CORPORATE DIRECTORY. Jumbo Corporation Limited Annual Report

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2 CORPORATE DIRECTORY Directors Alan Phillips ( Chairman ) Mike Veverka ( Chief executive officer ) Earl Evans ( Non executive director) Company Secretary Bruce David Burrell Registered Office Level 8, Riverside Centre 123 Eagle Street Brisbane Qld 4000 Telephone: Facsimile: Bankers ANZ Banking Group Commonwealth Bank of Australia St George Bank Share Register Computer Share Investor Services Pty Limited Level 27, Central Plaza Queen Street Brisbane Qld 4000 GPO Box 523 Brisbane Qld 4001 Telephone: Facsimile: Auditors Ernst & Young Level 5, 1 Eagle Street Brisbane Qld 4000 Internet Address www. jumbocorporation. com Australian Business Number

3 Directors Report...1 Statement of Financial Performance...8 Statement of Financial Position...9 Statement of Cash Flows...10 Notes to the Financial Statements...11 Note 1 - Summary of Significant Accounting Policies Note 2 - Revenue from Ordinary Activities Note 3 - Expenses and Losses/ (Gains) Note 4 - Income Tax Note 5 - Dividends paid or provided for on ordinary shares Note 6 - Receivables (Current) Note 7 - Inventories (Current) Note 8 - Other Financial Assets (Current) Note 9 - Other Financial Assets (Non-Current) Note 10 - Interests in Controlled Entities Note 11 - Property, Plant and Equipment Note 12 - Intangibles Note 13 - Payables (Current) Note 14 - Interest Bearing Liabilities (Current) Note 15 - Provisions (Current) Note 16 - Interest Bearing Liabilities (Non-Current) Note 17 - Contributed Equity Note 18 - Accumulated Losses Note 19 Outside Equity Interest Note 20 - Statement of Cash Flows Note 21 - Expenditure Commitments Note 22 - Employee Entitlements and Superannuation Commitments Note 23 - Contingent Liabilities Note 24 - Subsequent Events Note 25 - Earnings Per Share Note 26 - Remuneration of Directors Note 27 - Remuneration of Executives Note 28 - Auditors Remuneration Note 29 - Related Party Disclosures Note 30 - Segment Information Note 31 - Financial Instruments Directors Declaration...38 Independent Audit Report...39 ASX Additional Information...40 Corporate Governance Statement...44

4 DIRECTORS REPORT Your directors submit their report for the year ended 30 June DIRECTORS The names and details of the directors of the Company in office at any time during the financial year and until the date of this report are as follows. Names, qualifications, experience and special responsibilities Alan Phillips (Chairman) Mike Veverka (Chief Executive Officer) Earl Evans (Non executive Director) Alan Phillips is the non-executive chairman of Jumbo Corporation Ltd. He has been a director, executive director and chairman of ASX listed public companies covering a period of 30 years, specialising in startup and turn-around across a broad range of industries, but predominantly in the mining exploration and technology industries. Alan s current directorships include Eastern Corporation Limited (Chairman), Adex Holdings Limited, Central Kalgoorlie Gold Mines Limited, Michelago Limited and Focus Technologies Limited. Alan was appointed a director of Jumbo Corporation Limited on 10 May Prior to his current appointment, Mr. Phillips was a director from 30 October 1997 to 8 September 1999 of Windsor Resources NL (now Jumbo Corporation Limited). Mike Veverka has been chief executive officer and a director of Jumbo Corporation Limited since the restructuring of the Company in September Mike was instrumental in the development of the e-commerce software that is the foundation to the various Jumbo operations. He was the original founder of Benon Technologies in 1995 when development of the software began. Mike also established a leading Internet Service Provider in Queensland which operated successfully for 3 years before being sold. Mike is regarded as a pioneer in the Australian Internet Industry with many successful Internet endeavours to his name. Mike graduated with an honours degree in engineering in Earl Evans is a senior executive of Hartleys stockbrokers and has been instrumental in the capital raisings by the Company. He was appointed a non-executive director of Jumbo Corporation Limited on 10 May Interests in the shares and options of the company and related bodies corporate As at the date of this report, the interests of the directors in the shares and options of the Company and related bodies corporate were: Ordinary Shares fully paid Jumbo Corporation Limited Options over Ordinary Shares Editson Pty Limited Ordinary Shares Fully Paid Alan Phillips Mike Veverka 57,798,572 48,000,000 2,434,000 Earl Evans The options held by Mr. Veverka are as follows: 1. 19,000,000 options exercisable at 25 cents, expiring on 31 December ,000,000 options exercisable at 50 cents, expiring on 31 December The options were issued pursuant to the Company s Prospectus dated 13 August The 2,434,000 shares in Editson Pty Limited are held by Vesteon Pty Limited, a Company of which Mr. Veverka is a director and shareholder and represent 20% of that Company s issued capital. The balance of 80% is held by Jumbo Corporation Limited. EARNINGS PER SHARE 2002 cents 2001 cents Basic loss per share (0.32) cents loss (0.38) cents loss Diluted loss per share (0.32) cents loss (0.38) cents loss 1

