recommendation 4.4 – The Company should provide the information indicated
in the Guide to reporting on Principle 4
The names and qualifications of the audit committee members and their attendance
at audit committee meetings is shown in the Directors’ Report.
The Board’s policy is to appoint external auditors who clearly demonstrate
quality and independence. The performance of the external auditor is reviewed annually and applications for tender for external
audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender
costs. The audit engagement partner is rotated periodically, as required by the Corporations Act.
MOKO became compliant with Recommendations 4.1 and 4.3 on 28 February
2014. MOKO has not complied with Recommendation 4.2 during the year.
Principle 5: Make timely and balanced disclosure
Recommendation 5.1 – The Company should put in place
written policies and procedures designed to ensure compliance with the ASX Listing Rule requirements and to ensure accountability
at a senior executive level for that compliance and disclose those policies or a summary of those policies
The CEO and Company Secretary have been appointed as the
persons responsible for communications with the ASX. The Board is responsible for ensuring the compliance with the continuous disclosure
requirements in the ASX listing rules and overseeing and co-ordinating information disclosure to the ASX.
The Company’s disclosure policy is set out in the Code
of Conduct and Ethics.
Recommendation 5.2 – The Company should provide
the information indicated in the Guide to reporting on Principle 5
A digital copy of the Code of Business Conduct and Ethics
is available on MOKO’s website.
There have been no departures from Recommendations 5.1 and
5.2 during the year.
Principle 6: Respect
the rights of shareholders
Recommendation 6.1 – The Company should design a
communications policy for promoting effective communication with shareholders
The Board and the Company Secretary are responsible for the
communications strategy to promote effective communications with shareholders and encourage effective participation at general
meetings. MOKO adheres to best practice in its preparation of Notices of Meetings to ensure all shareholders are fully informed.
Due to MOKO’s size, all communications are prepared and administered in-house.
Shareholders may elect to receive electronic notifications
when the Annual Report is available on the Company’s website, and may electronically lodge proxy instructions for items of
business to be considered at general meetings.
The Board encourages full participation of shareholders at
the annual general meeting. Shareholders who are unable to attend general meetings are encouraged to lodge proxy appointments in
advance of the meeting.
The external auditor is requested to attend the annual general
meeting and to be available to answer shareholder questions about the conduct of the audit and the preparation and content of the
audit report.
Recommendation 6.2 – The Company should provide
the information indicated in the Guide to reporting on Principle 6
There have been no departures from Recommendations 6.1 and
6.2 during the year.
34 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CORPORATE GOVERNANCE STATEMENT
Principle 7: Recognise
and manage risk
Recommendation 7.1 – The Company should establish
policies for the oversight and management of material business risks and disclose a summary of those policies
The Board is responsible for reviewing the Company’s
policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of
risk management and internal control. The Board constantly monitors the operation and financial aspects of MOKO’s activities
and considers the recommendations and advice of external auditors and other external advisers on the operations and financial risks
that it faces. The Board ensures that recommendations made by the external auditors and other external advisers are investigated
and, where considered necessary, appropriate action is taken to ensure that MOKO has an appropriate internal control environment
in place to manage the key risks identified.
On 28 February 2014, an audit committee was formed, which
has responsibility for discussing and reviewing guidelines and policies with respect to risk assessment and risk management, including
the Company’s insurance coverage.
Since the year end, management has commenced work to formalise
the processes for documenting risks and risk mitigation plans in a risk matrix. This matrix will be reviewed and monitored by the
audit committee.
Recommendation 7.2 – The Company should require
management to design and implement a risk management and internal control system to manage the Company’s material business
risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported
to it as to the effectiveness of the Company’s management of its material business risks.
Management is responsible for designing, implementing and
reporting on the adequacy of the Group’s risk management and internal control system. Key elements of the Group’s
internal control systems include:
| · | the
Code of Business Conduct and Ethics; |
| · | financial
systems to provide timely, relevant and reliable information to management and the Board; |
| · | appropriate
delegations and limits of authority; and |
| · | sources
of independent assurance, such as reports from the external auditors. |
Under Recommendation 7.2, management is required to the
Board on the effectiveness of the Company’s management of its material business risks.
The Board reviews ways of enhancing existing risk management
strategies, including appropriate segregation of duties and the employment and training of suitably qualified and experienced personnel.
Recommendation 7.3 – The Company should disclose
whether it has received assurance from the chief executive officer and chief financial officer (or equivalent) that the declaration
provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and that the system
is operating effectively in all material respects in relation to financial reporting risks
The Board requires that the Chief Executive Officer and Group
Financial Controller annually provide the declaration required by Recommendation 7.3.
Recommendation 7.4 – The Company should provide
the information indicated in the Guide to reporting on Principle 7
The Board has received the report required from management
under Recommendation 7.2 and the assurance from the Chief Executive Officer and Group Financial Controller required under Recommendation
7.3 for the year ended 30 June 2014.
The Board believes MOKO’s risk management and internal
compliance and control procedures are operating efficiently and effectively in all material aspects appropriate for a Company
of MOKO’s size and nature. The Board will continue to monitor this closely, and will cause to be developed a comprehensive
Risk Management Process and Policy document, additional to the material outlined above.
There have been no departures from Principle 7 during the
year.
Principle 8: Remunerate
fairly and responsibly
Recommendation 8.1 – The board should establish
a remuneration committee
On 28 February 2014, the Board established a compensation
(remuneration) committee to assist the Board in reviewing and approving the compensation forms and structure of MOKO’s Directors
and officers.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
35 |
CORPORATE GOVERNANCE STATEMENT
The compensation committee is responsible for, among other
things:
| · | reviewing and determining the compensation package for
our senior executives; |
| · | reviewing and making recommendations to our board with
respect to the compensation of our directors; |
| · | reviewing and approving officer and director indemnification
and insurance matters; |
| · | reviewing and approving any employee loan in an amount
equal to or greater than $20,000; |
| · | reviewing periodically and approving any long term incentive
compensation or equity plans, and |
| · | programs or similar arrangements, annual bonuses, employee
pension and welfare benefit plans. |
A digital copy of the charter of the compensation committee
is available on MOKO’s website.
Recommendation 8.2 – The remuneration committee
should be structured so that it:
| · | consists of a majority of independent directors; |
| · | is chaired by an independent chair; and |
| · | has at least three members. |
The compensation committee has had the following three members
since it was formed on 28 February 2014: chairman Peter Yates (non-independent Non-Executive Director), Greg McCann (non-independent
Non-Executive Director) and Mark Hauser (independent Non-Executive Director).
The compensation committee does not comply with Recommendation
8.2, as it is not chaired by an independent Director and of the three members, two members are not independent Directors. Given
that there is only one independent Director on the Board, the Company is currently unable to comply with Recommendation 8.2.
Recommendation 8.3 – The Company should clearly
distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives
All Directors have been granted options, and the Chairman
has been granted Performance Shares following approval by shareholders in general meeting. The issue of share based payments as
part of Director remuneration ensures that Director remuneration is competitive with market standards as well as providing an incentive
to pursue longer term success for the Company. It also reduces the demand on the critical cash resources of the Company, and assists
in ensuring the continuity of service of Directors who have extensive knowledge of the Company, its business activities and assets
and the industry in which it operates. The Company does not have any scheme for retirement benefits, other than statutory superannuation,
for any Directors.
The objective of the Company’s executive reward framework
is to ensure reward for performance is competitive and appropriate for the results delivered. The board ensures that executive
reward satisfies the following criteria for good reward governance practices:
| · | competitiveness and reasonableness |
| · | acceptability to shareholders |
The remuneration structure for directors, secretaries and
senior managers is based on the following factors:
| · | experience of the individual concerned |
| · | the overall performance of the market in which the
Company operates |
| · | the overall performance of the Company |
Recommendation 8.4 – The Company should provide
the information indicated in the Guide to reporting on Principle 8
The names of the compensation committee members and their attendance at compensation
committee meetings is shown in the Directors’ Report.
Any employees participating in equity based remuneration schemes are prohibited
from entering into transactions in associated products which limit the economic risk of participating in unvested entitlements
under those schemes.
MOKO became compliant with Recommendation 8.1 on 28 February 2014. MOKO has not
complied with Recommendations 8.2 or 8.3 during the year.
36 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
|
Tel: +61 2 9251 4100 |
Level 11, 1 Margaret St |
Fax: +61 2 9240 9821 |
Sydney NSW 2000 |
www.bdo.com.au |
Australia |
INDEPENDENT AUDITOR’S REPORT
To the members of Moko Social Media Limited
Report on the Financial Report
We have audited the accompanying financial report of Moko Social Media
Limited, which comprises the consolidated statement of financial position as at 30 June 2014, 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, notes comprising a summary of significant accounting policies and other explanatory information,
and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s
end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the
financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state,
in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based
on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the company’s preparation 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 company’s 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 believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
BDO East Coast Partnership ABN 83 236 985 726 is a member
of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian
company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO International Ltd, a UK company
limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme
approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each
State or Territory other than Tasmania.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
37 |
Independence
In conducting our audit, we have complied with the independence requirements
of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of Moko Social Media Limited, would be in the same terms if given to the directors as at the time of this
auditor’s report.
Opinion
In our opinion:
| (a) | the financial report of Moko Social Media Limited is in accordance with the Corporations Act 2001, including: |
| (i) | giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance
for the year ended on that date; and |
| (ii) | complying with Australian Accounting Standards and the Corporations Regulations 2001; and |
| (b) | the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. |
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 18 to 23
of the directors’ report for the year ended 30 June 2014. 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.
Opinion
In our opinion, the Remuneration Report of Moko Social Media Limited for
the year ended 30 June 2014 complies with section 300A of the Corporations Act 2001.
BDO East Coast Partnership
Arthur Milner
Partner
Sydney, 30 September 2014
38 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 30 June 2014
|
|
Consolidated |
|
Note |
2014 |
2013 |
|
|
$ |
$ |
Revenue from continuing operations |
5 |
8,228,151 |
6,020,593 |
Interest income |
5 |
104,850 |
8,813 |
Other Income |
5 |
282,148 |
- |
Fair
value gain on deferred contingent consideration |
5 |
383,933 |
1,829,653 |
Expenses |
|
|
|
Cost of providing goods and services |
|
(6,536,820) |
(4,330,167) |
Computer expenses |
|
(566,858) |
(665,957) |
Marketing expenses |
|
(1,308,959) |
(320,481) |
Travel and entertainment expenses |
|
(566,259) |
(202,815) |
Occupancy expenses |
|
(198,236) |
(119,262) |
Administration expenses |
|
(1,027,810) |
(332,800) |
Exchange loss |
|
(142,664) |
(238,717) |
Finance costs |
|
(3,838) |
(210,572) |
Legal and professional fees |
|
(3,223,803) |
(1,640,327) |
Employee benefits expenses |
6 |
(3,796,520) |
(2,510,446) |
Share based payments |
6 |
(5,144,968) |
(434,743) |
Depreciation and amortisation |
6 |
(1,224,238) |
(1,067,523) |
Other expenses |
|
91,527 |
- |
Impairment of goodwill |
6 |
- |
(1,487,137) |
|
|
|
|
Loss before income tax expense from continuing operations |
|
(14,650,364) |
(5,701,888) |
Income tax benefit |
7 |
1,053,905 |
990,594 |
|
|
|
|
Loss after income tax expense from continuing operations |
|
(13,596,459) |
(4,711,294) |
Profit/(Loss) after income tax expense from discontinued operations |
33 |
- |
(1,566,785) |
|
|
|
|
Loss after income tax for the year |
|
(13,596,459) |
(6,278,079) |
|
|
|
|
Other comprehensive income for the year, net of tax |
|
|
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
Exchange differences on translation of foreign operations |
|
(244,676) |
853,663 |
Total comprehensive income/(loss) for the year, net of tax |
|
(13,841,135) |
(5,424,416) |
|
|
|
|
Total comprehensive income/(loss) for the year is attributable to: |
|
|
|
Continuing operations |
|
(13,841,135) |
(3,857,631) |
Discontinued operations |
|
- |
(1,566,785) |
Total comprehensive income/(loss) for the year, net of tax |
|
(13,841,135) |
(5,424,416) |
|
|
|
|
Loss attributable to: |
|
|
|
Owners of the Company |
|
(13,472,361) |
(6,278,079) |
Non-controlling interest |
|
(124,098) |
- |
|
|
(13,596,459) |
(6,278,079) |
Total comprehensive income/(loss) for the year, net of tax attributable to: |
|
|
|
Owners of the Company |
|
(13,717,037) |
(5,424,416) |
Non-controlling interest |
|
(124,098) |
- |
|
|
(13,841,135) |
(5,424,416) |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
39 |
CONSOLIDATED STATEMENT
OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2014
|
|
Consolidated |
|
|
2014 |
2013 |
|
|
$ |
$ |
|
|
|
|
Earnings per share from continuing operations attributable to the owner of MOKO Social Media Limited |
|
|
|
Basic / Diluted EPS (Cents per share) |
28 (a) |
(2.85) |
(1.54) |
|
|
|
|
Earnings per share from discontinued operations attributable to the owner of MOKO Social Media Limited |
|
|
|
Basic / Diluted EPS (Cents per share) |
28 (b) |
- |
(0.51) |
|
|
|
|
Earnings per share for loss attributable to the owner of MOKO Social Media Limited |
|
|
|
Basic / Diluted EPS (Cents per share) |
28 (c) |
(2.85) |
(2.05) |
THESE FINANCIAL STATEMENTS
SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES
40 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2014
|
|
Consolidated |
|
|
Note |
2014 |
2013 |
|
|
$ |
$ |
Current assets |
|
|
|
Cash and cash equivalents |
8 |
9,878,011 |
2,519,186 |
Trade and other receivables |
9 |
784,872 |
823,898 |
Other current assets |
10 |
441,696 |
153,236 |
Total current assets |
|
11,104,579 |
3,496,320 |
|
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment |
11 |
87,726 |
72,662 |
Intangible assets |
12 |
3,613,433 |
4,410,248 |
Deferred tax asset |
7 |
427,719 |
- |
Total non-current assets |
|
4,128,878 |
4,482,910 |
Total assets |
|
15,233,457 |
7,979,230 |
|
|
|
|
Current liabilities |
|
|
|
Deferred
contingent consideration |
14 |
- |
1,430,252 |
Trade and other payables |
15 |
2,563,611 |
1,814,544 |
Borrowings |
16 |
- |
1,136,390 |
Employee benefits |
17 |
276,920 |
134,048 |
Provisions |
18 |
- |
264,912 |
Income tax provision |
|
740,880 |
279,808 |
Total current liabilities |
|
3,581,411 |
5,059,954 |
|
|
|
|
Non-current liabilities |
|
|
|
Employee benefits |
17 |
35,348 |
45,904 |
Total non-current liabilities |
|
35,348 |
45,904 |
Total liabilities |
|
3,616,759 |
5,105,858 |
|
|
|
|
Net assets |
|
11,616,698 |
2,873,372 |
|
|
|
|
Equity |
|
|
|
Issued capital |
19 |
41,679,662 |
24,656,473 |
Reserves |
20 |
8,990,804 |
3,674,208 |
Accumulated losses |
21 |
(38,929,670) |
(25,457,309) |
Non-controlling interest |
|
(124,098) |
- |
Total equity |
|
11,616,698 |
2,873,372 |
THESE FINANCIAL
STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
41 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2014
Consolidated |
Issued capital |
Foreign
currency
translation
reserve |
Option
reserves |
Accumulated
losses |
Non-
controlling
interest |
Total |
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
|
|
|
|
|
Balance at 30 June 2012 |
20,685,557 |
(38,815) |
2,424,617 |
(19,179,230) |
- |
3,892,129 |
|
|
|
|
|
|
|
Loss after income tax expense for the year |
- |
|
- |
(6,278,079) |
- |
(6,278,079) |
Other comprehensive income for the year, net of tax |
- |
853,663 |
- |
- |
- |
853,663 |
Total comprehensive loss for the year, net of tax |
- |
853,663 |
- |
(6,278,079) |
- |
(5,424,416) |
|
|
|
|
|
|
|
Transactions with owners in their capacity as owners |
|
|
|
|
|
|
Issue of shares |
4,228,250 |
- |
- |
- |
- |
4,228,250 |
Capital raising costs |
(257,334) |
- |
- |
- |
- |
(257,334) |
Share based payments |
- |
- |
434,743 |
- |
- |
434,743 |
|
|
|
|
|
|
|
Balance at 30 June 2013 |
24,656,473 |
814,848 |
2,859,360 |
(25,457,309) |
- |
2,873,372 |
|
|
|
|
|
|
|
Loss after income tax expense for the period |
- |
- |
- |
(13,472,361) |
(124,098) |
(13,596,459) |
Other comprehensive income for the year, net of tax |
- |
(244,676) |
- |
- |
- |
(244,676) |
Total comprehensive loss for the year, net of tax |
- |
(244,676) |
- |
(13,472,361) |
(124,098) |
(13,841,135) |
|
|
|
|
|
|
|
Transactions with owners in their capacity as owners |
|
|
|
|
|
|
Issue of shares |
18,546,936 |
- |
- |
- |
- |
18,546,936 |
Share based payments - Shares |
160,000 |
- |
- |
- |
- |
160,000 |
Capital raising costs |
(1,683,747) |
- |
- |
- |
- |
(1,683,747) |
Share based payments - Options |
- |
- |
5,561,272 |
- |
- |
5,561,272 |
|
|
|
|
|
|
|
Balance at 30 June 2014 |
41,679,662 |
570,172 |
8,420,632 |
(38,929,670) |
(124,098) |
11,616,698 |
THESE FINANCIAL STATEMENTS
SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES
42 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2014
|
|
Consolidated |
|
|
2014 |
2013 |
|
Note |
$ |
$ |
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Receipts from customers |
|
9,190,127 |
19,685,705 |
R&D tax offset received |
|
1,082,953 |
1,008,231 |
Export market development grant received |
|
172,655 |
- |
Payments to suppliers and employees |
|
(17,502,785) |
(22,365,381) |
Interest received |
|
24,485 |
8,813 |
Interest and other finance costs paid |
|
(35,162) |
(95,727) |
Income taxes paid |
|
- |
(10,517) |
Net cash used in operating activities |
23 |
(7,067,727) |
(1,768,876) |
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Proceeds from sale of business |
|
109,493 |
- |
Payment for acquisition of business, net of cash acquired |
|
(406,997) |
(1,352,620) |
Payment for property, plant and equipment |
|
(62,006) |
(89,854) |
Payments for disposal of subsidiary |
|
(339,996) |
(342,636) |
Net cash used in investing activities |
|
(699,506) |
(1,785,110) |
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from issues of shares |
|
17,427,068 |
3,456,961 |
Share issue transaction costs |
|
(1,157,468) |
(229,668) |
Proceeds from borrowings |
|
- |
1,269,565 |
Repayment of borrowings |
|
(1,118,197) |
- |
Net cash provided by financing activities |
|
15,151,403 |
4,496,858 |
|
|
|
|
Net increase in cash held |
|
7,384,170 |
942,872 |
|
|
|
|
Cash and cash equivalents at beginning of the year |
|
2,519,186 |
1,573,783 |
|
|
|
|
Effects of exchange rate changes on cash |
|
(25,345) |
2,531 |
Cash and cash equivalents at end of the year |
8 |
9,878,011 |
2,519,186 |
THESE FINANCIAL STATEMENTS SHOULD BE
READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
43 |
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2014
Note 1: Significant accounting policies
The principal accounting policies adopted in the preparation
of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
Reporting entity
MOKO Social Media Limited (the Company) is a company
domiciled in Australia. The consolidated financial statements of the Company as at and for the year ended 30 June 2014 comprises
the Company and its subsidiaries (together referred to as the Consolidated Entity). The Consolidated Entity is involved
in tailored digital publishing of mobile applications for common interest groups, within the youth and young adult demographic,
in the United States of America.
