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1 ON Q GROUP LIMITED APPENDIX 4E FOR THE YEAR ENDED 30 JUNE 2008 The following information is given to ASX under listing rule 4.3A. 1. Reporting period Current Period Prior Period 12 months ended 30 June months ended 30 June Results for announcement to the market 30 June 2007 $ 000 % Change 30 June 2008 $ Revenue from ordinary activities 1,025,255 - to N/A 2.2 Loss after tax attributable to members (2,848) - to N/A 2.3 Net Loss attributable to members (2,848) - to N/A 2.4 Dividend N/A 2.5 Record date for determining entitlements to the dividends N/A 2.6 Explanatory information Refer accompanying annual report 3. Statement of Profit or Loss and Other Comprehensive Income Refer accompanying annual report 4. Statement of Financial Position Refer accompanying annual report 5. Statement of Cash Flow Refer accompanying annual report 6. Dividends Paid or Recommended N/A 7. Details of any Dividend or distribution reinvestment plans N/A 8. Statement of movements in Retained Earnings Refer statement of changes in equity in the accompanying annual report

2 9. Net tangible assets per security 30 June June 2007 Number of securities 73,950,146 66,554,831 Net tangible assets per security in cents N/A Changes in controlled entities N/A 11. Details of associates and joint venture entities N/A 12. Any other significant information needed by an investor to make an informed assessment of the entity s financial performance and financial position Refer accompanying annual report 13. Foreign entities disclosures The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act Additional information 14.1 Earnings per Share 30 June June 2007 Basic earnings per share in cents N/A (4.3) Diluted earnings per share in cents N/A (3.8) 14.2 Returns to Shareholders N/A 14.3 Significant features of operating performance Refer accompanying annual report 14.4 Results of segments Refer accompanying annual report 14.5 Trends in performance Refer accompanying annual report 14.6 Subsequent events Refer accompanying annual report 15. Compliance Statement The financial statements have been audited. 16. If the accounts are subject to audit dispute or qualification, details are described below Due to the matters described in the Basis of Disclaimer of opinion paragraphs of the Independent Auditor s Report, the auditors do not express an opinion on the financial report as they have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. 2

3 ACN ANNUAL REPORT For the year ended 30 June 2008

4 DIRECTORS REPORT Your directors present their report on the consolidated group for the financial year ended 30 June 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 year ended 30 June Directors The following persons were directors of during the whole of the financial year and up to the date of this report, unless otherwise stated: Current directors Khoo Gee Choo, Jamie (appointed 3 September 2014) Ms Khoo has a Master of Business Studies and is a member of the Institute of Singapore Chartered Accountants. Ms Khoo has over 20 years experience in accounting and corporate finance and extensive experience in company funding, investment evaluation, due diligence and structuring. Ms Khoo is also director of ASX listed Refresh Group Ltd, Lionhub Group Ltd and MDS Financial Group Ltd. Ko Chun Way, Wayne (appointed 3 September 2014) Mr Ko has a Bachelor of Commerce and a Master of Business Administration. He is a member of CPA Australia and Hong Kong Institute of Certified Public Accountants. He has been involved in a number of assignments including initial public offerings, merger and acquisition and audit in various industries, including manufacturing, construction strategic investment, entertainment, energy and resources, media and others. Mr Ko has no directorship on other listed companies. Chow-Yee Koh (appointed 3 September 2014) Mr Koh has a Bachelor of Commerce and is a fellowship member of the Association of Chartered Certified Accountants (UK). Mr Koh has over 17 years experience in accounting, auditing and corporate finance. Mr Koh is also the company s joint company secretary and is a company secretary of ASX listed Sunbridge Group Limited. Mr Koh has no directorship on other listed companies. Previous directors Ian Christiansen (removed 3 September 2014) Mr Christiansen began business as a retailer in 1984 and co-founded in He was the General Manager of through its formative years. Ian has developed the internal management team and systems to support the rapid growth of Bill Express. Ian is also a foundation member of Software Engineering Australia. Julian Little (removed 3 September 2014) From 1991 Mr Little operated his own company as the NSW agent for before merging with ON Q Group Limited in He has been instrumental in the execution of the strategies and commercialisation of the products within DialTime and Bill Express. Harold Christiansen (deceased 1 July 2008) Mr Christiansen was the Managing Director of since its formation and Dialtime Pty Ltd before it changed its name to Bill Express Limited. He was the driving force behind the creation and development of many of the technology based products. He began business as a service station operator in the petroleum industry in 1984, co-founded in 1989, and was a foundation member of Software Engineering Australia. Stephen Fitzgerald (resigned 28 April 2008) Stephen has over 6 years experience as a manager of private funds for US clients. He has experience in capital raisings, placements, rights issues and mergers and acquisitions. His experience away from the finance sector includes General management of a 5 star hotel and current owner of an award winning restaurant and function centre in Sydney. 1