5 DIRECTORS REPORT DIVIDENDS The directors recommend that no dividend be paid at this time. No dividend has been paid or provided since the end of the previous financial year CORPORATE STRUCTURE Jumbo Corporation Limited is a Company limited by shares that is incorporated and domiciled in Australia. Jumbo Corporation Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year, which are outlined in the following illustration of the group s corporate structure. Jumbo Corporation Limited 80% 70% 75% 75% 100% Editson Pty Limited Building Site Services (Aust) Pty Limited Dealer Dan Pty Limited Online Computing Australia Pty Limited Kringle Pty Limited 100% Benon Technologies Pty Limited PRINCIPAL ACTIVITIES Benon Technologies Pty Limited owns the e-commerce software that is used in the various Jumbo and related businesses. The company is also responsible for the operation of a range of web sites that sell Internet friendly products such as computer software, lottery products, tobacco, cosmetics and jewellery. The e-commerce software controls most aspects of the online business including marketing, secure ordering, customer support and repeat customer promotion. Building Site Services (Aust) Pty Limited, which trades as Neobuild, provides information services to the commercial building industry, such as tenders, development applications, jobs won and lists of sub-contractors, suppliers and hire services. The 70% equity interest in Building Site Services (Aust) Pty Limited was acquired on 20 February Dealer Dan Pty Limited is an exploration into the viability of retailing computer hardware and peripherals via the web. Currently the only operational web site is dealerdan.com.au. The 75% equity interest in Dealer Dan Pty Limited was acquired on 26 April Online Computing Australia Pty Limited, trading as Bozzo Brown Computer Wholesalers, is an on-line retailer and wholesaler of computer hardware. The 75% interest was acquired on 29 May The acquisition of Building Site Services (Aust) Pty Limited, Dealer Dan Pty Limited and Bozzo Brown represent an expansion to the group s principal activities of using e-commerce technology to create efficient businesses. Kringle Pty Limited is inactive. 2

6 DIRECTORS REPORT Cont d EMPLOYEES The consolidated entity employed 8 full-time employees as at 30 June 2002 ( employees). RESULTS OF OPERATIONS Financial The results for the 12 months ending June 2002 demonstrate the second year of continued growth for the group, led by Benon Technologies (the operating company for the core Jumbo business) that delivered its first annual profit. The 3 new startup companies required startup capital during the year to bring them to a point of minimal losses at the end of June The following table demonstrates the trend over the last 3 years. FY 99/00 FY 00/01 FY 01/02 Benon Technologies (Jumbo Core Business) Sales Turnover* $671,000 $1,488,000 $10,061,000 Profit/(Loss) ($1,950,000) ($379,000) $61,000 New Startups and Parent Entity (Neobuild, Online Computing Australia and Dealer Dan) Sales Turnover $30,000 $116,000 $476,000 Profit/(Loss) ($10,523,000) ($221,000) ($563,000) (Includes a non cash writedown of intangible assets) Consolidated Sales Turnover $701,000 $1,604,000 $10,537,000 Profit/(Loss) ($12,473,000) ($600,000) ($502,000) * Included in sales turnover is the total amount of sales made through websites operated by the Company. Revenue from ordinary activities, as reflected in the Statement of Financial Performance, includes only the commissions that the consolidated entity earns on these sales. The consolidated entity incurred a loss after tax of $592,451 before outside equity interests, for the year ended 30 June 2002, compared to a $744,244 loss for the year ended 30 June The loss attributable to members of Jumbo Corporation Limited, after deducting the outside equity interests in the loss, is $502,014. ( $600,243 loss). The consolidated entity has sufficient cash levels for at least the next 12 months to fund further growth of the business. 8 consecutive quarters of improving results clearly demonstrate that the business model is working. 3