The consolidated financial statements were authorised for
issue by the Board of Directors on 30 September 2014.
Basis of preparation
Statement of compliance
These general purpose financial statements have been prepared
in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB')
and the Corporations Act 2001, as appropriate for-profit oriented entities. These financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical
cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities
at fair value through profit or loss, investment properties, certain classes of property, plant and equipment and derivative financial
instruments.
Critical accounting estimates
The preparation of the financial statements requires the
use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying
the Consolidated Entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements are disclosed in note 3.
New accounting standards and interpretations
The Consolidated Entity has adopted all of the new, revised
or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory
for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations
that are not yet mandatory have generally not been early adopted, unless stated otherwise.
Any significant impact on the accounting policies of the
Consolidated Entity from the adoption of these Accounting Standards and Interpretations are disclosed below. The adoption of these
Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Consolidated
Entity.
The following Accounting Standards and Interpretations are
most relevant to the Consolidated Entity:
AASB 2011-9 Amendments to Australian Accounting Standards
- Presentation of Items of Other Comprehensive Income
The Consolidated Entity has applied AASB 2011-9 amendments
from 1 July 2013. The amendments requires grouping together of items within other comprehensive income on the basis of whether
they will eventually be 'recycled' to the profit or loss (reclassification adjustments). The change provides clarity about the
nature of items presented as other comprehensive income and the related tax presentation. The amendments also introduced the term
'Statement of profit or loss and other comprehensive income' clarifying that there are two discrete sections, the profit or loss
section (or separate statement of profit or loss) and other comprehensive income section.
44 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2014
Note 1: Significant accounting policies (continued)
New accounting standards and interpretations (continued)
AASB 10 Consolidated Financial Statements
The Consolidated Entity has applied AASB 10 from 1 July 2013,
which has a new definition of 'control'. Control exists when the reporting entity is exposed, or has the rights, to variable returns
from its involvement with another entity and has the ability to affect those returns through its 'power' over that other entity.
A reporting entity has power when it has rights that give it the current ability to direct the activities that significantly affect
the investee's returns. The Consolidated Entity not only has to consider its holdings and rights but also the holdings and rights
of other shareholders in order to determine whether it has the necessary power for consolidation purposes.
AASB 12 Disclosure of Interests in Other Entities
The Consolidated Entity has applied AASB 12 from 1 July 2013.
The standard contains the entire disclosure requirement associated with other entities, being subsidiaries, associates, joint arrangements
(joint operations and joint ventures) and unconsolidated structured entities. The disclosure requirements have been significantly
enhanced when compared to the disclosures previously located in AASB 127 'Consolidated and Separate Financial Statements', AASB
128 'Investments in Associates', AASB 131 'Interests in Joint Ventures' and Interpretation 112 'Consolidation - Special Purpose
Entities'.
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments
to Australian Accounting Standards arising from AASB 13
The Consolidated Entity has applied AASB 13 and its consequential
amendments from 1 July 2013. The standard provides a single robust measurement framework, with clear measurement objectives, for
measuring fair value using the 'exit price' and provides guidance on measuring fair value when a market becomes less active. The
'highest and best use' approach is used to measure non-financial assets whereas liabilities are based on transfer value. The standard
requires increased disclosures where fair value is used.
AASB 119 Employee Benefits (September 2011) and AASB 2011-10
Amendments to Australian Accounting Standards arising from AASB 119 (September 2011)
The Consolidated Entity has applied AASB 119 and its consequential
amendments from 1 July 2013. The standard eliminates the corridor approach for the deferral of gains and losses; streamlines the
presentation of changes in assets and liabilities arising from defined benefit plans, including requiring re-measurements to be
presented in other comprehensive income; and enhances the disclosure requirements for defined benefit plans.
The standard also changed the definition of short-term employee
benefits, from 'due to' to 'expected to' be settled within 12 months. Annual leave that is not expected to be wholly settled within
12 months is now discounted allowing for expected salary levels in the future period when the leave is expected to be taken.
AASB 127 Separate Financial Statements (Revised), AASB
128 Investments in Associates and Joint Ventures (Reissued) and AASB 2011-7 Amendments to Australian Accounting Standards arising
from the Consolidation and Joint Arrangements Standards
The Consolidated Entity has applied AASB 127, AASB 128 and
AASB 2011-7 from 1 July 2013. AASB 127 and AASB 128 have been modified to remove specific guidance that is now contained in AASB
10, AASB 11 and AASB 12 and AASB 2011-7 makes numerous consequential changes to a range of Australian Accounting Standards and
Interpretations. AASB 128 has also been amended to include the application of the equity method to investments in joint ventures.
AASB 2012-2 Amendments to Australian Accounting Standards
- Disclosures - Offsetting Financial Assets and Financial Liabilities
The Consolidated Entity has applied AASB 2012-2 from 1 July
2013. The amendments enhance AASB 7 'Financial Instruments: Disclosures' and requires disclosure of information about rights of
set-off and related arrangements, such as collateral agreements. The amendments apply to recognised financial instruments that
are subject to an enforceable master netting arrangement or similar agreement.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
45 |
NOTES TO THE FINANCIAL STATEMENTS
Note 1: Significant accounting policies (continued)
New accounting standards and interpretations (continued)
AASB 2012-5 Amendments to Australian Accounting Standards
arising from Annual Improvements 2009-2011 Cycle
The Consolidated Entity has applied AASB 2012-5 from 1 July
2013. The amendments affect five Australian Accounting Standards as follows: Confirmation that repeat application of AASB 1 'First-time
Adoption of Australian Accounting Standards' is permitted; Clarification of borrowing cost exemption in AASB 1; Clarification of
the comparative information requirements when an entity provides an optional third column or is required to present a third statement
of financial position in accordance with AASB 101 'Presentation of Financial Statements'; Clarification that servicing of equipment
is covered by AASB 116 'Property, Plant and Equipment', if such equipment is used for more than one period; clarification that
the tax effect of distributions to holders of equity instruments and equity transaction costs in AASB 132 'Financial Instruments:
Presentation' should be accounted for in accordance with AASB 112 'Income Taxes'; and clarification of the financial reporting
requirements in AASB 134 'Interim Financial Reporting' and the disclosure requirements of segment assets and liabilities.
AASB 2012-10 Amendments to Australian Accounting Standards
- Transition Guidance and Other Amendments
The Consolidated Entity has applied AASB 2012-10 amendments
from 1 July 2013, which amends AASB 10 and related standards for the transition guidance relevant to the initial application of
those standards. The amendments clarify the circumstances in which adjustments to an entity's previous accounting for its involvement
with other entities are required and the timing of such adjustments.
AASB 2011-4 Amendments to Australian Accounting Standards
to Remove Individual Key Management Personnel Disclosure Requirement
The Consolidated entity has applied 2011-4 from 1 July 2013,
which amends AASB 124 'Related Party Disclosures' by removing the disclosure requirements for individual key management personnel
('KMP'). Corporations and Related Legislation Amendment Regulations 2013 and Corporations and Australian Securities and Investments
Commission Amendment Regulation 2013 (No.1) now specify the KMP disclosure requirements to be included within the directors' report.
Parent entity information
In accordance with the Corporations Act 2001, these financial
statements present the results of the Consolidated Entity only. Supplementary information about the parent entity is disclosed
in Note 26.
Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of MOKO Social Media Limited as at 30 June 2014 and the results of all subsidiaries for the
year then ended. MOKO Social Media Limited and its subsidiaries together are referred to in these financial statements as the 'Consolidated
Entity' or ‘MOKO’.
Subsidiaries are all those entities over which the Consolidated
Entity has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half
of the voting rights. The effects of potential exercisable voting rights are considered when assessing whether control exists.
Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are de-consolidated
from the date that control ceases.
Intercompany transactions, balances and unrealised gains
on transactions between entities in the Consolidated Entity are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary
to ensure consistency with the policies adopted by the Consolidated Entity.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. Refer to the 'business combinations' accounting policy for further details. A change in ownership
interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Non-controlling interest in the results and equity of subsidiaries
are shown separately in the statement of profit or loss and other comprehensive income and statement of financial position of the
Consolidated Entity. Losses incurred by the Consolidated Entity are attributed to the non-controlling interest in full, even if
that results in a deficit balance.
46 |
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2014
Note 1: Significant accounting policies (continued)
Where the Consolidated Entity loses control over a subsidiary,
it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative
translation differences recognised in equity. The Consolidated Entity recognises the fair value of the consideration received and
the fair value of any investment retained together with any gain or loss in profit or loss.
Segment reporting
Operating segments are reported in a manner consistent with
the internal reporting provided to the chief operating decision maker. The chief operating decision makers, who are responsible
for allocating resources and assessing performance of the operating segments, is the Board of Directors.
Foreign currency translation
Functional and presentation currency
These consolidated financial statements are presented in
Australian dollars, which is MOKO Social Media Limited’s functional and presentation currency.
The functional currencies of the overseas subsidiaries are
as follows:
Entity |
Functional currency |
MOKO.mobi Inc |
United States Dollars (USD) |
All Night Media Ltd |
Great British Pounds (GBP) |
The functional currencies of the overseas subsidiaries are
translated to the presentation currency.
Foreign currency transactions
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 at
the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date
of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were
determined.
Exchange differences arising on the translation of monetary
items are recognised in the statement of profit or loss and other comprehensive income, except where deferred in equity as a qualifying
cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary
items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange
difference is recognised in the statement of profit or loss and other comprehensive income.
Exchange differences arising on translation of foreign operations
are transferred directly to the Company’s foreign currency translation reserve in the statement of financial position. These
differences are recognised in the statement of profit or loss and other comprehensive income in the period in which the operation
is disposed.
Revenue and other income
Revenue is recognised when it is probable that the economic
benefit will flow to the Consolidated Entity and the revenue can be reliably measured. Revenue is measured at the fair value of
the consideration received or receivable.
Revenue is recognised gross with amounts payable to carriers
and aggregators as a cost of sale. This accurately represents the Consolidated Entity’s relationship with its carriers as
being the “principal” rather than “agent” as noted in AASB 118 - "Revenue”.
MOKO generates revenue from its customers who are the
individually contracted mobile users engaging in MOKO’s mobile social networks or using its community and chat products,
typically via pre-paid, monthly, subscriptions which are billed directly to user’s mobile phone accounts, enabling them
to access and participate in our mobile chat and share communities. Given the short subscription period and the inability to cancel
mid-month, revenue is recognised when paid by the carriers to MOKO each month.
‘Carriers’ are individual telecommunication service providers,
who typically have their own network and are consumer facing in the marketplace, who provide MOKO’s customers.
All revenue is stated net of the amount of goods and services
tax (GST).
Rendering of services
Revenue from the rendering of a service is recognised upon
the delivery of the service to the customers.
MOKO SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
47 |
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2014
Note 1: Significant accounting policies (continued)
Sale
of goods
Sale of
goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods, the risks and rewards
are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are net of sales returns and
trade discounts.
Interest
Interest
revenue is recognised on a proportional basis to the interest rates applicable to the financial assets.
Other income
Other income is recognised when it is received
or when the right to receive payment is established.
Government grants
Grants from the government
are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Consolidated
Entity will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the statement
of profit or loss and other comprehensive income over the period necessary to match them with the costs that they are intended
to compensate.
Income tax
The income tax expense or
revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for
each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the
tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities
are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled,
based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied
to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception
is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset
or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination,
that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised
for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available
to utilise those temporary differences and losses. Deferred tax assets and liabilities are 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 assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either 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.
Discontinued operations
A discontinued operation is
a component of the Consolidated Entity that has been disposed of or is classified as held for sale and that represents a separate
major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of
business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations
are presented separately on the face of the statement of profit or loss and other comprehensive income.
Cash and cash equivalents
For cash flow statement presentation
purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings
in current liabilities on the statement of financial position.
Trade and other receivables
Trade receivables are recognised
initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are
generally due for settlement within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which
are known to be uncollectible are written off. A provision for impairment of trade receivables is raised when there is objective
evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of receivables.
The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted
if the effect of discounting is immaterial. The amount of the impairment is recognised in the statement of profit or loss and
other comprehensive income.
48 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For the year ended 30 June 2014
Note 1: Significant accounting policies (continued)
Other receivables are recognised
at amortised cost, less any provision for impairment.
Property, plant and equipment
Each class of property, plant
and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.
Plant and equipment are 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 these assets.
Depreciation
The depreciable amount of
all fixed assets is depreciated on a straight-line basis over their useful lives to the Company commencing from the time the asset
is held ready for use.
The depreciation rates used for each class of depreciable
assets are:
Class
of fixed asset |
Depreciation
rate |
Furniture
and fittings |
11½%
- 30% |
Computer
equipment |
37½%
- 60% |
The assets’ residual
values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.
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 or losses are
included in the statement of profit or loss and other comprehensive income.
Leases
The determination of whether
an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment
of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between
finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to
ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and
benefits.
Finance leases are capitalised.
A lease asset and liability are established at the fair value of the leased assets, or if lower, the present value of minimum
lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs, so
as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under
a finance lease are depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the
lease term if there is no reasonable certainty that the Consolidated Entity will obtain ownership at the end of the lease term.
Operating lease payments,
net of any incentives received from the lessor, are charged to profit or loss on a straight line basis over the term of the lease.
Intangible assets
Intangible assets acquired
as part of a business combination, other than goodwill, are initially measured at their fair value at the date of acquisition.
Intangible assets acquired separately are initially recognised at cost. Intangible assets are subsequently measured at cost less
amortisation and any impairment. The gains or losses recognised in profit or loss arising from de-recognition of intangible assets
are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful
lives of finite life intangibles are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted
for prospectively by changing the amortisation method or period.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
49 |
NOTES TO THE FINANCIAL
STATEMENTS
For the year ended 30 June 2014
Note 1: Significant accounting policies (continued)
Goodwill
Goodwill arises on the acquisition
of a business combination. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently
if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.
Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
The amortisation rates used
for each class of amortisable assets are:
Class
of fixed asset |
Amortisation
rate (1) |
Intellectual
Property |
20%
- 50% per annum |
Customer
Database |
100%
per annum |
Capitalised
product development |
50%
per annum |
Customer
contracts |
50%
per annum |
Software |
50%
per annum |
| (1) | Straight
line amortisation is used as this reflects the periods over which the Consolidated Entity
expects to realise the benefits from the underlying assets |
Research and development
Research costs are expensed
in the period in which they are incurred. Development costs are capitalised when it is probable that the project will be a success
considering its commercial and technical feasibility; the Consolidated Entity is able to use or sell the asset; the Consolidated
Entity has sufficient resources; and intent to complete the development and its costs can be measured reliably. Capitalised development
costs are amortised on a straight line basis over the period of their expected benefit.
Customer contracts
Customer contracts acquired
in a business combination are amortised on a straight line basis over the period of their expected benefit
Software
Software costs associated
with software are deferred and amortised on a straight line basis over the period of their expected benefit.
Customer database
Customer database acquired
in a business combination are amortised on a straight line basis over the period of their expected benefit.
Impairment of non-financial
assets
Goodwill and other intangible
assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently
if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised
for the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the
higher of an asset's fair value less costs to sell and value-in-use. The value-in-use is the present value of the estimated future
cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset
belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities
for goods and services provided to the Consolidated Entity prior to the end of the financial year which are unpaid. The amounts
are unsecured and are usually paid within 30 days of recognition.
50 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 1: Significant accounting
policies (continued)
Compound
financial instruments
Compound financial
instruments issued by the Consolidated Entity comprise convertible notes that can be converted to share capital at the option
of the Consolidated Entity, and the number of shares to be issued does not vary with changes in their fair value. The liability
component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have
an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound
financial instrument as a whole and the fair value of the liability component.
Subsequent
to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective
interest method until extinguished on conversion or upon the instruments reaching maturity. The equity component of a compound
financial instrument is not measured subsequent to initial recognition. Distributions to the convertible note holders are recognised
against equity.
.Employee
benefits
Provision
is made for the Consolidated Entity’s liability for employee benefits arising from services rendered by employees to balance
date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid
when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the
present value of the estimated future cash outflows to be made for those benefits using the government bond discount rates with
terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Share based payments
When goods
or services received are acquired in a share-based payment transaction, they are recognised as expenses or assets, as determined
by the nature of the goods or services received, over the vesting period attached to the equity instrument acquired in the transaction.
A corresponding increase is recognised in equity.
The goods
or services are measured by reference to the fair value of goods or services received, or where this is not possible, indirectly,
by reference to the fair value of the equity instrument acquired at grant date.
The fair value
of securities provided to directors and employees is determined by reference to the fair value of the equity instrument granted.
Issued capital
Ordinary shares
are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction, net of tax, from the proceeds.
Business combinations
The acquisition
method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are
acquired.
The consideration
transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities
incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For
each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate
share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition
of a business, the Consolidated Entity assesses the financial assets acquired and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms, economic conditions, the Consolidated Entity’s operating or accounting
policies and other pertinent conditions in existence at the acquisition date.
