For personal use only

Transcription

1 Half-year report Page 1 of 3 APPENDIX 4D HALF-YEAR REPORT 1. Company details Name of entity: ABN: Reporting period: Previous corresponding period: Half-year ended 31 December 2011 Half-year ended 31 December Results for announcement to the market Revenues from ordinary activities up 13.2% to $ 3,430,000 Profit from ordinary activities after tax attributable to the owners of Kip McGrath Education Centres Limited Profit for the period attributable to the owners of Kip McGrath Education Centres Limited up 100.2% to up 100.2% to $ 7,000 $ 7,000 Dividends There were no dividends paid or declared during the current financial period. Comments The profit for the consolidated entity after providing for income tax amounted to $7,000 (31 December 2010: loss of $3,187,000). Further commentary on the business operations and developments by directors are contained in the attached letter from the chairman. 3. NTA backing Net tangible asset backing per ordinary security Reporting period Previous corresponding period (12.74) cents (13.37) cents 4. Control gained over entities Name of entities (or group of entities) Not applicable. Date control gained Contribution of such entities to the reporting entity's profit/(loss) from ordinary activities during the period (where material) Profit/(loss) from ordinary activities after tax of the controlled entity (or group of entities) for the whole of the previous corresponding period (where material) $ - $ -

2 Half-year report Page 2 of 3 5. Loss of control over entities Name of entities (or group of entities) Not applicable. Date control lost Contribution of such entities to the reporting entity's profit/(loss) from ordinary activities during the period (where material) Profit/(loss) from ordinary activities after tax of the controlled entity (or group of entities) whilst controlled during the whole of the previous corresponding period (where material) $ - $ - 6. Dividends Current period There were no dividends paid or declared during the current financial period. Previous corresponding period There were no dividends paid or declared during the previous financial period. 7. Dividend reinvestment plans The following dividend or distribution plans are in operation: Not applicable. The last date(s) for receipt of election notices for the dividend or distribution plans: Not applicable. 8. Details of associates and joint venture entities Reporting entity's percentage holding Contribution to profit/(loss) (where material) Name of associate / joint venture Current period Previous corresponding period Current period Previous corresponding period Not applicable. Group's aggregate share of associates and joint venture entities' profit/(loss) (where material) Profit(loss) from ordinary activities before income tax Income tax on operating activities $ - $ - $ - $ - 9. Foreign entities Details of origin of accounting standards used in compiling the report: Not applicable.

3 Half-year report Page 3 of Audit qualification or review Details of audit/review dispute or qualification (if any): The accounts were subject to a review by the auditors and the review report is attached as part of the Interim Report. 11. Attachments Details of attachments (if any): The Interim Report of for the half-year ended 31 December 2011 is attached. 12. Signed Signed: Date: 29 February 2012 Kip McGrath Chairman Newcastle

4

5 ABN Interim Report - 31 December 2011

6 Directors' report 31 December 2011 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled for the half-year ended 31 December Directors The following persons were directors of during the whole of the financial halfyear and up to the date of this report, unless otherwise stated: Kip McGrath - Chairman (appointed Chairman on 1 September 2011) Dagnija McGrath Ian Campbell Richard Ryan (appointed on 1 September 2011) Joe Ewart (appointed on 1 September 2011) Lindy Hyam (resigned on 1 December 2011) Principal activities The principal activities of the consolidated entity during the course of the financial half-year continued to be the sale of franchises and providing services to franchisees in the education field. The consolidated entity does this in Australia and overseas, principally in the United Kingdom and New Zealand. Review of operations The profit for the consolidated entity after providing for income tax amounted to $7,000 (31 December 2010: loss of $3,187,000). Further commentary on the business operations and developments by directors are contained in the attached letter from the chairman. Significant changes in the state of affairs On 18 July 2011 the company held an extraordinary general meeting, seeking shareholder approval of two resolutions in accordance with the La Jolla Cove Investors ('LJC') funding agreement. Shareholders resolved unanimously the first resolution, which ratified the partial drawdown of the convertible note issued by the company to LJC. The second resolution was voted against unanimously which sought approval for the company to drawdown amounts up to US$900,000 under the convertible note. There were no other resolutions put to the meeting. On 1 August 2011 the consolidated entity entered into a Subscription Agreement for $209,713 in respect of the issue of 3,495,222 ordinary shares of 6 cents each and an unsecured loan of $290,287 with Editure Capital Pty Limited ( Editure ). During the period unsecured loans of $446,472 was converted into unsecured convertible notes. On 8 November 2011the consolidated entity converted $500,000 of unsecured loans with the founders Kip McGrath and Dagniji McGrath into an unsecured convertible note, as approved by the Annual General Meeting held on 11 October On 16 December 2011 the company received a further $200,000 unsecured loan from Editure. During the period, the $290,287 loan was converted into an unsecured convertible note, with an additional $106,186 draw down against the facility. There were no other significant changes in the state of affairs of the consolidated entity during the financial half-year. Rounding of amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. 1