7 DIRECTORS REPORT Cont d REVIEW OF OPERATIONS Benon Technologies Core Jumbo E-Commerce Business The sales turnover for the core Jumbo business grew 670% over the previous year primarily due to a greater focus on retailing a specific range of Internet friendly products that include computer software, lottery products, tobacco, cosmetics and jewellery. The Jumbo technology that was developed in previous years is used as a competitive advantage in marketing, processing orders and customer support. New technology was developed over the year to accommodate regular customers with standing orders. The software automatically records future orders and handles the logic to transact, deliver and support the orders when they become due. This advancement has accumulated the number of regular customers which has had a significant effect on the company s growth. New Startups In an effort to create new revenue streams for the future, Jumbo Corp committed funds to 3 new startup companies. Building Site Services (Aust) Pty Ltd (Neobuild) - Online information for the commercial building industry. This service provides access to online information about tenders, development applications and jobs won for the commercial building industry in Queensland and New South Wales. The service is available from the company s web site at The 70% equity interest in Building Site Services (Aust) Pty Limited was acquired on 20 February Online Computing Australia Pty Ltd Retailing and wholesaling of new computer hardware online Australia wide. The acquisition of this business last year gave Jumbo access to one of the longest running online computer hardware sites in Australia The 75% interest was acquired on 29 May Dealer Dan Pty Ltd Retailing and wholesaling of used computer hardware online Australia wide. This business supplies a large range of cost effective second hand computer components to customers in Australia and New Zealand. The 75% equity interest in Dealer Dan Pty Limited was acquired on 26 April During the 2002 financial year, these startup businesses required capital to establish their operations and develop their customer base. These businesses have grown to the point of requiring minimal further cash requirements with potential for growth in the coming year. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Shareholder s equity attributable to members of the Company decreased to $(41,036) from $403,033 at the close of the previous financial year. The components of this decrease are: $ Shareholders equity at 30 June ,033 i) Movements in issued capital (refer note 17) Transaction costs 144,457 (75) ii) Losses attributable to members of Jumbo Corporation Limited (502,014) iii) Movement in interests of minority shareholders - in current year losses - in issued shares of acquired controlled entity (90,437) 4,000 Shareholders equity at 30 June 2002 (41,036) The balance sheet includes liabilities of approximately $200,000 which directors regard as negotiable and not requiring short term cash outflows. The balance sheet was further strengthened after June 30, 2002 by an additional $60,000 resulting from the successful shareholder scheme. During the year the Company conducted a compulsory sale of non-marketable parcels of shares of less than 5000 shares. As a result of this the number of the Company s shareholders decreased from approximately 5,950 to some 1700 shareholders which reduced ongoing costs. 4

8 DIRECTORS REPORT Cont d SIGNIFICANT EVENTS AFTER THE BALANCE DATE Since 30 June 2002 the Company has issued a further 2,426,768 ordinary shares at 2.5 cents per share pursuant to the Shareholder Share Offer Plan, raising an additional $60,667 in new capital. On 10 July 2002 a total of 22,941,171 options exercisable at 20 cents each, expired unexercised. Other than for the above there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, 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 The directors foresee that the 2003 financial year will be a period of further steady growth due to the commercialization of the technology. Furthermore, the acquisition of additional business activities made during the year ended 30 June 2002, will have their fuller impact. The consolidated entity is in a stable position at the date of this report with adequate cash reserves and sufficient controls on costs to enable directors to grow the existing businesses and to look for further opportunities to benefit shareholders. Directors believe it would be prejudicial to the consolidated entity to make further comments on likely developments. ENVIRONMENTAL REGULATION AND PERFORMANCE The consolidated entity is not subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory. SHARE OPTIONS Unissued shares As at the date of this report, there were 61,500,000 unissued ordinary shares under options as follows: 22,500,000 options to take up one ordinary share in Jumbo Corporation Limited at an issue price of $0.25. The options expire on 31 December ,500,000 options to take up one ordinary share in Jumbo Corporation Limited at an issue price of $0.50. The options expire on 31 December ,500,000 options to take up one ordinary share in Jumbo Corporation Limited at an issue price of $0.05. The options expire on 5 June These options were issued under the Employee Share Option Plan. Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate or in the interest issue of any other registered scheme. Shares issued as a result of the exercise of options No options were exercised during the year ended 30 June No executives have exercised any options held by them. No options have been exercised since the end of the financial year. Employee Share Option Plan The Company has in place an Employee Share Option Plan approved by shareholders at the annual general meeting held on 30 November ,500,000 options as described above have been issued under the Plan. 5