5 Peter J McGougall (removed 29 November 2007) Peter s family company was the principal shareholder of, which he listed on the ASX and of which he was the Chairman. He has been a director of since 30 July Peter has had over 30 years of management and entrepreneurial experience. Principal activities During financial year ended 30 June 2008 and prior to being placed into voluntary administration, the principal activities of the consolidated entity were: The management and development of an electronic distribution system for pre-paid products and services across in excess of 14,000 locations around Australia, automated ordering, delivery and inventory control for pre-paid services including mobile, landline and internet services; Processing payments for bills and services including bills that are presented for payment to Bill Express outlets across Australia; The licensing of intellectual property and the provision of network access and hosting services; Managing the sale of the Bopo prepaid Visa cards and the operation of a prepaid card network; and In-store media which is a network that promotes 's and other products at the point of sale and in-store aisles. The company was placed into voluntary administration on 28 July 2008 and subsequently placed into liquidation on 23 December Review of Operations On 30 April 2008, the Company s subsidiary Bill Express Limited advised that it was involved in a dispute with Optus regarding its supply agreement for pre-paid products. On 5 May 2008, the Company requested that its shares be suspended from quotation as its subsidiary Bill Express Limited has requested for suspension. The Company s shares were suspended from trading on the ASX since then. Information on accounting records for the year ended 30 June 2008 is not available ( n/a ). See note 1(b) in the Notes to the Financial Statements. For year ended 30 June 2007, the consolidated entity reported a consolidated net profit from ordinary activities after tax expense of $0.402 million. Significant changes in state of affairs The company was placed into voluntary administration on 28 July 2008 and subsequently placed into liquidation on 23 December No other significant changes in the consolidated entity s state of affairs occurred during the financial year. Events subsequent to the end of the reporting date 1 July 2008 Passing of Harold Christiansen. 28 July Company placed into voluntary administration. Paul Andrew Burness and Matthew James Jess from Worrells Melbourne appointed Joint and Several administrators of the Company. 23 December 2008 Company placed into liquidation. Paul Andrew Burness and Matthew James Jess ceased to act as Joint and Several administrators of the Company and become the appointed Joint and Several liquidators of the Company ( Liquidators ) to 2013 no event of significance announced on ASX 23 January 2014 Danny Tony Vrkic appointed administrator of the Company by the Liquidators for the purposes of recapitalisation of the Company. 2