7 Directors' report 31 December 2011 Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act On behalf of the directors Kip McGrath Chairman 29 February 2012 Newcastle 2

8 AUDITOR S INDEPENDENCE DECLARATION TO THE DIRECTORS OF KIP MCGRATH EDUCATION CENTRES LIMITED In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of. As lead audit partner for the review of the financial statements of Kip McGrath Education Centres Limited for the half-year ended 31 December 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) and (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the review; any applicable code of professional conduct in relation to the review. NEXIA FORSYTHES D Gallery Partner Newcastle, 29 February 2012 Limited Liability by a scheme approved under professional standards legislation. Nexia Court & Co trading as Nexia Forsythes (ABN ) is an independent New South Wales partnership International and a member of Nexia worldwide network of independent accounting and consulting firms. Nexia International provides no services to clients. Level 29, 264 George Street Sydney, NSW 2000 P O Box H195 Australia Square NSW 1215 Telephone: Fax: info@nexiacourt.com.au 3

9 Financial report For the half-year ended 31 December 2011 Contents Financial report Statement of comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration Independent auditor's review report to the members of Kip McGrath Education Centres Limited Page General information The financial report covers as a consolidated entity consisting of Kip McGrath Education Centres Limited and the entities it controlled. The financial report is presented in Australian dollars, which is 's functional and presentation currency. The financial report consists of the financial statements, notes to the financial statements and the directors' declaration. is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 3 6 Newcomen Street Newcastle NSW 2300 A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial report. The financial report was authorised for issue, in accordance with a resolution of directors, on 29 February The directors have the power to amend and reissue the financial report. 4

10 Statement of comprehensive income For the half-year ended 31 December 2011 Note 31/12/ /12/2010 $'000 $'000 Revenue from continuing operations Expenses Royalties, commissions and other direct expenses Employee expenses Marketing expenses Administration expenses Merchandising expenses Depreciation and amortisation expense Net foreign exchange loss Finance costs Profit/(loss) before income tax expense from continuing operations Income tax expense Profit/(loss) after income tax expense from continuing operations Loss after income tax benefit from discontinued operations Profit/(loss) after income tax expense for the half-year attributable to the owners of Other comprehensive income Foreign currency translation Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year attributable to the owners of 3 3,430 3,030 (1,385) (1,500) (864) (977) (61) (40) (593) (405) (198) (45) 4 (103) (98) (7) (25) 4 (212) (138) 7 (198) - (218) 7 (416) 5 - (2,771) 7 (3,187) (2) (80) (2) (80) 5 (3,267) Cents Cents Earnings per share from continuing operations attributable to the owners of Basic earnings per share Diluted earnings per share Earnings per share from discontinued operations attributable to the owners of Basic earnings per share Diluted earnings per share Earnings per share for loss attributable to the owners of Kip McGrath Education Centres Limited Basic earnings per share Diluted earnings per share (2.10) (2.10) 11 - (13.98) 11 - (13.98) (16.08) (16.08) The above statement of comprehensive income should be read in conjunction with the accompanying notes 5

11 Statement of financial position As at 31 December 2011 Note 31/12/ /06/2011 $'000 $'000 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other Total current assets Non-current assets Receivables Property, plant and equipment Intangibles Deferred tax Total non-current assets Total assets , ,616 8,343 1,604 1,815 10,309 10,322 11,099 11,503 Liabilities Current liabilities Trade and other payables Borrowings Provisions Total current liabilities Non-current liabilities Borrowings Deferred tax Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity 695 1,320 3,200 3, ,065 4, , ,832 1,613 5,897 6,513 5,202 4, ,229 7, (2,567) (2,574) 5,202 4,990 The above statement of financial position should be read in conjunction with the accompanying notes 6