9 DIRECTORS REPORT Cont d Options Expired No options expired during the year ended 30 June Subsequent to balance date the following options expired unexercised. Number Exercise Price Expiry Date 22,941, cents 10 July 2002 INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The company has made an agreement to indemnify all the directors and executive officers for any breach of environmental or discrimination laws by the company, for which they may be held personally liable where: (a) the liability does not arise out of conduct involving a lack of good faith; or (b) the liability is for costs and expenses incurred by the director or officer in defending proceedings in which judgement is given in their favor or in which they are acquitted. The Company has not entered into any agreement or arrangement to indemnify its auditors, Ernst & Young, in respect to any claims by third parties. The Company does not have a directors and officers insurance contract in place. DIRECTORS AND OTHER OFFICERS EMOLUMENTS Details of the nature and amount of each element of the emolument of each director of the Company for the financial year are as follows: Emoluments of directors of Jumbo Corporation Limited Annual Emoluments Base Fee Bonus Professional Fees Total $ $ $ $ Alan Phillips ,500 53,500 Mike Veverka , ,217 Earl Evans ,750 36, ,467 The elements of emoluments have been determined on the basis of the cost to the Company and the consolidated entity. Emoluments of Executive Officers of Jumbo Corporation Limited Executives are those directly accountable and responsible for the operational management and strategic direction of the Company and the consolidated entity. Mike Veverka, executive director, was the only executive during the financial year. Emoluments paid to Mr. Veverka are set out above. No options were granted to any executive or executive director during the year ended 30 June DIRECTORS MEETINGS The number of meetings of directors held during the year and the number of meetings attended by each director, while they were a director, were as follows: Directors Meetings No. held No. attended Alan Phillips Mike Veverka Earl Evans There were no meetings of the Audit Committee, Nomination Committee or Remuneration Committee during the financial year ended 30 June

10 DIRECTORS REPORT Cont d CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behavior and accountability, the directors of Jumbo Corporation Limited support and have adhered to the principles of corporate governance. The Company s corporate governance statement is contained in the additional ASX information section of this annual report. Signed in accordance with a resolution of the directors. Mike Veverka Director Dated at Brisbane this 30th day of September

11 STATEMENT OF FINANCIAL PERFORMANCE YEAR ENDED 30 JUNE 2002 Notes CONSOLIDATED JUMBO CORPORATION LIMITED $ $ $ $ REVENUES FROM ORDINARY ACTIVITIES 2 1,816, ,417 39,759 57,120 Cost of sales 3 (752,788) (57,304) - - Depreciation expense 3 (10,918) (12,819) - - Amortisation expense 3 (80,378) (30,363) - - Marketing costs 3 (63,727) (96,905) - - Borrowing costs 3 (2,240) (4,555) - (32) Salaries and employee benefits expense 3 (412,586) (218,493) - - Consultancy fees 3 (332,695) (220,035) (109,252) (18,648) Directors remuneration 3 (200,377) (191,345) - - Other expenses from ordinary activities 3 (553,260) (462,842) (520,038) (550,033) LOSS FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE INCOME TAX EXPENSE RELATING TO ORDINARY ACTIVITIES LOSS FROM ORDINARY ACTIVITIES AFTER INCOME TAX EXPENSE (592,451) (744,244) (589,531) (511,593) (592,451) (744,244) (589,531) (511,593) NET LOSS (592,451) (744,244) (589,531) (511,593) NET LOSS ATTRIBUTABLE TO OUTSIDE EQUITY INTEREST NET LOSS ATTRIBUTABLE TO MEMERS OF JUMBO CORPORATION LIMITED 19 90, , (502,014) (600,243) (589,531) (511,593) Capital raising costs taken directly to equity - (88,382) - (88,382) Total changes in equity other than those resulting from transactions with owners as owners attributable to members of Jumbo Corporation Limited (502,014) (688,625) (589,531) (599,975) Basic loss per share (cents per share) Diluted loss per share (cents per share) (0.32) (0.32) (0.38) (0.38) 8

12 STATEMENT OF FINANCIAL POSITION. AS AT 30 JUNE 2002 Notes CONSOLIDATED JUMBO CORPORATION LIMITED CURRENT ASSETS $ $ $ $ Cash assets 20(b) 758, , , ,279 Receivables 6 73, ,595 1,720 1,720 Inventories 7 24,675 3, Other financial assets 8-34,000-34,000 TOTAL CURRENT ASSETS 856, , , ,999 NON-CURRENT ASSETS Other financial assets 9 51,701-51,701 - Interests in controlled entities , ,007 Property, plant and equipment 11 26,676 35, Intangible assets 12 12,000 77, TOTAL NON-CURRENT ASSETS 90, ,406 63, ,007 TOTAL ASSETS 946,748 1,069, , ,006 CURRENT LIABILITIES Payables , , ,558 81,479 Interest-bearing liabilities 14 2,793 7, Provisions 15 88, , TOTAL CURRENT LIABILITIES 987, , ,558 81,479 NON-CURRENT LIABILITIES Interest-bearing liabilities 16-8, TOTAL NON-CURRENT LIABILITIES - 8, TOTAL LIABILITIES 987, , ,558 81,479 NET ASSETS/(DEFICIENCY) (41,036) 403, , ,527 EQUITY Parent entity interest Contributed equity 17 20,214,423 20,070,041 20,214,423 20,070,041 Accumulated losses 18 (19,587,010) (19,084,996) (19,959,045) (19,369,514) Total parent entity interest in equity 627, , , ,527 Total outside equity interest 19 (668,449) (582,012) - - TOTAL EQUITY/(DEFICIT) (41,036) 403, , ,527 9