6 27 February 2014 Deed of Company Arrangement approved by creditors. 12 March 2014 Deed of Company Arrangement executed. 4 August 2014 Notice of Extraordinary General Meeting of shareholders on recapitalisation proposal 3 September 2014 All resolutions of the Extraordinary General Meeting of shareholders on recapitalisation proposal were passed by the requisite majority. Old board of directors and company secretary removed and replaced with a new board of directors and company secretary. 17 October 2014 Supreme Court Judgement on the termination of winding up procedure of the Company, subject to the Deed of Company Arrangement. 17 October 2014 Company raised $405,000 from allotment of 142,158,000 shares. 27 November 2014 Deed of Company Arrangement effectuated. 2 December 2014 Company raised $500,000 from allotment of 175,503,704 shares. 22 December 2014 Company entered into a conditional Sale and Purchase agreement to acquire a Singapore biotechnology company which focuses on using stem cell technology to grow and extract plant essence. 26 February Issued 5,000,000 shares through exercising of options by option holder. 17 March Issued 95,000,000 shares through exercising of options by option holders. 31 March 2015 Company issued 49,101,374 Convertible Notes to raise $3,437, April As at 31 December 2014 the net assets of the Company totalled $317,132 and cash at bank totalled $501,211. Management have prepared forecasts which show that the Company will be able to continue as a going concern. Furthermore, on 31 March 2015 the Company issued 49,101,374 Convertible Notes to raise $3,437,096. The directors believe that the Company will have sufficient cash to be able to continue as a going concern for at least 12 months from the date of the financial report being signed by the directors. Therefore the financial report has been prepared on this basis. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. Future development, prospects and business strategies The Company entered into a conditional Sale and Purchase agreement to acquire a Singapore biotechnology company which focuses on using stem cell technology to grow and extract plant essence on 22 December Environmental issues The consolidated entity is not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory of Australia. Dividends paid, recommended or declared No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. Meetings of directors Information on meeting of directors for the year ended 30 June 2008 is not available. 3

7 Indemnifying directors, officers or auditor No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been a director, officer or auditor of the consolidated entity. Proceedings on behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Remuneration Report (Audited) This report outlines the remuneration arrangement in place for directors and key management personnel of ON Q Group Limited. As detailed above, all directors as at 30 June 2008 have resigned and a new board has been appointed. Principles of compensation The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors and senior executives. The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. Remuneration of directors and executives is referred to as compensation as defined in AASB 124. Compensation levels for key management personnel and the secretary of the Company and relevant key management personnel of the consolidated entity are competitively set to attract and retain appropriately qualified and experienced directors and executives. The Remuneration Committee obtains independent advice on the appropriateness of compensation packages of both the Company and consolidated group given trends in comparative companies and the objectives of the Company s compensation strategy. The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account: the capability and experience of the key management personnel; the key management personnel s ability to control the relevant segments performance; the consolidated entity s performance including: o the consolidated entity s earnings; o the growth in share price and delivering constant returns on shareholder wealth; and o The amount of incentives within each key management person s compensation. Compensation packages include a mix of fixed and variable compensation and short- and long-term performancebased incentives. In addition to their salaries, the consolidated entity also provides non-cash benefits to its key management personnel, and contributes to post-employment superannuation plans on their behalf. Fixed remuneration Fixed compensation 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 funds. Compensation levels are reviewed annually through a process that considers individual, segment and overall performance of the consolidated entity. In addition external consultants provide analysis and advice to ensure the directors and senior executives compensation is competitive in the market place. A senior executive s compensation is also reviewed on promotion. 4

8 Performance-linked remuneration Performance-linked compensation includes both short-term and long-term incentives and is designed to reward key management personnel for meeting or exceeding their financial and personal objectives. The short-term incentive (STI) is an at risk bonus provided in the form of cash, while the long-term incentive (LTI) is provided as options over ordinary shares of Bill Express Limited under the rules of the Employee Share Option Plan. Long-term incentive Options are issued under the Employee Share Option Plan and it provides for key management personnel to receive options over ordinary shares for no consideration. The ability to exercise the options is conditional on the consolidated entity achieving certain performance hurdles. The performance hurdles comprise the consolidated company reaching and exceeding its budgeted profit forecast. Short-term incentive bonus Each year KPI s (key performance indicators) for the key management personnel are set. The KPI's generally include measures relating to the consolidated entity, the relevant segment and the individual, and include financial, people, customer and strategy and risk measures. The measures are chosen as they directly align the individual's reward to the KPI's of the consolidated entity and to its strategy and performance. The financial performance objectives are profit after tax and return on capital employed compared to budgeted amounts. The non-financial objectives vary with position and responsibility and include measures such as achieving strategic outcomes, customer satisfaction and staff development. Directors Remuneration 2008 Information on remuneration of directors and key management personnel for the year ended 30 June 2008 is not available (See note 1(b) in the Notes to the Financial Statements) Short term Post employment Other Share TOTAL Salary & Fees STI Cash bonus Nonmonetary benefits Superannuation benefits long term benefits Termination benefits based payments options $ $ $ $ $ $ $ $ Peter McDougall 297, , ,362 Hal Christiansen 113, , ,184 Ian Christiansen 304, , ,091 Julian Little 304, , ,091 Michael Doery 75, , ,500 Greg Daniel 28, , ,154 Chris Murphy 17, , ,750 Craig Brown 16, , ,125 5