12 Statement of changes in equity For the half-year ended 31 December 2011 Balance at 1 July 2010 Other comprehensive income for the half-year, net of tax Loss after income tax expense for the half-year Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Balance at 31 December 2010 Balance at 1 July 2011 Other comprehensive income for the half-year, net of tax Profit after income tax expense for the half-year Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Balance at 31 December 2011 Contributed Accumulated Total equity Reserves losses equity $'000 $'000 $'000 $'000 $'000 $'000 6, , (80) - (80) (3,187) (3,187) (80) (3,187) (3,267) , (2,304) 5,192 Contributed Accumulated Total equity Reserves losses equity $'000 $'000 $'000 $'000 $'000 $'000 7, (2,574) 4, (2) - (2) (2) , (2,567) 5,202 The above statement of changes in equity should be read in conjunction with the accompanying notes 7

13 Statement of cash flows For the half-year ended 31 December 2011 Note 31/12/ /12/2010 $'000 $'000 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest and other finance costs paid Income taxes paid Net cash used in operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for intangibles Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Share issue transaction costs Repayment of borrowings Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the financial half-year Effects of exchange rate changes on cash Cash and cash equivalents at the end of the financial half-year 3,884 3,478 (3,936) (3,434) (52) 44-3 (212) (138) (1) (10) (265) (101) (7) (21) (293) (311) (300) (332) (3) - (595) (176) (100) (323) (14) The above statement of cash flows should be read in conjunction with the accompanying notes 8

14 Notes to the financial statements 31 December 2011 Note 1. Significant accounting policies These general purpose financial statements for the interim half-year reporting period ended 31 December 2011 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by the company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. New, revised or amending Accounting Standards and Interpretations adopted 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 not been early adopted. Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed in the relevant accounting policy. 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 Amendments to Australian Accounting Standards The consolidated entity has applied AASB from 1 July These amendments make numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, which had no major impact on the requirements of the amended pronouncements. The main amendment was to AASB 8 'Operating Segments' and required an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. AASB Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project The consolidated entity has applied AASB amendments from 1 July The amendments made numerous non-urgent but necessary amendments to a range of Australian Accounting Standards and Interpretations. The amendments provided clarification of disclosures in AASB 7 'Financial Instruments: Disclosures', in particular emphasis of the interaction between quantitative and qualitative disclosures and the nature and extent of risks associated with financial instruments; clarified that an entity can present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes in accordance with AASB 101 'Presentation of Financial Instruments'; and provided guidance on the disclosure of significant events and transactions in AASB 134 'Interim Financial Reporting'. 9

15 Notes to the financial statements 31 December 2011 Note 1. Significant accounting policies (continued) AASB Amendments to Australian Accounting Standards The consolidated entity has applied AASB amendments from 1 July The amendments made numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of International Financial Reporting Standards by the International Accounting Standards Board. AASB 124 Related Party Disclosures (December 2009) The consolidated entity has applied AASB 124 (revised) from 1 July The revised standard simplified the definition of a related party by clarifying its intended meaning and eliminating inconsistencies from the definition. A subsidiary and an associate with the same investor are related parties of each other; entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer related parties of each other; and whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other. AASB Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project The consolidated entity has applied AASB amendments from 1 July They make changes to a range of Australian Accounting Standards and Interpretations for the purpose of closer alignment to International Financial Reporting Standards ('IFRSs') and harmonisation between Australian and New Zealand Standards. The amendments remove certain guidance and definitions from Australian Accounting Standards for conformity of drafting with International Financial Reporting Standards but without any intention to change requirements. AASB Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets The consolidated entity has applied AASB amendments from 1 July These amendments add and amend disclosure requirements in AASB 7 about transfer of financial assets, including the nature of the financial assets involved and the risks associated with them. AASB 1054 Australian Additional Disclosures The consolidated entity has applied AASB 1054 from 1 July The standard sets out the Australian-specific disclosures, which are in addition to International Financial Reporting Standards, for entities that have adopted Australian Accounting Standards. Going concern The consolidated entity has prepared the financial report on a going concern basis. The consolidated entity has a net current asset deficiency of $3,275,000 (30 June 2011: $3,719,000). The consolidated entity advised National Australia Bank ('NAB') on 14 February 2012 that it was in breach of its interest covenant as at 31 December 2011 in respect of its loan to the NAB as required by the loan agreements. The directors consider the preparation of the financial report on a going concern basis as a result of consideration of the following: (i) Included in current liabilities are bank loans of $3,125,000 (30 June 2011: $3,093,000) which are technically repayable on demand. However, the loan is being serviced by quarterly repayments of $85,000 (2010: $62,500) plus interest; and (ii) On 16 December 2011 the consolidated entity announced a further unsecured loan of $200,000 with Editure Capital Pty Limited ( Editure ). The consolidated entity has prepared updated cash flow forecasts for 12 months from signing of these accounts. Based on these forecasts, the directors consider the company and consolidated entity will be able to meet their debts as and when they fall due and payable. The financial report has been prepared on the going concern basis for the above reasons. Accordingly, the financial report does not include any adjustments relating to the recoverability and classification of recorded assets or to the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern. 10