The difference
between the acquisition date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree
and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised
as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable
net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss
by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets
acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held
equity interest in the acquirer.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
51 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 1: Significant accounting
policies (continued)
Business combinations
are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and
also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts
and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from
the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value and at which
time the business combination accounting is final.
Earnings per share
Basic earnings
per share
Basic earnings
per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing
equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial 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.
Goods and Services Tax (GST)
Revenues,
expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation
authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
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 taxation authority 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 taxation authority, are presented as operating cash flow.
New accounting standards
and interpretations that are not yet mandatory
Australian
Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early
adopted by the Consolidated Entity for the annual reporting period ended 30 June 2014, unless noted below. The Consolidated Entity's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Consolidated Entity,
are set out below.
AASB 9 Financial Instruments
and its consequential amendments
This
standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2017 and
completes phases I and III of the IASB's project to replace IAS 39 (AASB 139) 'Financial Instruments: Recognition and Measurement'.
This standard introduces new classification and measurement models for financial assets, using a single approach to determine
whether a financial asset is measured at amortised cost or fair value. The accounting for financial liabilities continues to be
classified and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating
to the entity's own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch.
Chapter 6 'Hedge Accounting' supersedes the general hedge accounting requirements in AASB 139 and provides a new simpler approach
to hedge accounting that is intended to more closely align with risk management activities undertaken by entities when hedging
financial and non-financial risks. The Consolidated Entity will adopt this standard and the amendments from 1 July 2017 but the
impact of its adoption is yet to be assessed by the Consolidated Entity.
AASB 2012-3 Amendments to
Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities
The
amendments are applicable to annual reporting periods beginning on or after 1 January 2014. The amendments add application guidance
to address inconsistencies in the application of the offsetting criteria in AASB 132 'Financial Instruments: Presentation', by
clarifying the meaning of 'currently has a legally enforceable right of set-off'; and clarifies that some gross settlement systems
may be considered to be equivalent to net settlement. The adoption of the amendments from 1 July 2014 will not have a material
impact on the Consolidated Entity.
52 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 1: Significant accounting
policies (continued)
AASB 2013-3 Amendments to
AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets
These
amendments are applicable to annual reporting periods beginning on or after 1 January 2014, however Moko has elected to early
adopt, from 1 January 2014. The disclosure requirements of AASB 136 'Impairment of Assets' have been enhanced to require additional
information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs
of disposals. The adoption of these amendments from 1 January 2014 has resulted in additional disclosure of the discount rate
is used in measuring recoverable amounts where a present value technique was used.
AASB 2013-4 Amendments to
Australian Accounting Standards - Novation of Derivatives and Continuation of Hedge Accounting
These
amendments are applicable to annual reporting periods beginning on or after 1 January 2014 and amends AASB 139 'Financial Instruments:
Recognition and Measurement' to permit continuation of hedge accounting in circumstances where a derivative (designated as hedging
instrument) is novated from one counter party to a central counterparty as a consequence of laws or regulations. The adoption
of these amendments from 1 July 2014 will not have a material impact on the Consolidated Entity.
AASB 2013-5 Amendments to
Australian Accounting Standards - Investment Entities
These
amendments are applicable to annual reporting periods beginning on or after 1 January 2014 and allow entities that meet the definition
of an 'investment entity' to account for their investments at fair value through profit or loss. An investment entity is not required
to consolidate investments in entities it controls, or apply AASB 3 'Business Combinations' when it obtains control of another
entity, nor is it required to equity account or proportionately consolidate associates and joint ventures if it meets the criteria
for exemption in the standard. The adoption of these amendments from 1 July 2014 will have no impact on the Consolidated Entity.
Annual Improvements to IFRSs
2010-2012 Cycle
These
amendments are applicable to annual reporting periods beginning on or after 1 July 2014 and affects several Accounting Standards
as follows: Amends the definition of 'vesting conditions' and 'market condition' and adds definitions for 'performance condition'
and 'service condition' in AASB 2 'Share-based Payment'; Amends AASB 3 'Business Combinations' to clarify that contingent consideration
that is classified as an asset or liability shall be measured at fair value at each reporting date; Amends AASB 8 'Operating Segments'
to require entities to disclose the judgements made by management in applying the aggregation criteria; Clarifies that AASB 8
only requires a reconciliation of the total reportable segments assets to the entity's assets, if the segment assets are reported
regularly; Clarifies that the issuance of AASB 13 'Fair Value Measurement' and the amending of AASB 139 'Financial Instruments:
Recognition and Measurement' and AASB 9 'Financial Instruments' did not remove the ability to measure short-term receivables and
payables with no stated interest rate at their invoice amount, if the effect of discounting is immaterial; Clarifies that in AASB
116 'Property, Plant and Equipment' and AASB 138 'Intangible Assets', when an asset is revalued the gross carrying amount is adjusted
in a manner that is consistent with the revaluation of the carrying amount (i.e. proportional restatement of accumulated amortisation);
and Amends AASB 124 'Related Party Disclosures' to clarify that an entity providing key management personnel services to the reporting
entity or to the parent of the reporting entity is a 'related party' of the reporting entity. The adoption of these amendments
from 1 July 2014 will not have a material impact on the Consolidated Entity.
Annual Improvements to IFRSs
2011-2013 Cycle
These
amendments are applicable to annual reporting periods beginning on or after 1 July 2014 and affects four Accounting Standards
as follows: Clarifies the 'meaning of effective IFRSs' in AASB 1 'First-time Adoption of Australian Accounting Standards'; Clarifies
that AASB 3 'Business Combination' excludes from its scope the accounting for the formation of a joint arrangement in the financial
statements of the joint arrangement itself; Clarifies that the scope of the portfolio exemption in AASB 13 'Fair Value Measurement'
includes all contracts accounted for within the scope of AASB 139 'Financial Instruments: Recognition and Measurement' or AASB
9 'Financial Instruments', regardless of whether they meet the definitions of financial assets or financial liabilities as defined
in AASB 132 'Financial Instruments: Presentation'; and Clarifies that determining whether a specific transaction meets the definition
of both a business combination as defined in AASB 3 'Business Combinations' and investment property as defined in AASB 140 'Investment
Property' requires the separate application of both standards independently of each other. The adoption of these amendments from
1 July 2014 will not have a material impact on the Consolidated Entity.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
53 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 2: Financial risk management
Financial risk management objectives
The Consolidated
Entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate
risk), credit risk and liquidity risk. The overall risk management strategy focuses on the unpredictability of the finance markets
and seeks to minimise the potential adverse effects on the financial performance. The Consolidated Entity's uses derivative financial
instruments such as forward foreign exchange contracts to hedge certain risk exposures. Derivatives are exclusively used for hedging
purposes, i.e. not as trading or other speculative instruments. The Consolidated Entity's uses different methods to measure different
types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange
and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market
risk. Risk management is carried out under the direction of the Board.
Market risk
Foreign
currency risk
The Consolidated
Entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign
exchange rate fluctuations.
Foreign exchange
risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency
that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
In order to
protect against exchange rate movements, the Consolidated Entity has entered into forward foreign exchange contracts. These contracts
are hedging highly probable forecasted cash flows for the ensuing financial year.
The maturity,
settlement amounts and the average contractual exchange rates of the Consolidated Entity's outstanding forward foreign exchange
contracts at the reporting date was as follows:
|
Sell
Australian dollars |
Average
exchange rates |
|
2014
$ |
2013
$ |
2014 |
2013 |
Buy
US dollars |
|
|
|
|
Maturity: |
|
|
|
|
0
- 3 months |
- |
271,680 |
- |
0.9202 |
The carrying
amounts of the Consolidated Entity's foreign currency denominated financial assets and financial liabilities at the reporting
date, expressed in Australian dollars, were as follows:
|
Assets |
Liabilities |
Consolidated |
2014
$ |
2013
$ |
2014
$ |
2013
$ |
United
States dollars |
5,109,454 |
2,149,674 |
2,222,685 |
935,404 |
Great
British pounds |
14,655 |
151,562 |
205,106 |
554,713 |
|
5,124,109 |
2,301,236 |
2,427,791 |
1,490,117 |
Sensitivity analysis
The Consolidated
Entity had net assets denominated in foreign currencies of $2,696,318 (assets $5,124,109 less
liabilities $2,427,791) as at 30 June 2014 (2013 net assets: of $811,118 (assets $2,301,236
less liabilities $1,490,117)). Based on this exposure, had the Australian dollar weakened by 10%/strengthened by 5% (2013: weakened
by 10%/strengthened by 5%) against these foreign currencies with all other variables held constant, the Consolidated Entity's
loss before tax for the year would have been $269,632 higher/$134,816 lower (2013: $81,112 higher/$40,556 lower). The percentage
change is the expected overall volatility of the significant currencies, which is based on management's assessment of reasonable
possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting
date. The actual foreign exchange loss for the year ended 30 June 2014 was $142,664 (2013: loss of $462,918).
54 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 2: Financial risk management
(continued)
Price risk
The Consolidated
Entity is not exposed to any significant price risk.
Interest rate risk
The Consolidated
Entity’s income and operating cash flows are not materially exposed to changes in market interest rates.
At the reporting date the interest
rate profile of the Consolidated Entity’s interest bearing financial instruments was:
|
30-Jun-14 |
30-Jun-13 |
|
Weighted
average
interest rate |
Balance |
Weighted
average
interest rate |
Balance |
|
% |
$ |
% |
$ |
Variable
rate instruments |
|
|
|
|
Cash
at bank |
2.03% |
2,824,011 |
2.60% |
2,495,186 |
|
|
|
|
|
Fixed
rate instruments |
|
|
|
|
Term
deposits |
3.60% |
7,000,000 |
|
|
Term
deposits |
3.45% |
30,000 |
|
|
Term
deposits |
3.80% |
24,000 |
4.55% |
24,000 |
|
|
9,878,011 |
|
2,519,186 |
Cash flow sensitivity analysis
for variable rate instruments
A change of
75 basis points in interest rates would increase or decrease the Consolidated Entity’s loss by $74,085 (2013: $18,894),
based on the cash at bank at reporting date and calculated on an annual basis. The Board assessed a 75 basis point movement as
being reasonably possible based on short term historical movements. This analysis assumes that all other variables remain constant.
Credit risk
Credit risk
refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Consolidated
Entity. For the Company, it arises from receivables due from subsidiaries.
The Consolidated
Entity does not hold any credit derivatives to offset its credit exposure.
The Consolidated
Entity trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Consolidated
Entity’s policy to securitise its trade and other receivables.
Trade and other receivables
It is the
Consolidated Entity's policy that all customers who wish to trade on credit terms are subject to credit verification procedures
including an assessment of their credit rating, financial position, past experience and industry reputation, noting that the majority
of counter parties are large telecommunication organisations.
In addition,
receivable balances are monitored on an ongoing basis and as a result that the Consolidated Entity’s experience of bad debts
has not been significant.
The Consolidated
Entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments
entered into by the Consolidated Entity.
Liquidity risk
Vigilant liquidity
risk management requires the Consolidated Entity to maintain sufficient liquid assets (mainly cash and cash equivalents) to be
able to pay debts as and when they become due and payable.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
55 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 2: Financial risk management
(continued)
The Consolidated
Entity manages liquidity risk by maintaining adequate at call cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Remaining
contractual maturities
The following
tables detail the Consolidated Entity's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial
liabilities are required to be paid. All liabilities were non-derivative and non-interest bearing.
Consolidated
- 2014 |
Weighted
average
interest rate
% |
1
year or
less |
Between
1
and 2 years |
Between
2
and 5 years |
Over
5
years |
Remaining
contractual
maturities |
|
|
|
|
|
|
|
Non-derivatives |
|
|
|
|
|
|
Non-interest
bearing |
|
|
|
|
|
|
Trade
payables |
- |
1,594,143 |
- |
- |
- |
1,594,143 |
Other
payables |
- |
969,468 |
- |
- |
- |
969,468 |
Total
non-derivatives |
|
2,563,611 |
- |
- |
- |
2,563,611 |
|
|
|
|
|
|
|
Consolidated
- 2013 |
Weighted
average
interest rate
% |
1
year or
less |
Between
1
and 2 years |
Between
2
and 5 years |
Over
5
years |
Remaining
contractual
maturities |
|
|
|
|
|
|
|
Non-derivatives |
|
|
|
|
|
|
Non-interest
bearing |
|
|
|
|
|
|
Trade
payables |
- |
743,285 |
- |
- |
- |
743,285 |
Other
payables |
- |
1,071,259 |
- |
- |
- |
1,071,259 |
|
|
|
|
|
|
|
Interest
bearing – fixed rate |
|
|
|
|
|
|
Convertible
notes |
10% |
205,699 |
- |
- |
- |
205,699 |
Revolving
line of credit |
12% |
930,691 |
- |
- |
- |
930,691 |
Total
non-derivatives |
|
2,950,934 |
- |
- |
- |
2,950,934 |
The cash flows
in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Fair
value of financial instruments
The fair values
of financial assets and liabilities are determined in accordance with generally accepted pricing models based on estimated future
cash flows. The Directors consider that the carrying amounts of financial assets and financial liabilities recorded in the financial
statements approximate their fair values.
AASB 7 Financial
Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
| (a) | quoted
prices (unadjusted) in active markets for identical assets or liabilities (level 1) |
| (b) | inputs
other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices) (level 2),
and |
| (c) | inputs
for the asset or liability that are not based on observable market data (unobservable
inputs) (level 3). |
Deferred contingent consideration
liability is measured and recognised at fair value at 30 June 13 and is classified as level 3.
56 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 3: Critical accounting
estimates and judgements
The preparation
of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts
in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience
and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances.
The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Share-based
payment transactions
The Consolidated
Entity measures the cost of equity-settled transactions with directors, employees and limited suppliers, by reference to the fair
value of the equity instruments at the date at which they are granted. The fair value is determined by using either a Binomial,
Black-Scholes or other estimation model such as a trinomial barrier option model after taking into account the terms and conditions
upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments
would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact
profit or loss and equity.
Provision
for impairment of receivables
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, the ageing of receivables, historical collection rates and specific knowledge
of the individual debtors financial position.
Fair value
and hierarchy of financial instruments
The Consolidated
Entity is required to classify financial instruments, measured at fair value, using a three level hierarchy, being: Level 1: Quoted
prices (unadjusted) in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and Level
3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). An instrument is required
to be classified in its entirety on the basis of the lowest level of valuation inputs that is significant to fair value. Considerable
judgement is required to determine what is significant to fair value and therefore which category the financial instrument is
placed in can be subjective.
The fair value
of financial instruments classified as level 3 is determined by the use of valuation models. These include discounted cash flow
analysis or the use of observable inputs that require significant adjustments based on unobservable inputs.
Estimation
of useful lives of assets
The Consolidated
Entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment
and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other
event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives,
or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Goodwill
and other indefinite life intangible assets
The Consolidated
Entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other
indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The
recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require
the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated
future cash flows.
Long service
leave provision
Per note 1,
the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be
made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition
rates and pay increases through promotion and inflation have been taken into account.
Business
combinations
As discussed
in note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities
and contingent liabilities assumed are initially estimated by the Consolidated Entity taking into consideration all available
information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective,
where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and
amortisation reported, when the accounting is finalised.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
57 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 4: Segment information
MOKO Social
Media Limited is organized into four operating segments: Mobile Social, Mobile Advertising, Mobile Content and Mobile Commerce.
These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified
as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There
is no aggregation of operating segments.
The CODM reviews
EBITDA (earnings before interest, tax, depreciation and amortization). The accounting policies adopted for internal reporting
to the CODM are consistent with those adopted in the financial statements.
The information
reported to the CODM is on at least a monthly basis.
Types of
products and services
The principal
products and services of each of these operating segments are as follows:
Mobile
Social |
MOKO’s
proprietary mobile social networks and community/chat products |
Mobile
Advertising |
MOKO’s
own proprietary mobile performance ad network and customised mobile publishing division |
Mobile
Content |
MOKO’s
UK division that bundles and sells mobile content and entertainment products direct to mobile consumers (inactive) |
Mobile
Commerce |
MOKO’s
subsidiary e-commerce platform. Sales volumes and average revenue per user grew via diversified marketing channels and product
range |
Intersegment
receivables, payables and loans
Intersegment
loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur
non-market interest are not adjusted to fair value based on market interest rates. Intersegment receivables, payables and loans
are eliminated on consolidation.
Basis of
segmentation
The basis
of segmentation for the financial year has changed where general administrative and corporate expenses are now allocated to Mobile
Advertising rather than to Mobile Social where they were previously. The prior period has been restated. This change is effective
1 July 2013 and reflects the Board’s view that Mobile Advertising now consumes the general administrative and corporate
resources of the Group consistent with MOKO’s narrowed strategic focus.