9 Dugal McDougall 60, ,000 Tristan Fischer 20, ,000 Leath Nicholson 109, , ,000 Philip Jones 13, ,333 Stephen Fitzgerald 40, ,000 TOTAL 1,400,423 94,167 1,494,590 End of remuneration report Auditor s Independence Declaration The lead auditor s independence declaration for the year ended 30 June 2008 has been received and can be found on page 7 of the Annual Report. This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors. Signed by Khoo Gee Choo, Jamie Director Dated: 30 April

10 AUDITOR S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of On Q Group Limited for the year ended 30 June 2008 I declare that, to the best of my knowledge and belief, there have been no contraventions of: (a) (b) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. This declaration is in respect of On Q Group Limited and the entities it controlled during the year. Sydney, NSW A G Smith 30 April 2015 Director 7

11 CORPORATE GOVERNANCE STATEMENT Background The board of directors is responsible for the corporate governance of (the Company) and its controlled entities (the Group). The Group operates in accordance with the corporate governance principles as set out by the ASX corporate governance council and required under ASX listing rules. The Board guides and monitors the business and affairs of the Group on behalf of the shareholders by whom they are elected and to whom they are accountable. The s Corporate Governance Statement on the governance practices adopted by the Company is structured with reference to the ASX Corporate Governance Council s Principles and Recommendations. The practices are summarised below. The Board is committed to improving its corporate governance practices and embracing the principles put out by the ASX Corporate Governance Council, however the Board is of a view that the adoption of the practices and principles should be in line with the growth in size, changes in the nature and increase in complexity of the Company s business. The Board aims to achieve all of the Best Practice Recommendations in stages as the Company grows and its circumstances change over time. As reported in the current years annual report, the Company has been concentrating on its efforts to restore the financial position of the Company and does not have sufficient resources to adopt and improve its corporate governance practices at present. A number of the principles previously adopted by the Company were not consistently adhered to during the period from July 2008 to November 2014, of which the Company was placed in voluntary administration, and subsequently in liquidation ( Administration ). The Company has been suspended from quotation from the ASX since May It is the new Board s intention to apply all principals previously adopted on the resumption of quotation on the ASX and achieve all of the Best Practice Recommendations in stages as the Company grows and its circumstances change over time. Principle 1: Lay solid foundations for management and oversight For the reasons outlined above, this principle previously adopted by the Company was not consistently adhered to when the Company was in Administration. On resumption of quotation of securities on the ASX, it is Board s intention to ensure the Company is structured such that there are clearly defined roles, segregation of duties and responsibilities and approved levels of authority between the management and the governance of the Company. The Board will set the overall corporate governance policy for the Company including determining the strategic direction, establishing policies and goals for management and monitoring the achievement of them. The Board will delegate responsibility for the day to day management of the Company to the Chief Executive Officer and the senior executive team. The key responsibilities of the Board will include: Setting the long-term strategy and annual business plan including objectives and milestones to be achieved; Evaluating capital, cash and operating risk budgets and making appropriate recommendations on an annual basis; Reviewing and approving the Company's financial, strategic and operational goals and assessing key business developments as formulated by management in line with the objectives and goals set by the Board; Monitoring the performance of the Company against the financial objectives and operational goals set by the Board and reviewing the implementation of Board approved strategies; Assessing the appropriateness of the skill sets and the levels of experience of the members of the Board, individually and as a whole and selecting new members to join the Board when a vacancy exists; Appointing, removing and determining the terms of engagement of the Directors, Chief Executive Officer and Company Secretary; Overseeing the delegation of authority for the day to day management of the Company; 8