13 STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2002 Notes CONSOLIDATED JUMBO CORPORATION LIMITED $ $ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 1,841,898 1,561, ,923 Payments to suppliers and employees (1,928,395) (2,208,903) (122,921) (185,751) Interest received 14,257 40,197 13,085 35,197 Borrowing costs (2,240) (4,555) - (32) NET CASH FLOWS (USED IN) OPERATING ACTIVITIES 20(a) (74,480) (611,948) (109,381) (128,663) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (4,566) (4,320) - - Purchase of shares - (100,000) - (100,000) Funds placed on deposit (51,701) - (51,701) - Proceeds from sale of shares 26,219-26,219 - Purchase of controlled entity (net of cash acquired) (160,006) Loans to controlled entity - - (281,358) (335,968) NET CASH FLOWS (USED IN) INVESTING ACTIVITIES (30,048) (104,320) (306,840) (595,974) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of ordinary shares 120,457 1,170, ,457 1,170,000 Proceeds on share issue from outside equity interests 4, Repayment of borrowings - related party 1, Payment of share issue costs - (88,382) - (88,382) Repayment of borrowings (13,447) (14,236) - - NET CASH FLOWS FROM FINANCING ACTIVITIES 112,690 1,067, ,457 1,081,618 NET INCREASE/(DECREASE) IN CASH HELD 8, ,114 (295,764) 356,981 Add opening cash brought forward 750, , , ,298 CLOSING CASH CARRIED FORWARD 20(b) 758, , , ,279 10

14 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of accounting The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, which includes applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. The financial report has been prepared in accordance with the historical cost convention. (b) Going Concern The financial statements have been prepared on a going concern basis which contemplates the continuity of business activities and the realisation of assets and the payment of liabilities in the normal course of business and at the amounted stated in this report. As at 30 June 2002 current liabilities exceed current assets by $131,413 and the Company has generated a net loss after tax for the year of $592,451. In addition, the consolidated entity has negative net assets of $41,036 and negative net tangible assets of $53,036. The directors believe that the Company will be able to pay its debts as and when they fall due based on the following information: Since 30 June 2002, the Company has issued additional new ordinary shares raising $60,667 in new capital; The Company s consolidated operating results have improved each year over the past three years and are anticipated to improve during 2003; Benon Technologies, the operating company for the core Jumbo on line shopping business, generated its first annual profit of $61,000 in The other three start-up businesses have required capital to establish their operations and develop their customer base, but have now grown to the point of requiring minimal further cash requirements with potential for growth in the coming year; Based on indications of interest from potential equity investors, and based on the recent success of the Company s shareholder scheme, the Company believes it has the ability to raise additional capital of $500,000 should it be required. Consequently, no adjustments have been made 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. (c) Changes in accounting policies The accounting policies adopted are consistent with those of the previous year, except for the accounting policy with respect to earnings per share. The revised policy has had no impact for the financial year. (d) Principles of consolidation The consolidated financial statements are those of the consolidated entity, comprising Jumbo Corporation Limited (the parent entity) and all entities, which Jumbo Corporation Limited controlled from time to time during the year and at balance date. Information from the financial statements of subsidiaries is included from the date the parent company obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the parent company has control. Subsidiary acquisitions are accounted for using the purchase method of accounting. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. 11

15 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) (e) Foreign currencies Transactions in foreign currencies within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction. All resulting exchange differences arising on settlement or re-statement are recognised in the profit/(loss) from ordinary activities for the financial year. (f) Cash and cash equivalents Cash on hand and in banks and short-term deposits are stated at the lower of cost and net realisable value. For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within 2 working days, net of outstanding bank overdrafts. Bank overdrafts are carried at the principal amount. Interest is charged as an expense as it accrues. (g) Receivables Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as incurred. Receivables from related parties are recognised and carried at the nominal amount due. (h) Investments Listed shares held for trading are carried at net market value. Changes in net market value are recognised in the profit/(loss) from ordinary activities for the year. All other non-current investments are carried at the lower of cost and recoverable amount. (i) Inventories Inventories are valued at the lower of cost and net realisable value. (j) Recoverable Amount Non-current assets are not carried at an amount above their recoverable amount, and where carrying values exceed this recoverable amount assets are written down. In determining recoverable amount, the expected net cash flows have been discounted to their present value using a market determined risk adjusted discount rate. (k) Property, plant and equipment Items of property, plant and equipment are carried at cost. Depreciation is provided on a straight-line basis on all property, plant and equipment. Major depreciation periods are: Leasehold improvements: the lease term the lease term Plant and equipment: 3 to 5 years 3 to 5 years (l) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis. Finance leases 12