58 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 4: Segment information
(continued)
Operating segment information
Continuing
operations |
Consolidated
-
30 June
2014 |
Mobile
Advertising |
Mobile
Social |
Mobile
Content |
Mobile
Commerce |
Intersegment
eliminations/
unallocated |
Total |
|
$ |
$ |
$ |
$ |
$ |
$ |
Total
segment revenue |
3,102,132 |
882,393 |
(30,945) |
4,274,571 |
- |
8,228,151 |
|
|
|
|
|
|
|
EBITDA |
(13,865,990) |
575,052 |
(25,778) |
(210,422) |
- |
(13,527,138) |
|
|
|
|
|
|
|
Depreciation
and amortisation |
(1,224,238) |
- |
- |
- |
- |
(1,224,238) |
Interest
income |
128 |
147,561 |
- |
2,441 |
(45,280) |
104,850 |
Finance
costs |
(3,838) |
- |
- |
(45,280) |
45,280 |
(3,838) |
Loss
before income tax expense |
|
|
|
|
|
(14,650,364) |
Income
tax benefit |
|
|
|
|
|
1,053,905 |
Loss
after income tax expense |
|
|
|
|
|
(13,596,459) |
|
|
|
|
|
|
|
Assets |
15,017,068 |
425,836 |
122,804 |
363,043 |
(695,294) |
15,233,457 |
Liabilities |
2,917,584 |
75,248 |
333,534 |
945,687 |
(655,294) |
3,616,759 |
|
|
|
|
|
|
|
Continuing
operations |
Consolidated
-
30 June
2013 |
Mobile
Advertising |
Mobile
Social |
Mobile
Content |
Mobile
Commerce |
Intersegment
eliminations/
unallocated |
Total |
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
|
|
|
|
|
Total
segment revenue |
4,400,611 |
1,251,864 |
368,118 |
- |
|
6,020,593 |
|
|
|
|
|
|
|
EBITDA |
(4,142,695) |
(244,275) |
(45,636) |
- |
|
(4,432,606) |
|
|
|
|
|
|
|
Depreciation
and amortisation |
|
|
|
|
|
(1,067,523) |
Other
income |
|
|
|
|
|
8,813 |
Finance
costs |
|
|
|
|
|
(210,572) |
Loss
before income tax expense |
|
|
|
|
|
(5,701,888) |
Income
tax benefit |
|
|
|
|
|
990,594 |
Loss
after income tax expense |
|
|
|
|
|
(4,711,294) |
|
|
|
|
|
|
|
Assets |
8,587,252 |
252,608 |
102,012 |
- |
(962,642) |
7,979,230 |
Liabilities |
5,641,358 |
103,092 |
288,531 |
- |
(927,123) |
5,105,858 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
59 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 4: Segment information
(continued)
Geographical information
|
Continuing
operations |
|
Australia |
Europe |
Asia |
US |
TOTAL |
Consolidated
- 30 June 2014 |
$ |
$ |
$ |
$ |
$ |
|
|
|
|
|
|
Sales
to external customers |
5,070,193 |
(26,375) |
3,931 |
3,180,402 |
8,228,151 |
Add:
Interest income |
104,513 |
- |
- |
337 |
104,850 |
Add:
Other income and revenue |
282,148 |
- |
- |
- |
282,148 |
Add:
Fair value gain on deferred contingent consideration |
- |
- |
- |
383,933 |
383,933 |
Less:
Cost of providing services |
(3,360,361) |
4,750 |
(4,922) |
(3,176,287) |
(6,536,820) |
Less:
Expenses * |
|
|
|
|
(16,058,721) |
Loss
after income tax expense |
|
|
|
|
(13,596,459) |
|
|
|
|
|
|
Assets |
10,109,347 |
14,655 |
- |
5,109,455 |
15,233,457 |
Liabilities |
1,188,968 |
205,106 |
- |
2,222,685 |
3,616,759 |
* Overhead expenses are not associated
to any one particular segment.
|
Continuing
operations |
Consolidated
- 30 June 2013 |
|
|
|
|
|
|
|
|
|
|
|
Sales
to external customers |
698,309 |
1,056,345 |
177,756 |
4,088,183 |
6,020,593 |
Add:
Other Income and revenue |
8,813 |
- |
- |
- |
8,813 |
Add:
Fair value gain on deferred contingent consideration |
|
|
|
|
1,829,653 |
Less:
Cost of providing goods and services |
(293,407) |
(587,072) |
(734,228) |
(2,715,460) |
(4,330,167) |
Less
Expenses * |
|
|
|
|
(8,240,186) |
Loss
after income tax expense |
|
|
|
|
(4,711,294) |
|
|
|
|
|
|
Assets |
1,766,346 |
166,561 |
12,620 |
6,033,703 |
7,979,230 |
Liabilities |
3,950,538 |
877,281 |
- |
278,039 |
5,105,858 |
60 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 5: Revenue and income
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Revenue
from continuing operations |
|
|
Sale
of goods |
4,274,571 |
- |
Rendering
of services |
3,953,580 |
6,020,593 |
|
8,228,151 |
6,020,593 |
|
|
|
Interest
received |
104,850 |
8,813 |
|
|
|
Other
income |
|
|
Grants
received |
172,655 |
- |
Income
from Sales of Business |
109,493 |
- |
|
282,148 |
- |
|
|
|
Fair
value gain on deferred contingent consideration |
383,933 |
1,829,653 |
Note 6: Expenses
Loss before income tax from continuing
operations includes the following specific expenses:
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Employee
benefits expense |
|
|
Salaries
and wages |
3,512,198 |
2,398,145 |
Superannuation
& Work Compensation |
284,322 |
112,301 |
Total
employee benefits expense |
3,796,520 |
2,510,446 |
|
|
|
Share
based payments |
5,144,968 |
434,743 |
|
|
|
Depreciation |
|
|
Computer
equipment |
41,576 |
226,058 |
Furniture
and fittings |
899 |
1,480 |
Total
depreciation |
42,475 |
227,538 |
|
|
|
Amortisation |
|
|
Computer
software |
3,065 |
34,978 |
Customer
contracts |
- |
149,437 |
Capitalised
product development |
19,648 |
29,794 |
Intellectual
Property |
834,050 |
625,776 |
Customer
database |
325,000 |
- |
Total
amortisation |
1,181,763 |
839,985 |
|
|
|
Total
depreciation and amortisation |
1,224,238 |
1,067,523 |
|
|
|
impairment
expense |
|
|
Goodwill |
- |
1,487,137 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
61 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 7: Income tax benefit
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Income
tax expense |
|
|
Current
tax |
469,277 |
222,734 |
Current
tax - Research and Development tax offset |
(1,082,953) |
(1,008,231) |
Deferred
tax |
(440,229) |
- |
Aggregate
income tax benefit |
(1,053,905) |
(785,497) |
Income tax
benefit is attributable to:
Loss/(profit)
from continuing operations |
(1,053,905) |
(990,594) |
Profit
from discontinued operations |
- |
205,097
|
Aggregate
income tax benefit |
(1,053,905) |
(785,497) |
|
|
|
Prima
facie tax on loss before income tax is reconciled to income tax expense as follows: |
|
|
Loss
from continuing operations before income tax benefit |
(14,650,364) |
(5,701,888) |
Loss
from discontinued operations before income tax benefit |
- |
(1,361,688) |
|
(14,650,364) |
(7,063,576) |
Prima
facie tax refund on loss before income tax at 30% |
(4,395,109)
|
(2,119,073) |
Adjustment
for jurisdictional differences in tax rates |
1,429 |
92,950
|
Add
tax effect of: |
|
|
Non-allowable
items |
1,666,685 |
422,794
|
Non-assessable
items |
(142,638) |
- |
Tax
losses and timing differences not brought to account (continuing operations) |
2,898,681 |
1,317,582
|
Tax
losses and timing differences not brought to account (discontinued operations) |
- |
303,384
|
|
|
|
Research
and Development tax offset |
(1,082,953) |
(1,008,231) |
Current
tax expense |
29,048 |
- |
Adjustment
recognised for prior periods |
- |
205,097
|
Income
tax benefit |
(1,053,905) |
(785,497) |
The $1,082,953
research and development tax offset was received on 22 November 2013 for a claim in accordance with the Commonwealth Government's
Research and Development Tax Incentive Regime which has been in operation since 1 July 2011, the 45% refundable tax offset is
available to companies that have grouped aggregated turnover of less than $20million. There is no cap on R&D expenditure.
Recognised
deferred tax assets: |
|
|
Share
based payments – non qualified plan |
427,719 |
- |
Tax losses not recognised:
Tax
losses carried forward |
18,027,944 |
9,737,091 |
Other
Temporary differences not recognised |
3,854,686 |
1,209,025 |
Unused
tax losses for which no deferred tax has been recognised |
21,882,630 |
10,946,116 |
Potential
tax benefit at notional rate of tax (30%) |
6,564,789 |
3,283,835 |
No amounts have
been recognised for deferred tax on unutilised tax losses as it is not yet probable that future taxable amounts will be available
against which the Company will utilise these assets in future years.
62 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 8: Cash and cash equivalents
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
|
|
|
Cash
on hand |
500
|
48
|
Cash
at bank |
9,877,511
|
2,519,138
|
|
9,878,011
|
2,519,186
|
Note 9: Trade and other receivables
Trade
receivables |
840,676
|
845,145
|
Less:
Provision for impairment of receivables |
(55,804) |
(21,247) |
|
784,872
|
823,898
|
Impairment of receivables
The Consolidated
Entity has recognised a loss of $50,596 (2013: $21,247) in the statement of profit or loss and other comprehensive income in respect
of impairment of receivables for the year ended 30 June 2014.
The ageing of the impaired receivables
provided for above are as follows:
1-30
days |
- |
- |
31-60
days |
- |
- |
61-90
days |
- |
- |
90+
days |
55,804
|
21,247
|
|
55,804
|
21,247
|
Movements in the provision for impairment
of receivables are as follows:
Opening
Balance |
21,247
|
46,006
|
Additional
provisions recognised |
50,596
|
21,247
|
Reversal
of impairment during the year |
(16,039) |
(46,006) |
Closing
Balance |
55,804
|
21,247
|
Past due but not impaired
Customers with
balances past due but without provision for impairment of receivables amount to $232,125 as at 30 June 2014 ($189,898 as at 30
June 2013).
The Consolidated
Entity did not consider a credit risk on the aggregate balances after reviewing credit terms of customers based on recent collection
practices.
The ageing of
the past due but not impaired receivables are as follows:
31-60
days |
104,235
|
24,550
|
61-90
days |
52,185
|
23,862
|
90+
days |
75,705
|
141,486
|
|
232,125
|
189,898
|
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
63 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 10: Other current assets
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Other
debtors |
142,980 |
135,253 |
Deposit |
70,000 |
- |
Prepayments |
228,716 |
17,983 |
|
441,696 |
153,236 |
Note 11: Property, plant and equipment
Consolidated |
Computer
equipment |
Furniture
and
fittings |
Total |
2013 |
|
|
|
|
|
|
|
Cost |
599,527
|
185,156
|
784,683
|
Accumulated
depreciation |
(526,865) |
(185,156) |
(712,021) |
Balance
at 30 June 2013 |
72,662
|
- |
72,662
|
|
|
|
|
Reconciliation |
|
|
|
Balance
at 1 July 2012 |
335,934
|
457,405
|
793,339
|
Additions |
3,013
|
74,397
|
77,410
|
Disposals |
- |
(74,405) |
(74,405) |
Derecognised
on disposal of subsidiary |
(34,755) |
(337,267) |
(372,022) |
Depreciation
expense |
(231,242) |
(90,642) |
(321,884) |
Effects
of movements on foreign exchange rates |
(288) |
(29,488) |
(29,776) |
Balance
at 30 June 2013 |
72,662
|
- |
72,662
|
|
|
|
|
Consolidated |
|
|
|
2014 |
|
|
|
Cost |
634,982
|
40,777
|
675,759
|
Accumulated
depreciation |
(559,919) |
(28,114) |
(588,033) |
Balance
at 30 June 2014 |
75,063
|
12,663
|
87,726
|
|
|
|
|
Reconciliation |
|
|
|
Balance
at 1 July 2013 |
72,662
|
- |
72,662
|
Acquisitions
through business combinations |
2,239
|
245
|
2,484
|
Additions |
42,336
|
13,322
|
55,658
|
Depreciation
expense |
(41,576) |
(899) |
(42,475) |
Effects
of movements in exchange rates |
(597) |
(6) |
(603) |
Balance
at 30 June 2014 |
75,064
|
12,662
|
87,726
|
64 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 12: Intangibles
Consolidated
2013 |
Computer
software |
Customer
Contracts |
Capitalised
product
development
costs |
Intellectual
Property |
Customer
Database |
Goodwill |
TOTAL |
|
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|
|
|
|
|
|
|
|
Cost |
69,491
|
207,411
|
71,506
|
4,066,408
|
- |
2,456,753
|
6,871,569
|
Accumulated
amortisation/ impairment |
(69,491) |
(207,411) |
(71,506) |
(625,776) |
- |
(1,487,137) |
(2,461,321) |
Balance
at 30 June 2013 |
- |
- |
- |
3,440,632
|
- |
969,616
|
4,410,248
|
|
|
|
|
|
|
|
|
Reconciliation |
|
|
|
|
|
|
|
Balance
at 1 July 2012 |
22,775
|
149,437
|
29,794
|
- |
- |
772,675
|
974,681
|
Acquisitions
through business combinations |
- |
- |
- |
3,510,918
|
- |
1,551,627
|
5,062,545
|
Additions |
12,444
|
- |
- |
- |
- |
- |
12,444
|
Amortisation
expense |
(34,978) |
(149,437) |
(29,794) |
(625,776) |
- |
- |
(839,985) |
Impairment
expense |
- |
- |
- |
- |
- |
(1,487,137) |
(1,487,137) |
Effects
of movements on foreign exchange rates |
(241) |
- |
- |
555,490
|
- |
132,451
|
687,700
|
Balance
at 30 June 2013 |
- |
- |
- |
3,440,632
|
- |
969,616
|
4,410,248
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
2014 |
|
|
|
|
|
|
|
Cost |
75,839
|
207,411
|
110,803
|
3,932,447
|
- |
1,832,342
|
6,158,842
|
Accumulated
amortisation |
(72,556) |
(207,411) |
(91,154) |
(1,459,826) |
- |
(714,462) |
(2,545,409) |
Balance
at 30 June 2014 |
3,283
|
- |
19,649
|
2,472,621
|
- |
1,117,880
|
3,613,433
|
|
|
|
|
|
|
|
|
Reconciliation |
|
|
|
|
|
|
|
Balance
at 1 July 2013 |
- |
- |
- |
3,440,632
|
- |
969,616
|
4,410,248
|
Acquisitions
through business combinations |
- |
- |
39,297
|
49,470
|
325,000
|
179,727
|
593,494
|
Additions |
6,348
|
- |
- |
- |
- |
- |
6,348
|
Disposals |
- |
- |
- |
- |
- |
- |
- |
Amortisation
expense |
(3,065) |
- |
(19,648) |
(834,050) |
(325,000) |
- |
(1,181,763) |
Effects
of movements in exchange rates |
- |
- |
- |
(183,431) |
- |
(31,463) |
(214,894) |
Balance
at 30 June 2014 |
3,283
|
- |
19,649
|
2,472,621
|
- |
1,117,880
|
3,613,433
|
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
65 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 12: Intangibles (continued)
Goodwill acquired through business
combinations has been allocated to the following cash-generating units:
|
Mobile
Advertising (1) |
Mobile
Commerce (2) |
Total |
|
$ |
$ |
$ |
|
|
|
|
Balance
at 1 July 2013 |
969,616 |
- |
969,616 |
Acquisitions
through business combinations |
- |
179,727 |
179,727 |
Effects
of movements on foreign exchange rates |
(31,463) |
- |
(31,463) |
Balance
at 30 June 2014 |
938,153
|
179,727 |
1,117,880
|
The recoverable amount of the Group's
goodwill allocated to Mobile Advertising has been determined by a value-in-use calculation at the cash generating unit level using
a discounted cash flow model, based on a 2 year projection period approved by management and extrapolated for a further 3 years
using a steady growth rate and a terminal value based on a long term average growth rate. The pre-tax discount rate of 40% p.a.
was used to reflect management’s estimate of the time value of money and the risk adjusted costs of capital specific to
the Mobile Advertising cash generating unit.
The Directors do not consider goodwill
allocated to Mobile Commerce as significant to the total carrying value of Goodwill.
The goodwill acquired
on acquisition is deemed recoverable and no impairment expense has been recognized in the statement of profit or loss and other
comprehensive income during the period.
| (2) | Deals
I Love (Australia) Pty Ltd (‘DIL’) |
The goodwill acquired
on acquisition is deemed recoverable and no impairment expense has been recognised in the statement of profit or loss and other
comprehensive income during the period.
Impairment
expense
No goodwill was
impaired and charged to the statement of profit or loss and other comprehensive income during the period (2013: $1,487,137).
66 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 13: Business combinations
Acquisition
of Deals I Love (Australia) Pty Ltd
On 1 July 2013,
MOKO Social Media Ltd completed the acquisition of a controlling 51% share interest in a Sydney based e-commerce business, Deals
I Love (Australia) Pty Ltd (DIL). The acquisition represents a business combination and was made for the purpose of MOKO expanding
into the growing mobile commerce sector.
DIL sells merchant
product that is sourced internationally and domestically across the internet via pc’s and mobile interfaces through its
website, www.dealsilove.com.au to large quantities of individual customers.
The share acquisition
included a purchase of shares from a MOKO non-executive Director, Mr Johannes De Back, who after the acquisition has no further
equity interest in DIL.
Under the terms
of the acquisition MOKO was granted an option to acquire the remaining 49% of DIL and as a separate transaction agreed to loan
funds to DIL for marketing purposes, which bears interest of 10% per annum and is repayable on arms-length terms.
During the financial
year, DIL contributed revenues of $4,274,571 and made a net loss after tax of $207,980 for the period of 1 July 2013 to 30 June
2014.
The business combination
accounting is final and DIL is allocated to the Mobile Commerce segment in Australia.
|
Carrying
value |
|
Fair
value |
|
|
|
|
Intangible
assets |
- |
|
413,767
|
Property,
plant and equipment |
2,485
|
|
2,485
|
Cash
and cash equivalents |
36,958
|
|
36,958
|
Term
deposit |
70,000
|
|
70,000
|
Trade
receivables |
7,125
|
|
7,125
|
Inventory |
1,264
|
|
1,264
|
Deferred
Tax asset |
381,091
|
|
- |
Trade
payables |
(590,414) |
|
(574,158) |
Loans-shareholders |
(60,000) |
|
(10,000) |
Loans-MOKO |
(87,168) |
|
(87,168) |
|
|
|
|
Net
assets acquired |
(238,659)
|
|
(139,727) |
|
|
|
|
Goodwill |
179,727 |
|
|
Acquisition
date fair value of total consideration transferred |
40,000 |
|
|
Satisfied
By |
|
|
|
Consideration:
options issued on 15 May 2014 |
40,000 |
|
|
Total |
40,000 |
Acquisition expenses
of $16,047 for legal fees and have not impacted this business combination accounting.
Goodwill of $179,727
represents expected growth opportunities for DIL from new marketing channels such as ‘direct to consumer’ and additional
monetization opportunities from its user base, such as from mobile advertising.
Non-controlling
interest at acquisition was immaterial with a deemed fair value of nil and determined on the basis that future economic benefits
were unlikely to be realised but for the acquisition.
Fair value consideration
was settled via 400,000 options exercisable at $0.10 each on or before 28 November 2015.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
67 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 14: Deferred contingent
consideration
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Deferred
contingent consideration |
- |
1,430,252 |
|
|
|
Reconciliation |
|
|
|
OfferMobi |
|
Balance
at 1 July 2013 |
1,430,252 |
|
Less:
payments made – cash |
(443,955)
|
|
Less:
payments made – Shares |
(602,364)
|
|
Less:
Fair value gain on deferred contingent consideration |
(383,933)
|
|
Balance
at 30 June 2014 |
- |
|
The fair value
gain on deferred contingent consideration of $383,933 is the reversal, due to early settlement, of previously recognised
deferred contingent consideration payable to Howmark Mobile, LLC. (“Howmark”) shareholders in relation to the August
2012 acquisition of the Mobile Advertising business, OfferMobi. MOKO’s settlement with Howmark occurred in October 2013.