12 Ensuring that the risk management systems, financial reporting and information systems, personnel, policies and procedures are all operating efficiently and effectively by establishing a framework of internal controls and compliance; Reviewing major contracts, goods or services on credit terms acceptance of counter-party risks and issuing guarantees on behalf of the Company; Approving the capital structure and major funding requirements of the Company; Making recommendations as to the terms of engagement, independence and the appointment and removal of the external auditors; Setting the Code of Conduct for the Company and ensuring that appropriate standards of corporate governance and ethics are effectively communicated throughout the Company and complied with; Reviewing the adherence by each director to the Director s Code of Ethics; Establishing policies to ensure that the Company complies with the ASX Continuous Disclosure Policy; Approving the Company's half year and full year reports to the shareholders, ASX and ASlC; and Ensuring that recruitment, retention, termination, remuneration, performance review and succession planning policies and procedures are in place and complied with. Principle 2: Structure the Board to add value For the reasons outlined above, this principle previously adopted by the Company was not consistently adhered to when the Company was in Administration. The Board is presently structured to maximise value to the Company and the shareholders. The Board is of a size and composition that is conducive to making decisions expediently, with the benefit of a variety of perspectives, experiences and skills. Board composition The Board is composed of three directors. The skills, experience and expertise relevant to the position of Director held of each Director in office at the date of the annual report are included in the Directors Report. The names of the members of the Board as at the date of this report are as follows: Gee-Choo Khoo, Jamie Non-executive chairman Chun-Way Ko, Wayne Independent non-executive director Chow-Yee Koh Independent non-executive director It is noted that the Company's board composition is not in keeping with the commentary and guidance to Best Practice Recommendations 2.2. The Board is of the opinion that the current stage of uncertainty in relation to the future operations of the Company requires the Company to have a chairman, which has more of a hands-on and technical experience in order to stabilise the Company. However, the Board is committed to follow the guidance to Best Practice Recommendations 2.2 by appointing independent directors as chairman once the future direction of the Company is resolved. The Board has determined that there are sufficient appropriate alternative governance measures in place to ensure that non-compliance with the recommendations does not give rise to undue risk or other material concerns relating to the management and oversight of the Company. Term of office The members of the Board are elected by the shareholders to ensure that the Board has the appropriate mix of expertise and experience. In accordance with the Corporations Act 2001, if a person is appointed as Director during the year, the Company must confirm appointment by resolution at the Company's next Annual General Meeting. 9