16 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the group are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to the Statement of Financial Performance. (m) Intangibles Goodwill Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or shares in a controlled entity. Goodwill is amortised on a straight-line basis over the period during which benefits are expected to be received. At each reporting date, the carrying value of goodwill is reviewed to ensure it does not exceed the recoverable amount. When necessary adjustments are made to reduce the carrying value to the recoverable amount. Intellectual Property Intellectual property development costs are expensed as incurred, except where future benefits are expected, beyond any reasonable doubt, to exceed those costs. Where intellectual property development costs are deferred such costs are amortised over future periods on a basis related to expected future benefits. (n) Other non-current assets Research and development costs Research and development costs are expensed as incurred, except where future benefits are expected, beyond any reasonable doubt, to exceed those costs. Where research and development costs are deferred such costs are amortised over future periods on a basis related to expected future benefits. Unamortised costs are reviewed at each balance date to determine the amount (if any) that is no longer recoverable and any amount identified is written off. Expenditure carried forward Significant items of carry forward expenditure having a benefit or relationship to more than one period are written off over the periods to which such expenditure relates. (o) Payables Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised in the profit/(loss) from ordinary activities as an expense on an accrual basis. (p) Interest bearing liabilities All loans are measured at the principal amount. Interest is recognised in the profit/(loss) from ordinary activities as an expense as it accrues. Finance lease liability is determined in accordance with the requirements of AASB 1008: Leases. (q) Contributed equity Issued and paid up capital is recognised at the fair value of the consideration received or receivable by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. 13

17 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) (r) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the consolidated entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Interest Control of the right to receive the interest payment. Dividends Control of the right to receive the dividend payment. The consolidated entity generates revenue from e-commerce (Jumbomall), web site development and design software sales, subscriptions to business-to-business web portal and on-line retailing of computer equipment and peripherals. Benon Technologies Pty Ltd received commissions, which are charged on sales made through shops that are administrated by the Jumbomall and are recognised as income when the order has been completed. Jumbomall stores are charged subscriptions, which are payable monthly, quarterly, 6 monthly or yearly in advance. Revenue is recognised in the month that the fee relates to. Web site development and design revenues are recognised when the project is completed. The company sells internet software tools and revenue on these sales is recognised when the software is delivered and payment has been received. Building Site Services (Aust) Pty Ltd (trading as Neo Build) generates revenue from subscriptions to its business-to-business web portal. Revenue is recognised as it is billed to subscribers. Dealer Dan Pty Ltd generates revenue from on-line sales of computer hardware and peripherals. Revenue is recognised as it is received through credit card sales or as it is billed in the case of term sales, and when the equipment has been delivered. Online Computing Australia Pty Limited, trading as Bozzo Brown Computer Wholesalers generates revenue from on-line sales of computer hardware and peripherals. (s) Income tax Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised. (t) Employee entitlements Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee entitlements expected to be settled within twelve months of the reporting date are measured at their nominal amounts. All other employee entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to government guaranteed securities which have terms to maturity approximating the terms of the related liability are used. Employee entitlements expenses and revenues arising in respect of the following categories: wages and salaries, non-monetary benefits, annual leave, long service leave and other leave entitlements; and other types of employee entitlements are recognised in the profit/(loss) from ordinary activities on a net basis in their respective categories. The value of the Employee Share Option Plan, described in Note 22, is not being recognised in the profit/(loss) from ordinary activities as an employee entitlement expense. 14

18 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont d) (u) Earnings per share Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted EPS is calculated as net profit attributable to members, adjusted for: costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (v) Good and services tax Revenues, expenses and assets are recognised net of the amount of GST except: where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. (w) Comparative amounts Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures and as a result of the first time application of revised Accounting Standard AASB 1005 Segment Reporting. 15

19 30 JUNE 2002 CONSOLIDATED JUMBO CORPORATION LIMITED 2. REVENUE FROM ORDINARY ACTIVITIES $ $ $ $ Revenues from operating activities Jumbomall commissions 551,093 90, Other commissions 212, , Revenue from sale of goods 804,697 5, Revenue from services 171, ,760-35,197 Export Market Development Grant received - 123, Total revenues from operating activities 1,739, ,220-35,197 Revenues from non-operating activities Rental income 16, Interest received - other persons/corporations 14,257 40,197 13,085 21,923 Proceeds from sale of shares 26,219-26,219 Other revenues 19, Total revenues from ordinary activities 1,816, ,417 39,759 57, EXPENSES AND LOSSES a) Expenses Costs of sales Sale of goods 707,235 6, Sales of services 45,553 50, Total cost of sales 752,788 57, Depreciation of non current assets Plant and equipment 10,918 12, Amortisation of non-current assets Intellectual property - 20, Plant and equipment under lease 2,583 3, Preliminary expenses - 1, Goodwill 77,795 5, Total amortisation of non-current assets 80,378 30, Borrowing costs Interest expense other persons/corporations 763 2, Finance lease payments 1,477 2, Total borrowing costs 2,240 4, Salaries and employee benefits expense Salaries 371, , Superannuation contributions 33,044 22, Annual leave provision 7,745 7, Total salaries and employee benefits expense 412, , Directors remuneration Directors of the Company 200, , Directors of controlled entities - 36, Total directors remuneration 200, ,