Note 15: Trade and other payables
Trade
payables |
1,594,143 |
743,285 |
Other
payables and accruals |
969,468 |
1,071,259 |
|
2,563,611 |
1,814,544 |
Note 16: Borrowings
Convertible
notes (1) |
- |
205,699 |
Revolving
line of credit (2) |
- |
930,691 |
|
- |
1,136,390 |
| (1) | Director
Johannes De Back’s loans were fully repaid by ordinary shares as part of the entitlement
issued on 11 September 2013 (2,500,000 shares) and 15 May 2014 (2,500,000 shares). |
| (2) | The
TCA secured Loan Facility of USD$850,000 was repaid in July 2013 and the debt facility
was subsequently closed. |
68 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 17: Employee benefits
|
Consolidated |
|
2014 |
2013 |
Current |
|
|
|
|
|
Employee
benefits |
276,920
|
134,048
|
|
|
|
Non-Current |
|
|
|
|
|
Employee
benefits |
35,348
|
45,904
|
A provision has
been recognised for employee benefits relating to annual leave and long service leave. The measurement and recognition criteria
relating to employee benefits have been included in note 1 of this report.
Amounts not
expected to be settled within the next 12 months
The current provision
for long service leave includes all unconditional entitlements where employees have completed the required period of service and
also those where employees are entitled to pro-rata payments in certain circumstances. The employee benefits are presented as
current or non-current based on when the Consolidated Entity expects to settle the long service leave entitlements. However, based
on past experience, the Consolidated Entity does not expect all employees to take the full amount of accrued long service leave
or require payment within the next 12 months.
Note 18: Provisions
|
|
|
|
2014 |
2013 |
|
$ |
$ |
Current |
|
|
Claim
provision |
- |
264,912 |
The 2013 provision
was settled as $173,385 in November 2013 and the remaining $91,527 was reversed to Other Income and Revenue in the statement of
profit or loss in the 2014 year.
Note 19: Issued capital
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
|
|
|
Fully
paid ordinary shares 552,853,091 (2013: 374,873,050 shares) |
41,679,662 |
24,656,473 |
(a) Ordinary
shares
The followings
movements in ordinary share capital occurred during the year:
Date |
Details |
Number
of
shares |
Issue
Price
$ |
Amount
$ |
1
July 2013 |
Opening
Balance |
374,873,050 |
|
24,656,473 |
9
July 2013 |
Share
issue by placement |
24,725,000 |
0.04 |
989,000 |
12
July 2013 |
Share
issue by placement |
11,525,000 |
0.04 |
461,000 |
18
July 2013 |
Share
issue pursuant to Offer Mobi |
1,297,300 |
0.05 |
64,865 |
25
July 2013 |
Share
issue by exercise of options |
1,440 |
0.1 |
144 |
5
August 2013 |
Share
issue by exercise of options |
3,100 |
0.05 |
155 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
69 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 19: Issued capital (continued)
Date |
Details |
Number
of
shares |
Issue
Price
$ |
Amount
$ |
11
September 2013 |
Share
issue by placement |
11,250,000 |
0.04 |
450,000 |
11
September 2013 |
Share
issue by placement |
1,500,000 |
0.04 |
60,000 |
11
September 2013 |
Share
issue on conversion of loan |
2,500,000 |
0.04 |
100,000 |
12
September 2013 |
Share
issue by placement |
1,500,000 |
0.04 |
60,000 |
15
October 2013 |
Share
issue by exercise of options |
1,515,152 |
0.0477 |
72,273 |
15
October 2013 |
Share
issue by exercise of options |
23,660 |
0.05 |
1,183 |
21
October 2013 |
Share
issue pursuant to Offer Mobi |
1,250,000 |
0.17 |
212,500 |
23
October 2013 |
Share
issue by placement |
37,462,816 |
0.11 |
4,120,910 |
31
October 2013 |
Share
issue in lieu of services |
1,250,000 |
0.04 |
50,000 |
31
October 2013 |
Share
issue by placement |
181,818 |
0.11 |
20,000 |
6
November 2013 |
Share
issue pursuant to Offer Mobi |
508,130 |
0.123 |
62,500 |
8
November 2013 |
Share
issue by exercise of options |
500,000 |
0.05 |
25,000 |
15
November 2013 |
Share
issue by exercise of options |
5,000,000 |
0.042 |
210,000 |
19
November 2013 |
Share
issue by exercise of options |
550,313 |
0.05 |
27,516 |
19
November 2013 |
Share
issue by exercise of options |
100,000 |
0.12 |
12,000 |
29
November 2013 |
Share
issue by exercise of options |
600,000 |
0.12 |
72,000 |
29
November 2013 |
Share
issue by exercise of options |
350,000 |
0.05 |
17,500 |
4
December 2013 |
Share
issue pursuant to Offer Mobi |
937,500 |
0.28 |
262,500 |
4
December 2013 |
Share
issue by exercise of options |
880,000 |
0.05 |
44,000 |
4
December 2013 |
Share
issue by exercise of options |
2,593,750 |
0.05 |
129,688 |
19
December 2013 |
Share
issue by exercise of options |
12,075 |
0.05 |
604 |
19
December 2013 |
Share
issue by exercise of options |
200,000 |
0.1 |
20,000 |
9
January 2014 |
Share
issue by exercise of options |
750,000 |
0.05 |
37,500 |
14
January 2014 |
Share
issue by exercise of options |
100,000 |
0.17 |
17,000 |
14
January 2014 |
Share
issue by exercise of options |
50,000 |
0.12 |
6,000 |
22
January 2014 |
Share
issue by exercise of options |
1,200 |
0.05 |
60 |
22
January 2014 |
Share
issue by exercise of options |
15 |
0.05 |
1 |
22
January 2014 |
Share
issue by exercise of options |
300,000 |
0.05 |
15,000 |
22
January 2014 |
Share
issue by exercise of options |
385,000 |
0.05 |
19,250 |
28
January 2014 |
Share
issue by exercise of options |
200,000 |
0.05 |
10,000 |
28
January 2014 |
Share
issue by exercise of options |
200,000 |
0.12 |
24,000 |
30
January 2014 |
Share
issue by exercise of options |
2,000,000 |
0.03 |
60,000 |
17
February 2014 |
Share
issue by exercise of options |
2,581 |
0.05 |
129 |
19
March 2014 |
Share
issue by exercise of options |
52,817 |
0.05 |
2,641 |
19
March 2014 |
Share
issue by exercise of options |
22,183 |
0.05 |
1,109 |
28
March 2014 |
Share
issue by exercise of options |
79,661 |
0.12 |
9,559 |
28
March 2014 |
Share
issue by exercise of options |
2,667 |
0.05 |
133 |
28
March 2014 |
Share
issue by exercise of options |
4,857 |
0.05 |
243 |
28
March 2014 |
Share
issue by exercise of options |
25,000 |
0.05 |
1,250 |
28
March 2014 |
Share
issue by exercise of options |
166,667 |
0.05 |
8,333 |
28
March 2014 |
Share
issue by exercise of options |
500,000 |
0.06 |
30,000 |
4
April 2014 |
Share
issue by placement |
36,909,524 |
0.21 |
7,751,000 |
4
April 2014 |
Share
issue by placement |
1,190,476 |
0.21 |
250,000 |
11
April 2014 |
Share
issue by exercise of options |
250,000 |
0.05 |
12,500 |
70 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 19: Issued capital (continued)
Date |
Details |
Number
of
shares |
Issue
Price
$ |
Amount
$ |
23
April 2014 |
Share
issue by exercise of options |
600,000 |
0.05 |
30,000 |
9
May 2014 |
Share
issue by exercise of options |
350,000 |
0.05 |
17,500 |
15
May 2014 |
Share
issue by exercise of options |
2,500,000 |
0.04 |
100,000 |
19
May 2014 |
Share
issue by exercise of options |
83,333 |
0.12 |
10,000 |
30
May 2014 |
Share
issue by exercise of options |
350,000 |
0.12 |
42,000 |
13
June 2014 |
Share
issue by exercise of options |
550,000 |
0.155 |
85,250 |
13
June 2014 |
Share
issue by exercise of options |
100,000 |
0.12 |
12,000 |
13
June 2014 |
Share
issue by exercise of options |
50,000 |
0.12 |
6,000 |
13
June 2014 |
Share
issue by exercise of options |
100,000 |
0.12 |
12,000 |
13
June 2014 |
Share
issue by exercise of options |
100,000 |
0.12 |
12,000 |
13
June 2014 |
Share
issue by exercise of options |
100,000 |
0.17 |
17,000 |
13
June 2014 |
Share
issue by exercise of options |
250,000 |
0.12 |
30,000 |
13
June 2014 |
Share
issue by exercise of options |
1,000,000 |
0.042 |
42,000 |
13
June 2014 |
Share
issue by exercise of options |
4,000,000 |
0.12 |
480,000 |
18
June 2014 |
Share
issue by exercise of options |
2,250,000 |
0.12 |
270,000 |
18
June 2014 |
Share
issue by exercise of options |
2,000,000 |
0.12 |
240,000 |
18
June 2014 |
Share
issue by exercise of options |
1,000,000 |
0.12 |
120,000 |
23
June 2014 |
Share
issue by exercise of options |
3,000,000 |
0.12 |
360,000 |
25
June 2014 |
Share
issue by exercise of options |
5,000,000 |
0.12 |
600,000 |
27
June 2014 |
Share
issue in lieu of services |
500,000 |
0.22 |
110,000 |
30
June 2014 |
Share
issue by exercise of options |
100,000 |
0.17 |
17,000 |
30
June 2014 |
Share
issue by exercise of options |
250,000 |
0.05 |
12,500 |
30
June 2014 |
Share
issue by exercise of options |
100,000 |
0.12 |
12,000 |
30
June 2014 |
Share
issue by exercise of options |
200,000 |
0.12 |
24,000 |
30
June 2014 |
Share
issue by exercise of options |
100,000 |
0.12 |
12,000 |
30
June 2014 |
Share
issue by exercise of options |
125,000 |
0.12 |
15,000 |
30
June 2014 |
Share
issue by exercise of options |
150,000 |
0.12 |
18,000 |
30
June 2014 |
Share
issue by exercise of options |
125,000 |
0.12 |
15,000 |
30
June 2014 |
Share
issue by exercise of options |
1,100,000 |
0.12 |
132,000 |
30
June 2014 |
Share
issue by exercise of options |
300,000 |
0.12 |
36,000 |
30
June 2014 |
Share
issue by exercise of options |
137,006 |
0.12 |
16,441 |
|
Capital
raising costs |
- |
|
(1,683,747) |
30
June 2014 |
Closing
Balance |
552,853,091 |
|
41,679,462 |
(b) Performance
shares
Date |
Details |
Number
of
Shares |
Issue
Price |
Amount
$
|
Variation
Price |
28
November 2013 |
Share
issue to Director pursuant to shareholder approval |
20,000,000 |
$0.00001 |
200 |
$0.10 |
A
Performance Share Plan was approved by shareholders at MOKO’s 2013 Annual General Meeting and involves the issuance of a
new class of ordinary shares (“Performance Shares”) to eligible participants for their market value assessed by an
independent expert and based on the rights and conditions attached to the Performance Shares (the “Issue Price”) by
means of a payment to the Company of the Issue Price.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
71 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 19: Issued capital (continued)
Performance
Shares remain outstanding for a period equal to earlier of 3 years from the date of original purchase or the occurrence of the
relevant Performance Event (such earlier date, the “End Date”). If the Performance Shares have not been ‘varied’
by the End Date, which can include events such as termination, the VWAP share price hurdle having been met, a takeover offer among
others (any such event, a “Variation Event”) then the Performance Shares will be redeemed by the Company for their
Issue Price. If a Variation Event does occur prior to the End Date, the holder has twelve months from the date of the Variation
Event to provide notice and payment (a “Variation Payment”) to the Company.
Upon
payment of the Variation Payment to the Company, the relevant Performance Shares will rank pari passu all with existing ordinary
shares of the Company and trade together in the public market. On the other hand, at no time prior to a Variation Event will the
holder be permitted to transfer any Performance Shares, and no dividend or voting rights will attach to any Performance Shares
unless and until varied. In the event that the Variation Event does not occur prior or upon to the End Date, the Company will
pay the Issue Price that it received from the holder for the applicable Performance Shares and then redeem and cancel those Performance
Shares.
The
total number of Performance Shares issued under the Performance Share Plan, taken together with Performance Shares and options
issued during the previous five years pursuant to an employee share plan extended to directors, employees or eligible contractors
of the Company, may not exceed five percent of the total number of outstanding ordinary shares.
Mr.
McCann was issued 20.0 million Performance Shares at an Issue Price of $0.00001 per ordinary share with End Date of the third
anniversary of issuance, Variation Payment of $0.10 per ordinary share and the Variation Event being the 90 day VWAP of our ordinary
shares exceeding $0.40 per share.
(c) Options
Options granted
During the year, the Company granted
the following options over unissued ordinary shares:
Table A
– Options granted over unissued ordinary shares
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
(MKBAO)
Employee Unlisted Options |
31-Jul-16 |
$0.17 |
3,850,000 |
(MKBAO)
Unlisted Options |
24-Oct-15 |
$0.155 |
4,000,000 |
Unlisted
Options |
31-Dec-14 |
$0.10 |
200,000 |
Unlisted
Options |
28-Nov-15 |
$0.40 |
16,000,000 |
Unlisted
Options |
28-Nov-15 |
$0.10 |
6,000,000 |
Unlisted
Options |
30-Jun-15 |
$0.03 |
1,000,000 |
Unlisted
Options |
30-Jun-15 |
$0.04 |
1,000,000 |
Unlisted
Options |
30-Jun-15 |
$0.02 |
1,000,000 |
Unlisted
Options |
30-Jun-15 |
$0.11 |
1,000,000 |
(MKBAW)
Director and Employer Options |
30-Jun-14 |
$0.12 |
400,000 |
(MKBAO)
Employee Unlisted Options |
31-Jul-16 |
$0.17 |
700,000 |
Unlisted
Option |
28-Nov-15 |
$0.10 |
400,000 |
Unlisted
Option |
31-Jan-16 |
$0.20 |
2,000,000 |
(MKBOA)
Listed Options |
13-Jun-15 |
$0.05 |
81,750,000 |
Total |
|
|
119,300,000 |
72 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 19: Issued capital (continued)
Table B
- Options granted American Depositary Shares (where one ADS = 40 Ordinary shares)
Class |
Expiry
Date |
Exercise
Price (per
ADS in US$) |
Number
granted
(in ADSs) |
Number
granted
(in ordinary
shares) |
Employee
Unlisted Options |
30-Jun-16 |
$2.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-16 |
$3.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
31-Dec-14 |
$2.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
31-Dec-14 |
$4.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
31-Dec-15 |
$6.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-16 |
$7.50 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
31-Dec-14 |
$3.70 |
5,000 |
200,000 |
Employee
Unlisted Options |
31-Dec-14 |
$1.85 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
31-Dec-15 |
$4.07 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
31-Dec-16 |
$6.29 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-16 |
$7.50 |
41,750 |
1,670,000 |
Employee
Unlisted Options |
31-Dec-14 |
$6.29 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-16 |
$6.66 |
2,500 |
100,000 |
Employee
Unlisted Options |
30-Jun-16 |
$7.50 |
11,250 |
450,000 |
Employee
Unlisted Options |
30-Jun-16 |
$6.80 |
6,250 |
250,000 |
Employee
Unlisted Options |
31-Dec-14 |
$5.55 |
7,500 |
300,000 |
Employee
Unlisted Options |
31-Dec-14 |
$5.55 |
7,500 |
300,000 |
Employee
Unlisted Options |
31-Dec-15 |
$5.55 |
7,500 |
300,000 |
Employee
Unlisted Options |
30-Jun-16 |
$4.00 |
25,000 |
1,000,000 |
Total |
|
|
364,250 |
14,570,000 |
Unissued
shares under option
At the date of this report, unissued
ordinary shares of the Company under option are:
Table C
– Unissued ordinary shares under option
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Unlisted
Options |
30-Jun-15 |
$0.04 |
2,000,000 |
Unlisted
Options |
30-Nov-15 |
$0.10 |
500,000 |
Unlisted
Director Options |
30-Jul-16 |
$0.042 |
10,000,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.06 |
750,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.17 |
4,250,000 |
Unlisted
options |
24-Oct-15 |
$0.155 |
3,450,000 |
Unlisted
Director Options |
28-Nov-15 |
$0.40 |
16,000,000 |
Unlisted
Director Options |
28-Nov-15 |
$0.10 |
6,400,000 |
Unlisted
options |
30-Jun-15 |
$0.03 |
1,000,000 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
73 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 19: Issued capital (continued)
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Unlisted
options |
30-Jun-15 |
$0.04 |
1,000,000 |
Unlisted
options |
30-Jun-15 |
$0.02 |
1,000,000 |
Unlisted
options |
30-Jun-15 |
$0.11 |
1,000,000 |
Unlisted
options |
31-Jan-16 |
$0.20 |
2,000,000 |
Listed
Options (MKBOA) |
13-Jun-15 |
$0.05 |
145,811,886 |
Unlisted
Options over American Depositary Shares |
Refer
to table B |
|
14,570,000 |
Total |
|
|
209,731,886 |
These
options do not entitle the holder to participate in any share issue of the Company or any other entity.