16 Notes to the financial statements 31 December 2011 Note 2. Operating segments Identification of reportable operating segments The consolidated entity's operating segment is based on the internal reports that are reviewed and used by the Chief Executive Officer and the Board of Directors (collectively referred to as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. The information reported to the CODM is on at least a monthly basis. The consolidated entity operates in one segment being the provision of franchising of education services for the preschool, primary, secondary and tertiary market ( ('KMEC'), Kip McGrath Education UK ('KME UK') and Kip McGrath Direct ('KMD')). Major customers The consolidated entity has no significant individual customers. Geographical information Sales to external Geographical customers non-current assets 31/12/ /12/ /12/ /06/2011 $'000 $'000 $'000 $'000 Australasia United Kingdom and Europe Overseas other 1,230 1,296 8,085 7,879 1,380 1, ,417 3,020 8,705 8,507 The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets, post employment benefits assets and rights under insurance contracts. Note 3. Revenue From continuing operations 31/12/ /12/2010 $'000 $'000 Sales revenue Revenue from franchise operations Revenue from sale of franchisee centres Revenue from direct sales Other revenue Interest Other revenue Revenue from continuing operations 2,916 2, ,417 3, ,430 3,030 11

17 Notes to the financial statements 31 December 2011 Note 4. Expenses 31/12/ /12/2010 $'000 $'000 Profit/(loss) before income tax from continuing operations includes the following specific expenses: Depreciation Plant and equipment Plant and equipment under lease Total depreciation Employee benefits expense Superannuation Employment expense Other Total employee benefits expense Finance costs Interest and finance charges paid/payable Note 5. Discontinued operations Description Kip McGrath Institute of Business Australia Pty Ltd was discontinued in the prior half year and the liquidation of the entity is being finalised. 12

18 Notes to the financial statements 31 December 2011 Note 5. Discontinued operations (continued) Financial performance information Revenue from online higher education student income Total revenue Royalties, commissions and other direct expenses Employee expenses Marketing expenses Administration expenses Depreciation and amortisation expense Impairment of assets Other expenses Finance costs Total expenses Loss before income tax expense Income tax expense Loss after income tax expense Loss after income tax benefit from discontinued operations 31/12/ /12/2010 $'000 $' (77) - (258) - (5) - (52) - (10) - (2,509) - (1) - (1) (2,913) (2,771) (2,771) (2,771) Note 6. Equity - contributed 31/12/ /06/ /12/ /06/2011 Shares Shares $'000 $'000 Ordinary shares - fully paid 26,796,706 23,301,484 7,229 7,022 Movements in ordinary share capital Details Balance Issue of ordinary shares Share issue transaction costs Balance Date 1 July August December 2011 No of shares Issue price $'000 23,301,484 7,022 3,495,222 $ $0.00 (3) 26,796,706 7,229 Note 7. Equity - dividends There were no dividends paid or declared during the current or previous financial half-year. 13