20 30 JUNE 2002 CONSOLIDATED JUMBO CORPORATION LIMITED EXPENSES AND LOSSES (Cont d) $ $ $ $ Consultancy fees Legal fees 120,002 92,105 90,946 18,648 Corporate - other 127,003 91,771 18,306 - Controlled entities 85,690 36, Total Consultancy fees 332, , ,252 18,648 Marketing costs Commissions 52,721 16, Overseas marketing - 77, Promotions 11,006 3, Total marketing costs 63,727 96, Other expenses from ordinary activities: Provision for unrealised loss on investment - 66,000-66,000 Bad and doubtful debts-trade debtors 27,034 9, Operating lease rental - minimum lease payments 128,283 95,644-5,835 Provision for non recovery of loans to controlled , ,968 entities Provision for diminuition in investments in ,007 - controlled entities Auditors remuneration 34,542 36,000 34,542 36,000 Accountancy fees 5,727 14,052-14,052 Bank merchant fees 156,520 27, Cost of shares sold 34,000-34,000 Other 167, ,547 10,131 92,178 Total other expenses from ordinary activities 553, , , ,033 Total expenses 2,408,969 1,294, , ,713 b) Losses Net loss on sale of shares 7,781-7,781-17

21 30 JUNE 2002 CONSOLIDATED JUMBO CORPORATION LIMITED $ $ $ $ 4. INCOME TAX The prima facie tax, using tax rates applicable in the country of operation, on operating loss differs from the income tax provided in the financial statements as follows: Prima facie tax on loss from ordinary activities (177,735) (253,043) (176,859) (173,942) Calculated at 30% ( %) Tax effect of permanent differences Provision for diminution in investment ,000 - Amortisation of intangible assets 24,113 40, Utilised to increase tax losses (153,622) (212,213) (128,859) (173,942) Income tax expense attributable to ordinary activities Future income tax benefits not brought to account at balance date: - timing differences 73, , ,500 1,002,541 - tax losses 1,120,028 1,117, , ,501 Future income tax benefit arising from tax losses of a controlled entity not brought to account at balance date as realisation of the benefit is not regarded as virtually certain. This future income tax benefit will only be obtained if: (a) Future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; (b) the conditions for deductibility imposed by tax legislation continue to be compiled with; and (c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit. 1,193,486 1,325,750 1,163,189 1,265, DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES No dividends have been paid or provided for on ordinary shares during the year ended 30 June 2002 (30 June 2001 nil). 18

22 \ Jumbo Corporation Limited 30 JUNE 2002 CONSOLIDATED JUMBO CORPORATION LIMITED 6. RECEIVABLES $ $ $ $ Current Trade debtors 136, , Provision for doubtful debts (113,633) (87,100) ,321 93, Sundry debtors 18,370 41,275 1,720 1,720 Amounts other than trade debtors receivable from related parties: Directors and director-related entities director 31,335 33, , ,595 1,720 1,720 Non-current Amounts other than trade debts receivable from related parties: Loans to controlled entities Less provision for non-recovery - - 2,967,326 2,685, (2,967,326) (2,685,968) (a) Terms and conditions relating to the above financial instruments: (i) Trade debtors are non-interest bearing and generally on 30-day terms. (ii) Sundry debtors and other receivables are non-interest bearing. (iii) Details of the terms and conditions of related party receivables are set out in Note INVENTORIES (CURRENT) Finished goods at cost 24,675 3, OTHER FINANCIAL ASSETS (CURRENT) Listed Shares - 100, ,000 Provision for diminution in value - (66,000) - (66,000) - 34,000-34,000 Listed shares are readily saleable with no fixed terms. 19