Lapse of
options
During or since the end of the
financial year, the following options were lapsed:
Table D
– lapsed options
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Employee
Options |
25-Jul-13 |
$0.10 |
1,800,000 |
Director
Options |
25-Jul-13 |
$0.10 |
3,000,000 |
Employee
Options |
25-Jul-13 |
$0.12 |
1,950,000 |
Director
Options |
25-Jul-13 |
$0.12 |
2,500,000 |
Unlisted
Options |
25-Jul-13 |
$0.20 |
2,916,668 |
Listed
Options (MKBO) |
25-Jul-13 |
$0.10 |
57,314,138 |
Total |
|
|
69,480,806 |
Cancellation of options
During the
year, the following options cancelled:
Table E
– cancelled options
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Unlisted
Employee Options |
30-Jun-14 |
$0.12 |
3,050,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.06 |
500,000 |
Total |
|
|
3,550,000 |
74 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 19: Issued capital (continued)
Shares issued on the exercise
of options
Table
F – Shares issued on exercise of options
Class |
Expiry
Date |
Exercise
Price |
Number
of Options |
Unlisted
Employee Options |
30-Jun-14 |
$0.12 |
21,650,000 |
Unlisted
Options |
30-Jun-14 |
$0.03 |
2,000,000 |
Unlisted
Options |
31-Dec-14 |
$0.10 |
200,000 |
Unlisted
Options |
30-Jun-15 |
$0.05 |
2,593,750 |
Unlisted
Options |
24-Oct-15 |
$0.155 |
550,000 |
Unlisted
Options |
6-Nov-15 |
$0.0477 |
1,515,152 |
Unlisted
Director Options |
30-Jul-16 |
$0.042 |
6,000,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.06 |
500,000 |
Unlisted
Employee Options |
31-Jul-16 |
$0.17 |
300,000 |
Listed
Options |
25-Jul-14 |
$0.10 |
1,440 |
Listed
Options (MKBOA) |
13-Jun-15 |
$0.05 |
5,682,135 |
Total |
|
|
40,992,477 |
(d) Capital Management
When managing
capital, the Board’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns
to shareholders and benefits for other stakeholders. The Board also aims to maintain a capital structure that ensures the lowest
cost of capital available to the entity.
The Board
are constantly adjusting the capital structure to take advantage of favourable costs of capital or high return on assets. As the
market is constantly changing, management may issue new shares, sell assets to reduce debt or consider payment of dividends to
shareholders.
The Board
has no current plans to issue further shares on the market.
The Board
seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages
and security afforded by a sound capital position although there is no formal policy regarding gearing levels. The Consolidated
Entity had nil borrowings at 30 June 2014 (2013: 1,136,390l).
The Consolidated
Entity is not subject to any externally imposed capital requirements.
There were
no changes in the Consolidated Entity’s approach to capital management during the year.
Note 20: Reserves
Foreign
currency translation reserve
This reserve
comprises all foreign currency differences arising from the translation of the financial statements of foreign operations to Australian
dollars.
Share-based
payments reserve
This reserve
was used to recognise the value of share based payments.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
75 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 21: Accumulated losses
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Accumulated
losses brought forward |
(25,457,309)
|
(19,179,230)
|
Loss
after income tax expense for the year |
(13,472,361)
|
(6,278,079)
|
|
(38,929,670)
|
(25,457,309)
|
Note 22: Share Based payments
Below are
summaries of the movements of options during the year to key management personnel and employees:
2014
Class |
Grant
Date |
Expiry
Date |
Exercise
Price |
Balance
at
start of
the year |
Granted |
Exercised |
Expired/
forfeited/
other |
Balance
at
end of the
year |
Director
Options |
17-Dec-08 |
25-Jul-13 |
$0.10 |
3,000,000
|
- |
- |
(3,000,000)
|
- |
Employee
Options |
15-Oct-09 |
25-Jul-13 |
$0.10 |
1,800,000
|
|
- |
(1,800,000)
|
- |
Director
Options |
19-Oct-09 |
25-Jul-13 |
$0.12 |
2,500,000
|
- |
- |
(2,500,000)
|
- |
Employee
Options |
16-Dec-09 |
25-Jul-13 |
$0.12 |
1,950,000
|
- |
- |
(1,950,000)
|
- |
Employee
Options |
26-Aug-11 |
30-Jun-14 |
$0.12 |
6,050,000
|
-
|
(3,000,000) |
(3,050,000)
|
- |
Director
Options |
27-Oct-11 |
30-Jun-14 |
$0.12 |
18,250,000
|
- |
(18,250,000)
|
- |
- |
Director
Options |
14-Dec-12 |
30-Jul-16 |
$0.042 |
16,000,000
|
- |
(6,000,000)
|
- |
10,000,000 |
Employee
Options |
21-Dec-12 |
30-Nov-15 |
$0.10 |
500,000
|
- |
- |
- |
500,000 |
Employee
Options |
21-Feb-13 |
31-Jul-16 |
$0.06 |
1,750,000
|
- |
(500,000)
|
(500,000)
|
750,000 |
Employee
Options |
13-Sep-13 |
31-Jul-16 |
$0.17 |
- |
3,850,000 |
(200,000)
|
- |
3,650,000 |
Director
Options |
28-Nov-13 |
28-Nov-15 |
$0.40 |
- |
16,000,000 |
- |
- |
16,000,000 |
Director
Options |
28-Nov-13 |
28-Nov-15 |
$0.10 |
- |
6,000,000 |
- |
- |
6,000,000 |
Employee
Options |
25-Feb-14 |
30-Jun-14 |
$0.12 |
- |
400,000 |
(400,000)
|
- |
- |
Employee
Options |
19-Mar-14 |
31-Jul-16 |
$0.17 |
- |
700,000 |
(100,000)
|
- |
600,000 |
Director
Options |
5-May-14 |
28-Nov-15 |
$0.10 |
- |
400,000 |
- |
- |
400,000 |
Director
Options |
5-May-14 |
31-Jan-16 |
$0.20 |
- |
2,000,000 |
- |
- |
2,000,000 |
Employee
Options |
|
|
|
- |
|
- |
- |
- |
|
|
|
|
51,800,000 |
33,350,000 |
(28,450,000)
|
(12,800,000)
|
39,900,000 |
Weighted
average exercise price |
$0.09 |
|
|
|
$0.22 |
76 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 22: Share Based payments
(continued)
2013
Class |
Grant
Date |
Expiry
Date |
Exercise
Price |
Balance
at
start of
the year |
Granted |
Exercised |
Expired/
forfeited/
other |
Balance
at
end of the
year |
Employee
Options |
17-Dec-08 |
15-Dec-12 |
$0.20 |
2,165,000
|
- |
- |
(2,165,000) |
- |
Director
Options |
17-Dec-08 |
25-Jul-13 |
$0.10 |
3,000,000
|
- |
- |
- |
3,000,000
|
Employee
Options |
15-Oct-09 |
25-Jul-13 |
$0.10 |
1,800,000
|
- |
- |
- |
1,800,000
|
Director
Options |
19-Oct-09 |
25-Jul-13 |
$0.12 |
2,500,000
|
- |
- |
- |
2,500,000
|
Employee
Options |
16-Dec-09 |
25-Jul-13 |
$0.12 |
1,950,000
|
- |
- |
- |
1,950,000
|
Employee
Options |
26-Aug-11 |
30-Jun-14 |
$0.12 |
6,050,000
|
- |
- |
- |
6,050,000
|
Director
Options |
27-Oct-11 |
30-Jun-14 |
$0.12 |
18,250,000
|
- |
- |
- |
18,250,000
|
Director
Options |
14-Dec-12 |
30-Jul-16 |
$0.04 |
- |
16,000,000
|
- |
- |
16,000,000
|
Employee
Options |
21-Dec-12 |
30-Nov-15 |
$0.10 |
- |
500,000
|
- |
- |
500,000
|
Employee
Options |
21-Feb-13 |
31-Jul-16 |
$0.06 |
- |
1,750,000
|
- |
- |
1,750,000
|
|
|
|
|
35,715,000 |
18,250,000 |
- |
(2,165,000) |
51,800,000 |
Weighted
average exercise price |
$0.12 |
|
|
|
$0.09 |
The weighted
average share price during the financial year was $0.21 (2013: $0.04).
The weighted
average remaining contractual life of options outstanding at the end of the financial year was 20.11 months (2013: 15.02 months).
Options granted
over American Depositary Shares (where one ADS = 40 Ordinary shares)
2014
Class |
Grant
Date |
Expiry
Date |
Exercise
Price (per
ADS in
US$) |
Number
granted
(in ADSs) |
Number
granted (in
ordinary
shares) |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$2.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$3.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$2.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$4.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-15 |
$6.00 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$7.50 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$3.70 |
5,000 |
200,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$1.85 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-15 |
$4.07 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-16 |
$6.29 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$7.50 |
41,750 |
1,670,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$6.29 |
25,000 |
1,000,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$6.66 |
2,500 |
100,000 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
77 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 22: Share Based payments
(continued)
2014
Class |
Grant
Date |
Expiry
Date |
Exercise
Price (per
ADS in
US$) |
Number
granted
(in ADSs) |
Number
granted (in
ordinary
shares) |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$7.50 |
11,250 |
450,000 |
Employee
Unlisted Options |
30-Jun-14 |
30-Jun-16 |
$6.80 |
6,250 |
250,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$5.55 |
7,500 |
300,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-14 |
$5.55 |
7,500 |
300,000 |
Employee
Unlisted Options |
30-Jun-14 |
31-Dec-15 |
$5.55 |
7,500 |
300,000 |
Total |
|
|
|
339,250 |
13,570,000 |
|
|
|
|
|
|
Weighted
average exercise price |
USD$4.94 |
USD$4.94 |
There were
no options issued over granted over American Depositary Shares in 2013.
The weighted
average share price (ADS) was USD$7.61 based on the effective NASDAQ listing date of 27 June 2014 ((2013: Nil).
The weighted
average remaining contractual life of options outstanding at the end of the financial year was 17.06 months (2013: Nil).
For the options
granted to the key management personnel and employees during the current financial year, the fair value was measured at grant
date using a Black-Scholes model that took account of the terms and conditions upon which the instruments were granted. Expected
volatility reflects the historical volatility of the Company’s share price over the historical period commensurate with
the expected term.
The valuation
model inputs used to determine the fair value are as follows:
Options
over fully paid ordinary MOKO shares for the key management personnel and employees
Grant
date |
Expiry
date |
Maximum
life |
Exercise
price |
Share
price at
grant date |
Expected
volatility |
Risk
free
interest rate |
Tradeable
discount |
13-Sep-13 |
31-Jul-16 |
2.88 |
$0.17 |
$0.13 |
88.06% |
2.74% |
20% |
28-Nov-13 |
28-Nov-15 |
2.00 |
$0.40 |
$0.29 |
88.06% |
2.76% |
20% |
28-Nov-13 |
28-Nov-15 |
2.00 |
$0.10 |
$0.29 |
88.06% |
2.76% |
10% |
25-Feb-14 |
30-Jun-14 |
0.34 |
$0.12 |
$0.22 |
85.01% |
2.71% |
20% |
19-Mar-14 |
31-Jul-16 |
2.37 |
$0.17 |
$0.22 |
85.01% |
2.74% |
20% |
05-May-14 |
28-Nov-15 |
1.57 |
$0.10 |
$0.17 |
84.13% |
2.71% |
20% |
05-May-14 |
31-Jan-16 |
1.74 |
$0.20 |
$0.17 |
84.13% |
2.71% |
20% |
Options
granted over American Depositary Shares (where one ADS = 40 Ordinary shares)
Grant
Date |
Expiry
Date |
Maximum
life |
Exercise
Price (per
ADS in
US$) |
Share
price at
grant date
(US$) |
Expected
volatility |
Risk
free
interest rate |
Tradeable
discount |
30-Jun-14 |
30-Jun-16 |
2.00 |
$2.00 |
$7.50 |
82.55% |
0.47% |
10% |
30-Jun-14 |
30-Jun-16 |
2.00 |
$3.00 |
$7.50 |
82.55% |
0.47% |
10% |
30-Jun-14 |
31-Dec-14 |
0.50 |
$2.00 |
$7.50 |
51.12% |
0.07% |
10% |
30-Jun-14 |
31-Dec-14 |
0.50 |
$4.00 |
$7.50 |
51.12% |
0.07% |
10% |
30-Jun-14 |
31-Dec-15 |
1.50 |
$6.00 |
$7.50 |
87.59% |
0.29% |
10% |
78 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 22: Share Based payments
(continued)
Grant
Date |
Expiry
Date |
Maximum
life |
Exercise
Price (per
ADS in
US$) |
Share
price at
grant date
(US$) |
Expected
volatility |
Risk
free
interest rate |
Tradeable
discount |
30-Jun-14 |
30-Jun-16 |
2.00 |
$7.50 |
$7.50 |
82.55% |
0.47% |
10% |
30-Jun-14 |
31-Dec-14 |
0.50 |
$3.70 |
$7.50 |
51.12% |
0.07% |
10% |
30-Jun-14 |
31-Dec-14 |
0.50 |
$1.85 |
$7.50 |
51.12% |
0.07% |
10% |
30-Jun-14 |
31-Dec-15 |
1.50 |
$4.07 |
$7.50 |
87.59% |
0.29% |
10% |
30-Jun-14 |
31-Dec-16 |
2.51 |
$6.29 |
$7.50 |
83.10% |
0.68% |
10% |
30-Jun-14 |
30-Jun-16 |
2.00 |
$7.50 |
$7.50 |
82.55% |
0.47% |
10% |
30-Jun-14 |
31-Dec-14 |
0.50 |
$6.29 |
$7.50 |
51.12% |
0.07% |
10% |
30-Jun-14 |
30-Jun-16 |
2.00 |
$6.66 |
$7.50 |
82.55% |
0.47% |
10% |
30-Jun-14 |
30-Jun-16 |
2.00 |
$7.50 |
$7.50 |
82.55% |
0.47% |
10% |
30-Jun-14 |
30-Jun-16 |
2.00 |
$6.80 |
$7.50 |
82.55% |
0.47% |
10% |
30-Jun-14 |
31-Dec-14 |
0.50 |
$5.55 |
$7.50 |
51.12% |
0.07% |
10% |
30-Jun-14 |
31-Dec-14 |
0.50 |
$5.55 |
$7.50 |
51.12% |
0.07% |
10% |
30-Jun-14 |
31-Dec-15 |
1.50 |
$5.55 |
$7.50 |
87.59% |
0.29% |
10% |
All options
were granted for no consideration and vested immediately
Those options
granted to key management personnel have been identified in key management personnel disclosures (note 24) and the Remuneration
Report in the Directors' Report. Shareholder approval was obtained for the grants of options to directors on 28 November 2013
and 5 May 2014.
Shares issued as compensation
Performance
Shares
The terms and conditions of each
grant of Performance Shares affecting remuneration of directors and other key management personnel in this financial year or future
reporting years are as follows:
Number
of
Performance
Shares |
Grant
Date |
Vesting
date |
Expiry
(End) date |
Issue
Price |
Exercise
(Variation)
Price |
Expected
volatility |
Risk
Free
interest
rate |
Tradable
discount |
20,000,000 |
28-Nov-13 |
28-Nov-15 |
28-Nov-16 |
$0.00001 |
$0.10 |
25.00% |
2.76% |
60% |
Performance Shares granted
carry no dividend or voting rights.
The fair value
was measured at grant date using an American style, up and in, trinomial barrier option model that took account of the terms and
conditions upon which the instruments were granted. The expected volatility reflects an assessment of the company’s 90 day
Volume Weighted Average Price (VWAP) across the three year period preceding grant date (commensurate with the term), to adjust
for the VWAP condition of the instrument. The tradability discount was determined after consideration of specific lack of marketability
terms and conditions such as being unlisted instruments, vesting conditions such as ongoing employment, restricted transferability
and escrow provisions.
No Performance
Shares were issued in 2013.
Fully paid
ordinary shares
No shares
were issued to key management personnel or employees as compensation during the year (2013: nil).
For details
of shares and options issued in lieu of services rendered, refer to issued capital disclosures (note 19) and non-cash investing
and financing activities disclosures (note 23(b)).
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
79 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 23: Cash flow information
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
|
|
|
(a)
Reconciliation of cash flow from operations with loss after income tax |
|
|
|
|
|
Loss
after income tax expense for the year |
(13,596,459) |
(6,278,079) |
|
|
|
Adjustments
for: |
|
|
|
|
|
Depreciation
and amortisation |
1,224,238 |
1,161,869 |
Foreign
exchange differences |
32,284 |
586,125 |
Goodwill
impairment expense |
- |
1,487,137 |
Share
based payments and related costs |
5,144,969 |
434,743 |
Fair
value gain on deferred contingent consideration |
(383,933) |
(1,829,653) |
Unwinding
of the discount on deferred contingent consideration |
- |
104,018 |
Loss
on disposal of AMH Group |
- |
761,020 |
Loss
on disposal of non-current assets |
- |
89,660 |
Gain
on reversal of Peekable payable |
(91,527) |
- |
Income
from Sale of Business |
(109,493) |
- |
|
|
|
Changes
in operating assets and liabilities: |
|
|
Decrease
in receivables |
39,026 |
2,119,368 |
(Increase)/decrease
in other assets |
(294,159) |
32,828 |
Increase
/ (Decrease) in payables |
1,198,886 |
(590,960) |
Increase
/ (Decrease) in provisions |
(264,912) |
(37,010) |
Increase
in current tax |
461,072 |
279,808 |
(Increase)/decrease
in deferred tax assets |
(427,719) |
- |
(Decrease)/
increase in deferred tax liability |
- |
(89,750) |
Net
cash used in operating activities |
(7,067,727) |
(1,768,876) |
(b) Non-cash investing and financing
activities
On 10 August
2012, the Company acquired OfferMobi assets from Howmark Mobile, LLC. The fair value consideration was $4,547,173 comprising cash
and equity. During the year, MOKO issued equity consideration of $602,365 through the issue of 3,992,930 fully paid ordinary shares
to Howmark Mobile, LLC. (2013: $723,118 of 14,222,364 fully paid ordinary shares).
On 1 July
2013, MOKO Social Media Ltd completed the acquisition of a controlling 51% share interest in a Sydney based e-commerce business,
Deals I Love (Australia) Pty Ltd (DIL).The fair value consideration was $40,000 comprising cash and equity. The fair value consideration
was settled by way of issue of 400,000 options exercisable at $0.10 each on or before 28 November 2015.
Refer note
13 for further details of these business combinations.
80 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 23: Cash flow information (continued)
During the year, the Company
issued the following fully paid ordinary shares in satisfaction of convertible loan payable to director Johannes De Back:
Date |
Details |
Number
of
shares |
Issue
Price
$ |
Amount
$ |
11
September 2013 |
Share
issue on conversion of loan |
100,000
|
0.04 |
2,500,000
|
15
May 2014 |
Share
issue on conversion of loan |
100,000
|
0.04 |
2,500,000
|
Refer note 16 for further
details of convertible note funding.