19 Notes to the financial statements 31 December 2011 Note 8. Contingent liabilities The liquidator of Kip McGrath Institute of Business Australia Pty Limited (in liquidation) have advised there will be no distribution to creditors which include convertible note holders of $475,000. In respect of the liquidation, management believe there is no basis for any claim against the consolidated entity and accordingly no provision has been made. The consolidated entity is in a dispute with its US broker regarding the amount of commission payable to the broker in respect of fund raising activities. The consolidated entity has provided $18,000 relating to monies raised, which management and their legal advisers believe is the amount due and payable. The total claim from the broker amounts to $540,000. Note 9. Related party transactions On 8 November 2011the consolidated entity converted $500,000 of unsecured loans with the founders Kip McGrath and Dagniji McGrath into an unsecured convertible note, as approved by the Annual General Meeting held on 11 October The note has an issue price of $500,000 repayable on or before 1 August 2013 but not before the convertible note with Editure Capital Pty Limited is either repaid in full or converted to shares. Interest will accrue at 10% per annum. The conversion price is 9 cents per share (or adjusted to the price of other shares issued by the consolidated entity if lower) and a maximum of 6,722,223 shares can be converted. Note 10. Events after the reporting period No matter or circumstance has arisen since 31 December 2011 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years. Note 11. Earnings per share 31/12/ /12/2010 $'000 $'000 Earnings per share from continuing operations Profit/(loss) after income tax attributable to the owners of Kip McGrath Education Centres Limited 7 (416) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares used in calculating diluted earnings per share 26,169,846 19,815,951 26,169,846 19,815,951 Cents Cents Basic earnings per share Diluted earnings per share 0.03 (2.10) 0.03 (2.10) 14

20 Notes to the financial statements 31 December 2011 Note 11. Earnings per share (continued) Earnings per share from discontinued operations Profit/(loss) after income tax attributable to the owners of Kip McGrath Education Centres Limited 31/12/ /12/2010 $'000 $'000 - (2,771) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares used in calculating diluted earnings per share - 19,815,951-19,815,951 Cents Cents Basic earnings per share Diluted earnings per share - (13.98) - (13.98) 31/12/ /12/2010 $'000 $'000 Earnings per share for profit/(loss) Profit/(loss) after income tax attributable to the owners of Kip McGrath Education Centres Limited 7 (3,187) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares used in calculating diluted earnings per share 26,169,846 19,815,951 26,169,846 19,815,951 Cents Cents Basic earnings per share Diluted earnings per share 0.03 (16.08) 0.03 (16.08) 15

21 Directors' declaration In the directors' opinion: the attached financial statements and notes thereto comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes thereto give a true and fair view of the consolidated entity's financial position as at 31 December 2011 and of its performance for the financial half-year ended on that date; and there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of directors made pursuant to section 303(5) of the Corporations Act On behalf of the directors Kip McGrath Chairman 29 February 2012 Newcastle 16

22 INDEPENDENT AUDITOR S REVIEW REPORT TO THE MEMBERS OF KIP MCGRATH EDUCATION CENTRES LIMITED Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Kip McGrath Education Centres Limited, which comprises the statement of financial position as at 31 December 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year period. Directors responsibility for the financial report The directors of the company are responsible for the preparation of the half-year 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 half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Australian Auditing Standard on Review Engagements ASRE 2410 Review of Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position at 31 December 2011 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act As the auditor of, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we, would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Limited Liability by a scheme approved under professional standards legislation. Nexia Court & Co trading as Nexia Forsythes (ABN ) is an independent New South Wales partnership International and a member of Nexia worldwide network of independent accounting and consulting firms. Nexia International provides no services to clients. Level 29, 264 George Street Sydney, NSW 2000 P O Box H195 Australia Square NSW 1215 Telephone: Fax: info@nexiacourt.com.au 17

23 Independence In conducting our review, we have complied with the independence requirements of the Corporations Act Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of is not in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the of the consolidated entity s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and (ii) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations Significant Uncertainty Regarding Going Concern Without qualification to the conclusion expressed above, attention is drawn to the following matter. As a result of matters disclosed in Note 1 Going Concern to the financial statements, there is significant uncertainty whether the company will be able to continue as a going concern and therefore whether it will be able to pay its debts as and when they fall due and whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the company not continue as a going concern. NEXIA FORSYTHES D Gallery Partner Newcastle, 29 February 2012 Limited Liability by a scheme approved under professional standards legislation. Nexia Court & Co trading as Nexia Forsythes (ABN ) is an independent New South Wales partnership International and a member of Nexia worldwide network of independent accounting and consulting firms. Nexia International provides no services to clients. Level 29, 264 George Street Sydney, NSW 2000 P O Box H195 Australia Square NSW 1215 Telephone: Fax: info@nexiacourt.com.au 18