23 30 JUNE 2002 CONSOLIDATED JUMBO CORPORATION LIMITED $ $ $ $ 9. OTHER FINANCIAL ASSETS (NON-CURRENT) Security deposit 51,701-51,701 - This security deposit was lodged pursuant to the terms of the operating lease covering the premise. 10. INTERESTS IN CONTROLLED ENTITIES Name Benon Technologies Pty Limited Country of incor-poration Percentage of equity interest held by the consolidated entity Jumbo Corporation Limited % % $ $ Australia ,099,997 (a) 12,099,997 (a) Editson Pty Limited Australia ,400,000 10,400,000 less provision for diminution (10,400,000) (10,400,000) Kringle Pty Limited Australia Building Site Services (Aust) Pty Limited Australia , ,000 Dealer Dan Pty Limited Australia less provision for diminution Online Computing Australia Pty Ltd 160, ,007 (160,007) - Australia 75-12,000 - Editson Pty Limited is 80% owned by Jumbo Corporation Limited, the balance of 20% being owned by Vesteon Pty Limited a company associated with Mr Veverka, a director. Benon Technologies Pty Limited is a wholly owned controlled entity of Editson Pty Limited. Building Site Services (Aust) Pty Limited is owned 70% by Jumbo Corporation Limited. Dealer Dan Pty Limited and Online Computing Australia Pty Limited are both 75% owned by Jumbo Corporation Limited. Kringle Pty Limited is a wholly owned controlled entity of Jumbo Corporation Limited. Building Site Services (Aust) Pty Limited (trading as Neo Build) was acquired on 20 February Dealer Dan Pty Limited was acquired on 26 April Online Computing Australia Pty Limited (trading as Bozzo Brown Computer Wholesalers) was acquired on 26 May (a) Investment in Benon Technologies Pty Ltd is held by Editson Pty Ltd. 12, ,007 20

24 30 JUNE 2002 CONSOLIDATED JUMBO CORPORATION LIMITED $ $ $ $ 11. PROPERTY, PLANT AND EQUIPMENT Plant and equipment at cost Office equipment and furniture 119, ,685 13,597 13,597 Accumulated depreciation (100,088) (89,171) (13,597) (13,597) 19,162 25, Plant and equipment under lease Office Equipment 21,601 21, Accumulated amortisation (14,087) (11,504) - - 7,514 10, Total plant and equipment 26,676 35, a) Reconciliations Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current and previous financial year. Plant and equipment at cost Carrying amount at beginning 25,514 34, Addition through acquisition of entity - 4, Additions 4, Depreciation expense (10,918) (12,819) - - Carrying amount at year end 19,162 25, Plant and equipment - under lease Carrying amount at beginning 10, Addition through acquisition of entity - 13,796 - Amortisation expense (2,583) (3,699) - - Carrying amount at year end 7,514 10, INTANGIBLES Goodwill 95,352 83, Accumulated amortisation and write off (83,352) (5,557) ,000 77, Intellectual property 20,090 20, Accumulated amortisation (20,090) (20,090) ,000 77,

25 30 JUNE 2002 CONSOLIDATED JUMBO CORPORATION LIMITED $ $ $ $ 13. PAYABLES (CURRENT) Trade creditors 847, , ,558 59,603 Other creditors - 47,212-21,876 Aggregate amounts payable to related parties: Directors and director related entities former directors of controlled entities 49,324 49, , , ,558 81,479 a) Terms and conditions relating to the financial instruments: i) Trade creditors are non-interest bearing and are normally settled on 30-day terms. ii) Other creditors are non-interest bearing iii) Details of the terms and conditions of related party loans are set out in note INTEREST BEARING LIABILITIES (CURRENT) Lease liability (refer note 21) 1,173 4, Bank loan - unsecured 1,620 3, a) Terms and conditions relating to the above financial instruments: i) Lease liabilities have an average lease term of 4 years with the option to purchase the asset at the completion of the lease term. The average discount rate implicit in the leases is 16.6% ( %). Secured lease liabilities are secured by a charge over the leased assets. ii) Bank loan is repayable monthly with the final installment due on 28 March ,793 7,

26 30 JUNE 2002 CONSOLIDATED JUMBO CORPORATION LIMITED 2002 $ 2001 $ 2002 $ 2001 $ 15. PROVISIONS (CURRENT) Fringe benefits tax 33,271 33, Employee entitlements 30,228 22, Other provisions 25,000 54, , , INTEREST BEARING LIABILITIES (NON- CURRENT) Lease liability (refer note 21) - 8, CONTRIBUTED EQUITY a) Issued and paid up capital Ordinary shares fully paid 20,214,423 20,070,041 20,214,423 20,070,041 CONSOLIDATED b) Movements in shares on issue Number of Shares $ CONSOLIDATED Number of Shares $ Balance at the beginning of the year 157,720,171 20,070, ,779,000 19,552,298 Issued during the year: on conversion of convertible note ,941,171 1,170,000 on 7 February 2002 in satisfaction of debt 400,000 12, on 20 May 2002 in consideration for acquisition 400,000 12, of Online Computing Australia Pty Ltd on 28 June 2002 under the Shareholder Share 4,818, , Offer 163,338,459 20,214, ,720,171 20,722,298 less: Transaction costs - (75) - (652,257) Balance at the end of the financial year 163,338,459 20,214, ,720,171 20,070,041 c) Terms and conditions of contributed equity Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. d) Share Options Options over ordinary shares: At 30 June 2002 there were 84,441,171 (2001: 83,691,741) unissued ordinary shares in respect of which options were outstanding. 23