During the year, the Company
issued the following fully paid ordinary shares in satisfaction of professional fees payable to consultants of the Company:
Date |
Details |
Number
of
shares |
Issue
Price
$ |
Amount
$ |
31
October 2013 |
Share
issue in lieu of services |
1,250,000
|
0.04 |
50,000 |
27
June 2014 |
Share
issue in lieu of services |
500,000
|
0.22 |
110,000 |
These transactions ae not
reflected in the statement of cash flows.
Note 24: Key management personnel disclosures
The following persons were directors of MOKO Social
Media Limited during the financial year:
Greg McCann |
- |
Non Executive Chairman
|
Ian Rodwell |
- |
Managing Director and Chief Executive
Officer |
Johannes De Back |
- |
Non Executive Director |
Peter Yates |
- |
Non Executive Director |
Mark Hauser |
- |
Non-Executive Director (joined 1st
February, 2014) |
| (b) | Key
management personnel compensation |
The aggregate compensation
made to directors and other members of key management personnel of the Consolidated Entity is set out below:
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
|
|
|
Short-term
employee benefits |
551,700
|
571,984
|
Post-employment
benefits |
36,775
|
35,185
|
Share
based payments - Performance shares |
493,205
|
|
Share
based payments - Options |
2,723,037
|
140,800
|
|
3,804,717
|
747,969
|
Detailed remuneration
disclosures can be found in Sections A-C of the remuneration report on page 18 to 23.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
81 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 24: Key management personnel disclosures
(continued)
Ordinary
shares |
Balance at start of
the year |
Received
during
the year |
Other
changes
during the year |
Balance
at end
of the year |
2014 |
|
|
|
|
G
McCann |
7,944,444
|
- |
5,500,000
|
13,444,444
|
I
Rodwell |
3,707,917
|
- |
2,000,000
|
5,707,917
|
J
De Back |
30,932,539
|
- |
9,365,171
|
40,297,710
|
P
Yates |
40,472,926
|
- |
7,690,476
|
48,163,402
|
M
Hauser |
- |
- |
- |
- |
|
83,057,826
|
- |
24,555,647
|
107,613,473
|
2013 |
|
|
|
|
G
McCann |
5,444,444
|
- |
2,500,000
|
7,944,444
|
I
Rodwell |
3,382,917
|
- |
325,000
|
3,707,917
|
J
De Back |
30,932,539
|
- |
- |
30,932,539
|
P
Yates |
34,308,371
|
- |
6,164,555
|
40,472,926
|
|
74,068,271
|
- |
8,989,555
|
83,057,826
|
The numbers of options over
ordinary shares in the Company held during the financial year by each director of the Company and other key management personnel
of the Company, including their personally related parties, are set out below.
Options
over
ordinary shares |
Balance
at
the start of
the year |
Granted
during the
year as
compensation |
Exercised
during the
year |
Lapsed
during the
year |
Forfeited/
Other
changes
during the
year |
Balance
at
the end of the
year |
2014 |
|
|
|
|
|
|
G
McCann |
12,000,000 |
6,500,000 |
(5,000,000) |
(1,000,000) |
- |
12,500,000 |
I
Rodwell |
17,330,000 |
10,000,000 |
(7,000,000) |
(3,005,000) |
(7,000,000) |
10,325,000 |
J
De Back |
25,107,143 |
11,400,000 |
(2,250,000) |
(17,857,143) |
- |
16,400,000 |
P
Yates |
19,360,955 |
1,000,000 |
(5,000,000) |
(10,196,400) |
2,000,000 |
7,164,555 |
M
Hauser (1) |
6,000,000 |
2,000,000 |
- |
|
- |
8,000,000 |
|
79,798,098 |
30,900,000 |
(19,250,000) |
(32,058,543) |
(5,000,000) |
54,389,555 |
2013 |
|
|
|
|
|
|
G
McCann |
6,000,000 |
5,000,000 |
- |
- |
1,000,000 |
12,000,000 |
I
Rodwell |
12,005,000 |
5,000,000 |
- |
- |
325,000 |
17,330,000 |
J
De Back |
20,107,143 |
5,000,000 |
- |
- |
- |
25,107,143 |
P
Yates |
12,196,400 |
1,000,000 |
- |
- |
6,164,555 |
19,360,955 |
|
50,308,543 |
16,000,000 |
- |
- |
7,489,555 |
73,798,098 |
| (1) | Options
held on appointment (1 February 2014) (2,000,000 unlisted $0.04, expiry 30/06/2015, 1,000,000
unlisted $0.03, expiry 30/06/2015, 1,000,000 unlisted $0.04, expiry 30/06/2015, 1,000,000
unlisted $0.02, expiry 30/06/2015, 1,000,000 unlisted $0.11, expiry 30/06/2015) |
82 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 25: Related party transactions
(a) Parent entity
MOKO Social Media Limited
is the parent entity.
(b) Subsidiaries
Interests in subsidiaries
are set out in note 26.
(c) Key management personnel
Disclosures relating to key
management personnel are set out in note 24 and the remuneration report in the Directors’ Report.
(d) Transactions with related
parties
The following transactions
occurred with related parties:
On July 1, 2013, MOKO completed
the acquisition of a controlling 51% share interest in a Sydney based e-commerce business, Deals I Love (Australia) Pty Ltd (“DIL”).
The business combination was made for the purpose of MOKO expanding into the growing mobile commerce sector. The share acquisition
included a purchase of shares from a MOKO non-executive director, Mr. Johannes De Back, who after the acquisition has no further
equity interest in DIL. Acquisition date fair value of total consideration transferred was $40,000. The fair value consideration
was settled by way of issue of 400,000 options exercisable at $0.10 each on or before 28 November 2015.
Under the terms of the acquisition,
MOKO was also granted an option to acquire the remaining 49% of DIL and as a separate transaction agreed to loan funds to DIL
for marketing purposes, which loan bears interest of 10% per annum and is repayable on arms-length terms. On November 7, 2013,
Mr. Johannes De Back executed a personal letter of support to indemnify DIL in respect of its debts to a total liability value
of $500,000 and which may only be revoked with DIL’s prior written agreement.
During the year ended June
30, 2014, Mr. De Back provided consulting services to MOKO through Dutchman Capital, of which he is a director, on normal commercial
terms, for which Dutchman Capital was paid $39,000 in fees (2013: $156,045).
During the year ended June
30, 2014, the Company issued fully paid ordinary shares in satisfaction of convertible loans payable to director Johannes De Back
(refer note 16 for further details of convertible note funding):
Date |
Details |
Number
of
shares |
Issue
Price
$ |
Amount
$ |
11
September 2013 |
Share
issue on conversion of loan |
100,000
|
0.04 |
2,500,000
|
15
May 2014 |
Share
issue on conversion of loan |
100,000
|
0.04 |
2,500,000
|
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Amounts
recognised as expense |
|
|
Company
secretarial and accounting (1) |
97,793
|
49,892
|
Total |
97,793
|
49,892
|
(1) Andrew Bursill, Company
secretary, is also an associate of Franks & Associates Pty Ltd who provides accounting and Company secretarial services to
MOKO Social Media Limited. The contract between MOKO Social Media Limited and Franks & Associates is based on normal commercial
terms.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
83 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 25: Related party transactions (continued)
| (d) | Loans
to/from related parties |
Loans
are made to/by the Parent Entity, MOKO Social Media Limited, to its wholly owned subsidiaries for capital purchases and working
capital purposes. The loans outstanding between the Parent Entity and its subsidiaries have no fixed date of repayment and are
non-interest bearing. Details of the Parent Entity’s interest in its subsidiaries are set out in note 27. The loans outstanding
between the Moko and Deals I Love (Australia) Pty Ltd
have no fixed date of repayment but with 10% interest bearing per loan agreement.
|
Company |
|
2014 |
2013 |
|
$ |
$ |
Non-Current |
|
|
Loans
to subsidiaries: |
|
|
MOKO.mobi
Inc |
(572,875)
|
(305,588)
|
Deals
I Love (Australia) Pty Ltd |
535,280 |
- |
All
Night Media Limited |
(120,014)
|
(125,845)
|
Total |
(157,609)
|
(431,433)
|
No dividends were received from the subsidiaries
in the 2014 or 2013 financial year.
Terms and conditions
All transactions were made
on normal commercial terms and conditions and at market rates.
Note 26: Parent entity information
Set out below is the supplementary
information about the parent entity.
|
Parent |
|
2014 |
2013 |
Statement
of profit or loss and other comprehensive income |
$ |
$ |
Loss
after income tax |
(12,914,498) |
(5,708,811) |
|
|
|
Total
comprehensive income |
(12,914,498) |
(5,708,811) |
|
|
|
Statement
of financial position |
|
|
Total
current assets |
9,704,387
|
1,794,926
|
|
|
|
Total
assets |
13,051,229
|
6,751,268
|
|
|
|
Total
current liabilities |
1,627,957
|
4,968,239
|
|
|
|
Total
liabilities |
1,663,004
|
5,014,144
|
|
|
|
Equity |
|
|
Issued
capital |
41,679,662
|
24,656,473
|
Reserves |
8,420,633
|
2,859,360
|
Accumulated
losses |
(38,712,070) |
(25,797,571) |
|
|
|
Total
equity |
11,388,225
|
1,718,261
|
84 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 26: Parent entity information (continued)
Contingent liabilities
The parent entity had no contingent
liabilities as at 30 June 2014 and 30 June 2013.
Capital commitments
- Property, plant and equipment
The parent entity had no capital
commitments for property, plant and equipment as at 30 June 2014 and 30 June 2013.
Significant accounting
policies
The accounting policies of
the parent entity are consistent with those of the Consolidated Entity, as disclosed in note 1, except for the following:
· | | Investments
in subsidiaries are accounted for at fair value, less any impairment, in the parent entity. |
Note 27: Subsidiaries
The consolidated financial statements incorporate
the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described
in note 1:
The entities and interests
acquired are set out below:
|
|
Entity
interest |
|
Country
of incorporation |
2014 |
2013 |
Moko
Mobi Inc |
United
States of America |
100% |
100% |
All
Night Media Limited |
England |
100% |
100% |
Paper
Tree Limited |
British
Virgin Islands |
100% |
100% |
The consolidated financial statements incorporate
the assets, liabilities and results of the following subsidiary with non-controlling interests in accordance with the accounting
policy described in note 1:
Name |
Country
of
incorporation |
Parent
Ownership
interest |
Non-controlling
Ownership
interest |
Deals
I Love (Australia) Pty Ltd |
Australia |
51% |
49% |
* The Non-controlling interest
hold 49% of the voting rights of Deals I Love (Australia) Pty Ltd.
Summarised financial information
Summarised financial information
of the subsidiary with non-controlling interests that are material to the Consolidated Entity are set out below:
|
Deals
I Love (Australia)
Pty Ltd |
|
2014 |
|
$ |
Summarised
statement of financial position |
|
Current
assets |
136,447 |
Non-current
assets |
2,485 |
Total
assets |
138,932 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
85 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 27: Subsidiaries (continued)
|
Deals I Love (Australia)
Pty Ltd |
|
2014 |
|
$ |
Current
liabilities |
961,942 |
Non-current
liabilities |
- |
Total
liabilities |
961,942 |
Net
assets |
(823,010) |
|
|
Summarised
statement of profit or loss and other comprehensive income |
|
Revenue |
4,274,571 |
Expenses |
(4,527,831) |
|
|
Profit
before income tax expense |
(253,260) |
Income
tax expense |
- |
|
|
Profit
after income tax expense |
(253,260) |
|
|
Other
comprehensive income |
- |
|
|
Total
comprehensive income |
(253,260) |
|
|
Statement
of cash flows |
|
Net
cash from operating activities |
(416,697) |
Net
cash used in investing activities |
- |
Net
cash used in financing activities |
402,832 |
|
|
Net
increase/(decrease) in cash and cash equivalents |
(13,865) |
|
|
Other
financial information |
|
Loss
attributable to non-controlling interests |
(124,098) |
Accumulated
non-controlling interests at the end of reporting period |
(124,098) |
Moko completed the acquisition
of a controlling 51% share interest in Deals I Love (Australia) Pty Ltd on 1 July 2013.
86 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 28: Earnings per share
|
2014 |
2013 |
|
$ |
$ |
(a)
Earnings per share from continuing operations |
|
|
Loss
after income tax attributable to owners of MOKO Social Media Limited |
(13,472,361) |
(4,711,294) |
Weighted
average number of shares used as the denominator in calculating basic and diluted earnings per share |
472,906,543 |
306,882,356 |
|
|
|
|
2014 |
2013 |
|
cents |
cents |
Basic
earnings per share |
(2.85) |
(1.54) |
|
|
|
|
2014 |
2013 |
|
$ |
$ |
(b)
Earnings per share from discontinued operations |
|
|
Loss
after income tax attributable to owners of MOKO Social Media Limited |
- |
(1,566,785) |
Weighted
average number of shares used as the denominator in calculating basic and diluted earnings per share |
472,906,543
|
306,882,356 |
|
|
|
|
2014 |
2013 |
|
cents |
cents |
Basic
earnings per share |
- |
(0.51) |
|
|
|
|
2014 |
2013 |
|
$ |
$ |
(c)
Earnings per share from loss |
|
|
Loss
after income tax attributable to owners of MOKO Social Media Limited |
(13,472,361) |
(6,278,079) |
Weighted
average number of shares used as the denominator in calculating basic and diluted earnings per share |
472,906,543
|
306,882,356 |
|
|
|
|
2014 |
2013 |
|
cents |
cents |
Basic
earnings per share |
(2.85) |
(2.05) |
(d)
Diluted earnings per share
Options issued to shareholders
and related parties are considered to be potential ordinary shares and have been considered in the determination of diluted earnings
per share. The calculation of dilutive earnings per share does not assume conversion, exercise, or other issue of potential ordinary
shares that would have an antidilutive effect on earnings per share. Diluted earnings per share are therefore not different from
basic earnings per share
Note 29: Contingencies
There were no contingent liabilities at 30 June
2014 (2013: $nil).
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
87 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 30: Commitments
Lease commitments - operating
Committed at the reporting date but not recognised
as liabilities, payable:
Equipment
Lease |
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Within
one year |
- |
21,485 |
One
and five years |
- |
- |
More
than five years |
- |
- |
|
- |
21,485 |
Operating lease commitments
include contracted amounts for computer equipment under non-cancellable operating leases expiring within one year, with an option
to extend. On renewal, the terms of the leases are renegotiated.
During the year an amount
of $40,983 (2013: $224,385) was recognised as an expense in profit or loss in respect of operating leases.
Rental
Lease |
Consolidated |
|
2014 |
2013 |
$ |
$ |
$ |
Within
one year |
242,086 |
- |
One
and five years |
361,855 |
- |
More
than five years |
- |
- |
|
603,941 |
- |
The Consolidated Entity leases
its offices in United States of America and Australia. The US lease includes a lease for a New York office until December 2014
after which it becomes month by month and a three year lease commitment for an office in Alexandria, VA.
During the year an amount
of $198,236 (2013: $216,111) was recognised as an expense in profit or loss in respect of operating rental leases.
Note 31: Events occurring after the statement
of financial position date
Share Issues
Since 30 June 2014, the following
fully paid ordinary shares were issued as follows:
| · | On
1 July, 2014 (1 July, 2014 New York time), MOKO closed its U.S. Initial Public Offering
and 1,100,000 ADS (representing 44,000,000 fully paid ordinary shares) were issued, and
proceeds of USD$8,250,000 (before underwriting commissions and transaction costs) was
received in cash; |
| · | the
issue of 1,000,000 shares at $0.10 each through the exercise of options, raising $100,000
in cash; |
| · | the
issue of 1,000,000 shares at $0.20 each through the exercise of options, raising $200,000
in cash; |
| · | the
issue of 50,000 shares at $0.05 each through the exercise of listed options, raising
$2,500 in cash; |
| · | the
issue of 400,000 shares at $0.05 each through the exercise of listed options, raising
$20,000 in cash; |
| · | the
issue of 3,912 shares at $0.05 each through the exercise of listed options, raising $195.6
in cash; |
| · | the
issue of 50,000 shares at $0.05 each through the exercise of listed options, raising
$2,500 in cash; |
| · | the
issue of 200,000 shares at $0.05 each through the exercise of listed options, raising
$10,000 in cash; and |
| · | the
issue of 1,000,000 shares at $0.05 each through the exercise of listed options, raising
$50,000 in cash |
Tagroom
On 29 September 2014, MOKO entered a Share Purchase
Agreement to acquire 80% of the ordinary shares as a controlling interest in Tagroom Pty Ltd. Tagroom is a news and entertainment
service that harnesses social, mobile and visual technologies used by contemporary consumers (www.tagroom.com). The acquisition
brings with it three new senior team members experienced in the creation of viral media and shareable entertainment content for
the important 18-30 year-old demographic.
88 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 31: Events occurring after the statement
of financial position date (continued)
Being so close
to the date of this report, the Directors consider it impracticable to estimate the preliminary business combination accounting.
No other matter or circumstance
has arisen since 30 June 2014 that has or may significantly affect:
(a)
MOKO Social Media Limited operations in future financial years, or
(b)
The results of those operations in future financial years, or
(c)
MOKO Social Media Limited’s state of affairs in future financial years.
Note 32: Auditor’s remuneration
During the year the
following fees were paid or payable for services provided by the auditor:
|
Consolidated |
|
2014 |
2013 |
|
$ |
$ |
Audit
services |
|
|
Audit
and review of financial reports – BDO |
318,537 |
130,000 |
F1
review of financial reports – BDO |
200,019 |
- |
Tax
advice - BDO |
10,790 |
- |
Audit
and review of Paper Tree Limited – PKF UK |
- |
38,650
|
|
|
|
|
529,346
|
168,650
|
Note 33: Discontinued operations
This note relates to the 2013 financial year.
| (a) | Details
of operations disposed |
On 27 April 2013, the board
of directors entered into a sales agreement to dispose of Antiphony Management Holdings Limited (AMH) and its operating subsidiaries
(the AMH Group), which were incorporated in and operated mobile content businesses from, the United Kingdom. The sale was completed
on 29 April 2013, on which date control of the business passed to the acquirer.
The business had been operating
in a challenging market environment and was becoming cash flow intensive due to the high up-front marketing costs and lower margins
with significant competitor activity, making it difficult for management to actively seek growth and maintain acceptable profitability.
The entities disposed of include:
| - | Antiphony
Management Holdings Limited |
| - | Cell
Media International Limited |
| - | Blue
Stream Mobile Limited |
| - | Southern
Breeze Trading 3 (PTY) Ltd |
| - | American
Mobile Ventures Limited |
The gross sales consideration
received was GBP1.00 ($2.00). Additional potential consideration of up to GBP2,125,000 ($3,204,644) has not been brought to account
as it is contingent on business performance and unlikely to being received.
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
89 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 33: Discontinued operations (continued)
| (b) | Financial
performance of operations disposed of during the year (2014: Nil) |
|
2013 |
|
$ |
Revenue |
9,128,887
|
Content
expenses |
(7,545,664) |
Expenses |
(2,089,545) |
Depreciation
and amortisation |
(94,346) |
Loss
before tax from discontinued operations |
(600,668) |
|
|
Income
tax expense |
(205,097) |
|
|
Loss
after income tax |
(805,765) |
|
|
Loss
on disposal before income tax |
(761,020) |
|
|
Income
tax expense |
- |
|
|
Loss
on disposal after income tax |
(1,566,785) |
|
|
|
|
(Loss)/profit
after income tax expense from discontinued operations |
(1,566,785) |
| (c) | Assets
and liabilities an cash flow information of disposed group |
The major classes of assets
and liabilities of AMH Group at 29 April 2013 were as follows:
|
2013 |
|
$ |
Cash
and cash equivalents |
86,549 |
Trade
and other receivables |
958,576 |
Other
current assets |
155,654 |
Property,
plant and equipment |
372,022 |
Total
assets |
1,572,801 |
|
|
Trade
and other payables |
1,499,391 |
Total
liabilities |
1,499,391 |
|
|
Net
assets/ (liabilities) |
73,410 |
90 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
NOTES TO THE FINANCIAL
STATEMENTS
For
the year ended 30 June 2014
Note 33: Discontinued operations
(continued)
(d) Cash flow information of disposed
group
|
2013 |
$ |
Operating
activities |
(316,504)
|
Investing
activities – including payments for sale |
(330,335)
|
Financing
activities |
(458,647)
|
Net
cash (outflow) / inflow |
(1,105,486)
|
(e) Consideration Paid
|
2013 |
$ |
Gross
Sales Consideration |
2 |
Less:
Amounts payable on disposal |
(422,700)
|
Less:
Liabilities assumed |
(264,912)
|
Net
disposal consideration |
(687,610)
|
|
|
Net
Assets disposed of in AMH Group |
(73,410)
|
|
|
Loss
on disposal before income tax |
(761,020)
|
(f) Net cash outflow on disposal
|
2013 |
$ |
Cash |
(256,087)
|
Less:
Cash and cash equivalents disposed of |
(86,549)
|
Reflected
in the consolidated statements of cash flows |
(342,636)
|
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
91 |
DIRECTORS’ DECLARATION
The directors
of the Company declare that:
| · | the
attached financial statements and notes thereto comply with the Corporations Act 2001,
the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; |
| · | the
attached financial statements and notes thereto comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board as described in note
1 to the financial statements; |
| · | the
attached financial statements and notes thereto give a true and fair view of the Consolidated
Entity's financial position as at 30 June 2014 and of its performance for the financial
year ended on that date; |
| · | 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 directors
have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance
with a resolution of directors made pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the
directors
|
|
|
Greg McCann
Chairman
Date: 30 September 2014
Sydney, Australia |
|
Ian Rodwell
Managing Director
Date: 30 September 2014
Virginia, USA |
92 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
SHAREHOLDER INFORMATION
The shareholder information set out
below was applicable as at 20 August 2014
A. Distribution of equity securities
Analysis of numbers of equity security
holders by size of holding:
| (i) | Distribution
schedule of shareholdings as at 20 August 2014 |
MKB –
Fully paid Ordinary Shares
Range |
Securities |
% |
No
of Holders |
% |
100,001
and Over |
544,825,732 |
90.87 |
509 |
12.07 |
10,001
to 100,000 |
50,301,290 |
8.39 |
1,141 |
27.05 |
5,001
to 10,000 |
2,439,284 |
0.41 |
295 |
6.99 |
1,001
to 5,000 |
1,594,985 |
0.27 |
597 |
14.15 |
1
to 1,000 |
395,712 |
0.07 |
1,676 |
39.73 |
Total |
599,557,003 |
100 |
4,218 |
100 |
There were 2,021
holders of less than a marketable parcel of ordinary shares.
| (ii) | Distribution
schedule of options as at 20 August 2014 |
MKBO –
Expiry 13 June 2015, Exercise Price $0.05
Range |
Securities |
% |
No
of Holders |
% |
100,001
and Over |
139,276,306 |
95.98 |
128 |
36.26 |
10,001
to 100,000 |
5,587,707 |
3.85 |
98 |
27.76 |
5,001
to 10,000 |
132,002 |
0.09 |
16 |
4.53 |
1,001
to 5,000 |
94,806 |
0.07 |
34 |
9.63 |
1
to 1,000 |
17,153 |
0.01 |
77 |
21.81 |
Total |
145,107,974 |
100 |
353 |
100 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
93 |
SHAREHOLDER
INFORMATION
(iii) Distribution schedule of unlisted
option holdings
Range |
Options
(1) |
Options
(2)* |
Options
(3) |
Options
(4)* |
Options
(5)* |
Options
(6) |
Options
(7) |
Options
(8) |
Options
(9) |
Options
(10) |
Options
(11) |
Options
(12) |
Options
(13) |
100,001
& Over |
1 |
1 |
2 |
3 |
9 |
6 |
3 |
2 |
1 |
1 |
1 |
1 |
1 |
10,001
to 100,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
5,001
to 10,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
1,001
to 5,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
1
to 1,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Total |
1 |
1 |
2 |
3 |
9 |
6 |
3 |
2 |
1 |
1 |
1 |
1 |
1 |
Number |
Expiry
Date |
Exercise
Price |
Number
under option |
(1) |
30-Jun-15 |
$0.04 |
2,000,000 |
(2)* |
30-Nov-15 |
$0.10 |
500,000 |
(3) |
30-Jul-16 |
$0.042 |
10,000,000 |
(4)* |
31-Jul-16 |
$0.06 |
750,000 |
(5)* |
31-Jul-16 |
$0.17 |
4,250,000 |
(6) |
24-Oct-15 |
$0.155 |
3,450,000 |
(7) |
28-Nov-15 |
$0.40 |
16,000,000 |
(8) |
28-Nov-15 |
$0.10 |
6,400,000 |
(9) |
30-Jun-15 |
$0.03 |
1,000,000 |
(10) |
30-Jun-15 |
$0.04 |
1,000,000 |
(11) |
30-Jun-15 |
$0.02 |
1,000,000 |
(12) |
30-Jun-15 |
$0.11 |
1,000,000 |
(13) |
31-Jan-16 |
$0.20 |
2,000,000 |
* Employee
share options
Details of holders
of unlisted share options in the employee share option category are exempted from disclosure under Chapter Four of the ASX listing
rules.
Unlisted Options
granted American Depositary Shares (where one ADS = 40 Ordinary shares)
Range |
ADS
(1) |
ADS
(2) |
ADS
(3) |
ADS
(4) |
ADS
(5) |
ADS
(6) |
ADS
(7) |
ADS
(8) |
ADS
(9) |
ADS
(10) |
ADS
(11) |
ADS
(12) |
ADS
(13) |
ADS
(14) |
ADS
(15) |
ADS
(16) |
ADS
(17) |
ADS
(18) |
ADS
(19) |
100,001
& Over |
1 |
1 |
1 |
1 |
1 |
2 |
1 |
1 |
1 |
1 |
1 |
3 |
1 |
2 |
1 |
1 |
1 |
1 |
1 |
10,001
to 100,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
3 |
- |
- |
- |
- |
- |
- |
- |
5,001
to 10,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
1,001
to 5,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
1
to 1,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Total |
1 |
1 |
1 |
1 |
1 |
2 |
1 |
1 |
1 |
1 |
1 |
6 |
1 |
2 |
1 |
1 |
1 |
1 |
1 |
94 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
SHAREHOLDER
INFORMATION
Number |
Expiry
Date |
Exercise
Price
(USD$) |
Number
of
Shares under
option |
Number
of ADS
under option |
(1) |
30-Jun-16 |
$2.00 |
1,000,000 |
25,000 |
(2) |
30-Jun-16 |
$3.00 |
1,000,000 |
25,000 |
(3) |
31-Dec-14 |
$2.00 |
1,000,000 |
25,000 |
(4) |
31-Dec-14 |
$4.00 |
1,000,000 |
25,000 |
(5) |
31-Dec-15 |
$6.00 |
1,000,000 |
25,000 |
(6) |
30-Jun-15 |
$7.50 |
1,000,000 |
25,000 |
(7) |
31-Dec-14 |
$3.70 |
200,000 |
5,000 |
(8) |
31-Dec-14 |
$1.85 |
1,000,000 |
25,000 |
(9) |
31-Dec-15 |
$4.07 |
1,000,000 |
25,000 |
(10) |
31-Dec-16 |
$6.29 |
1,000,000 |
25,000 |
(11) |
31-Dec-14 |
$6.29 |
1,000,000 |
25,000 |
(12) |
30-Jun-16 |
$7.50 |
1,670,000 |
41,750 |
(13) |
30-Jun-16 |
$6.66 |
100,000 |
2,500 |
(14) |
30-Jun-16 |
$7.50 |
450,000 |
11,250 |
(15) |
30-Jun-16 |
$6.80 |
250,000 |
6,250 |
(16) |
31-Dec-14 |
$5.55 |
300,000 |
7,500 |
(17) |
31-Dec-14 |
$5.55 |
300,000 |
7,500 |
(18) |
31-Dec-15 |
$5.55 |
300,000 |
7,500 |
(19) |
30-Jun-16 |
$4.00 |
1,000,000 |
25,000 |
B. Equity security
holders
| (i) | The
names of the twenty largest holders of quoted equity securities are listed below: |
Rank |
Name
Securities % |
Securities |
% |
1 |
NATIONAL
NOMINEES LIMITED |
70,541,914 |
11.77% |
2 |
EMROSE
BV |
38,182,539 |
6.37% |
3 |
REEF
INVESTMENTS PTY LTD |
29,343,372 |
4.89% |
4 |
GREATSIDE
HOLDINGS PTY LTD |
24,676,716 |
4.12% |
5 |
J
P MORGAN NOMINEES AUSTRALIA LIMITED |
14,092,896 |
2.35% |
6 |
FLORENCE
PROPRIETARY LIMITED |
12,694,444 |
2.12% |
7 |
PERSHING
AUSTRALIA NOMINEES PTY LTD |
10,900,000 |
1.82% |
8 |
REEF
INVESTMENTS PTY LTD |
10,100,000 |
1.68% |
9 |
EARL
FIDUCIARY AG |
10,000,000 |
1.67% |
9 |
OSIRIS
CAPITAL INVESTMENTS PTY LTD |
10,000,000 |
1.67% |
10 |
WESTERN
PACIFIC CORPORATE INVESTMENTS PTY LTD |
8,166,668 |
1.36% |
11 |
ANTHONIUS
MARIA KOLENBERG |
7,780,952 |
1.30% |
12 |
ICE
COLD INVESTMENTS PTY LTD |
7,500,000 |
1.25% |
13 |
CITICORP
NOMINEES PTY LIMITED |
7,235,887 |
1.21% |
14 |
MR
EDDIE SUGAR |
5,820,189 |
0.97% |
15 |
MR
IAN MICHAEL RODWELL & MRS SIMONE ELIZABETH RODWELL |
5,575,000 |
0.93% |
16 |
MR
IAN NIVEN GOLDIE |
5,003,801 |
0.83% |
17 |
HSN
INVESTMENTS PTY LTD |
4,511,761 |
0.75% |
18 |
ROXTRUS
PTY LIMITED |
4,424,833 |
0.74% |
19 |
BOWMAN
INVESTMENT HOLDINGS PTY LTD |
4,200,000 |
0.70% |
20 |
MR
ADRIAN KEITH CROOK & MRS SAMANTHA JANE CROOK |
4,140,000 |
0.69% |
|
TOTAL
TOP 20 |
294,890,972 |
49.18% |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
95 |
SHAREHOLDER
INFORMATION
(ii) The names
of the twenty largest holders of quoted options are listed below:
Rank |
Name
Securities % |
Securities |
% |
1 |
GREATSIDE
HOLDINGS PTY LTD |
14,301,000 |
9.86% |
2 |
REEF
INVESTMENTS PTY LTD |
10,565,000 |
7.28% |
3 |
PERSHING
AUSTRALIA NOMINEES PTY LTD |
6,489,619 |
4.47% |
4 |
NATIONAL
NOMINEES LIMITED |
6,164,701 |
4.25% |
5 |
PURE
INVESTOR PTY LTD |
5,909,642 |
4.07% |
6 |
EMROSE
BV |
5,000,000 |
3.45% |
7 |
REEF
INVESTMENTS PTY LTD |
4,444,336 |
3.06% |
8 |
MR
JASVEER SINGH JESSY |
4,128,888 |
2.85% |
9 |
TRIPLE
C CONSULTING PTY LTD |
4,000,000 |
2.76% |
10 |
MR
EDDIE SUGAR |
3,155,811 |
2.17% |
11 |
ICE
COLD INVESTMENTS PTY LTD |
3,000,000 |
2.07% |
12 |
CYBERTOP
PTY LTD |
3,000,000 |
2.07% |
13 |
OSIRIS
CAPITAL INVESTMENTS PTY LTD |
2,854,763 |
1.97% |
14 |
CAPPIG
FINANCE PTY LTD |
2,500,000 |
1.72% |
15 |
MRS
NADINE RUTH TOLCON |
2,500,000 |
1.72% |
16 |
FLORENCE
PROPRIETARY LIMITED |
2,500,000 |
1.72% |
17 |
MR
WILLIAM PERCIVAL REYNOLDS |
2,350,000 |
1.62% |
18 |
PARAKEET
BAY PTY LTD |
2,350,000 |
1.62% |
18 |
MR
GARY EDWARD WESTON |
2,300,000 |
1.59% |
18 |
ICE
COLD INVESTMENTS PTY LTD |
2,000,000 |
1.38% |
19 |
MR
PARAMJIT SINGH NAGRA & MRS SURINDER KAUR NAGRA |
1,983,334 |
1.37% |
19 |
ROXTRUS
PTY LIMITED |
1,924,833 |
1.33% |
19 |
MRS
JOAN KITCHIN |
1,875,000 |
1.29% |
20 |
HSN
INVESTMENTS PTY LTD |
1,656,851 |
1.14% |
|
TOTAL
TOP 20 |
96,953,778 |
66.81% |
96 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
SHAREHOLDER
INFORMATION
iii) Unquoted equity security
holders
Range |
Options
(1) |
Options
(2)* |
Options
(3) |
Options
(4)* |
Options
(5)* |
Options
(6) |
Options
(7)
|
Options
(8) |
Options
(9) |
Options
(10) |
Options
(11) |
Options
(12) |
Options
(13) |
100,001
& Over |
1 |
1 |
2 |
3 |
9 |
6 |
3 |
2 |
1 |
1 |
1 |
1 |
1 |
10,001
to 100,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
5,001
to 10,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
1,001
to 5,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
1
to 1,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Total |
1 |
1 |
2 |
3 |
9 |
6 |
3 |
2 |
1 |
1 |
1 |
1 |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater
than 20% holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Hauser |
2,000,000 |
- |
- |
- |
- |
- |
- |
- |
1,000,000 |
1,000,000 |
1,000,000 |
1,000,000 |
2,000,000 |
Florence
Pty Ltd ATF McCann Super Fund |
- |
- |
5,000,000 |
- |
- |
- |
5,000,000 |
- |
- |
- |
- |
- |
- |
Hans
De Back |
- |
- |
- |
- |
- |
- |
- |
400,000 |
- |
- |
- |
- |
- |
Emrose
BV |
- |
- |
5,000,000 |
- |
- |
- |
- |
6,000,000 |
- |
- |
- |
- |
- |
Triple
C Consulting Pty Ltd |
- |
- |
- |
- |
- |
1,250,000 |
- |
- |
- |
- |
- |
- |
- |
Cappig
Finance Pty Ltd |
- |
- |
- |
- |
- |
1,000,000 |
- |
- |
- |
- |
- |
- |
- |
Oska
Nominees Pty Ltd |
- |
- |
- |
- |
- |
500,000 |
- |
- |
- |
- |
- |
- |
- |
Mrs
Sharon Fay Sheppeard |
- |
- |
- |
- |
- |
250,000 |
- |
- |
- |
- |
- |
- |
- |
Mrs
Natalie Joy Ruck |
- |
- |
- |
- |
- |
250,000 |
- |
- |
- |
- |
- |
- |
- |
Mr
Nicholas Alan Brownbill |
- |
- |
- |
- |
- |
200,000 |
- |
- |
- |
- |
- |
- |
- |
Rodwell
Family Superannuation Fund |
- |
- |
- |
- |
- |
- |
10,000,000 |
- |
- |
- |
- |
- |
- |
Roadknight
Investments (Australia) Pty Limited |
- |
- |
- |
- |
- |
- |
1,000,000 |
- |
- |
- |
- |
- |
- |
*Employee share
options
Details of holders
of unlisted share options in the employee share option category are exempted from disclosure under Chapter Four of the ASX listing
rules.
C. Substantial Shareholders
Moko has been
notified of the following substantial shareholdings
Holder |
Number
of ordinary shares |
%
of total shares issued |
Peter
Yates |
43,472,926 |
8.98% |
Emrose
BV |
35,547,710 |
6.76% |
Trevor
Douglas Nairn |
34,928,372 |
5.85% |
D. Restricted
Securities
The Company does
not hold any restricted securities
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |
97 |
SHAREHOLDER
INFORMATION
E. Voting Rights
The voting rights attaching to each
class of equity securities are set out below:
| (i) | Ordinary
shares: Subject to any rights or restrictions for the time being attached to any
class of shares, at a meeting of shareholders each shareholders entitled to vote may
vote in person or by proxy or attorney or, being a corporation, by representative duly
authorised under the Corporations Law, and has one vote on a show of hands and one vote
per fully paid share on a poll. |
| (ii) | Options:
No voting rights. |
F. Listing
Rule 4.10.13
MOKO Social Media
Limited securities are quoted on the following exchanges:
ASX under the
code MKB
NASDAQ under the
code MOKO
98 |
MOKO
SOCIAL MEDIA LIMITED FOR THE YEAR ENDED 30 JUNE 2014 |