13 One-third of the Board retires and makes themselves available for re-election at the following AGM, with the exception of the Chief Executive Officer. No Director, with the exception of the Chief Executive Officer, is allowed to retain office for more than 3 years without submitting himself or herself for re-election. When a vacancy exists on the Board, the Board appoints the most suitable candidate from a panel of candidates, who then must stand for election at the next Annual General Meeting if he or she wishes to continue as a member of the Board in the following year. Personal interests & conflicts Directors must not take advantage of their position as Directors and must not allow their personal interests, or the interests of any associated person to interfere or exert undue influence on their conduct or decisions as a Director. Directors also have a duty to avoid conflicts of interest between the best interests of the Company and their own personal or commercial interests. Conflicts of interest can be either actual or potential. If a conflict of interest arises, Directors must disclose their interests to the Board immediately. The Directors concerned must not be present at the meeting while the matter is being considered and must not be allowed to vote on the matter either. Independent professional advice There are procedures in place, agreed by the Board, to enable directors in furtherance of their duties to seek independent professional advice at the Company's expense. Board Standing Committees Due to the size of the Company and present uncertainties the Board has decided not to formally establish a Nomination Committee. Although the Board established an Audit and Risk Management Committee, at the date of this report, the Company has not appointed any member to the Committee and as such, the responsibilities and duties of this Committee were taken up by the Board during the year. The small size and the hands on approach of the Board enable it to handle particular issues relevant to verifying and safeguarding the integrity of the Company's financial reporting with the same efficiency as an Audit and Risk Management Committee. Consequently, the Company does not comply with Best Practice Recommendations. However the Board will keep this position under review. Summary In summary, the Company does not meet the requirements of Principle 2 of the Corporate Governance Guidelines in that: The Chairperson is not an independent Director. As explained throughout this section, the Board feels that at the present time each of the recommendations is not cost effective for adoption in a small public company such as. However, the Board will constantly monitor and review the situation. Principle 3: Promote ethical and responsible decision-making and recognise the legitimate interests of stakeholders For the reasons outlined above, this principle previously adopted by the Company was not consistently adhered to when the Company was in Administration. Code of Conduct & Ethics The Company had a Code of Conduct, which sets the standards in accordance with which each director, manager and employee of the Company is expected to act. The code is communicated to all levels of the Company and deals with areas such as professional conduct, customers/consumers, suppliers, advisers/regulators, competitors, the community and the employees. In addition to the Code of Conduct, the Company also had a Directors' Code of Ethics, which sets out particular issues relevant to directors' obligations to the Company. 10

14 Share trading policy The constitution permits directors, senior executives and other officers of the Company to trade in Company shares as long as they comply with the Company's Share Trading Policy. The Share Trading Policy is a code that is designed to minimise the potential for insider trading. Directors must notify the Chairman of the Board, before they buy or sell shares in the Company. If the Chairman of the Board intends to trade in the Company shares, the Chairman of the Board must give prior notice to the Chairman of the Audit & Risk Management Committee. The details of the share trading must be given to the Company Secretary who must lodge such details of such changes in with the ASX. Senior executives must give prior notice to the Chief Executive Officer, while other officers must notify the Company Secretary, before trading in the Company shares and details of all such transactions must be given, in writing, to the Company Secretary within 7 business days. Any changes in substantial shareholding of the Directors, senior executives or other officers must be reported to the ASX within 2 business days of such trading. The policy also recommends that trading in the Company shares only occur in the following trading windows: 30 days after the announcement of the Company's half year results; and 30 days after the announcement of the Company s full year results. Principle 4: Safeguard integrity in financial reporting For the reasons outlined above, this principle previously adopted by the Company was not consistently adhered to when the Company was in Administration. It is the Board s responsibility to ensure an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information as well as non-financial considerations such as benchmarking of operational key performance indicators. Executive Certification Historically the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) are required to and have provided assurance to the Board stating that the financial statements and reports of the Company: Present a true and fair view, in all material respects, of the operating results and financial condition in accordance with the Australian Accounting Standards, Australian Accounting lnterpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001; Are founded on a system of risk management and internal compliance and control, and these are operating efficiently and effectively in all material aspects. However, as stated above, the principles previously adopted by the Company were not adhered to when the Company was in Administration - including the requirement to obtain assurance from the CEO and the CFO that the financial statements present a true and fair view, in accordance with the Australian Accounting Standards and are founded on a system of risk management and internal compliance and control. It is the Board s intention to apply all principles previously adopted on the resumption of quotation on the ASX including the requirement to obtain assurances from the CEO and the CFO in relation to the financial statements, systems of risk management and internal controls in stages as the Company grows and its circumstances change over time. Audit & Risk Management Committee - audit responsibilities Although the Board established an Audit and Risk Management Committee, at the date of this report, the Company has not appointed any member to the Committee and as such, the responsibilities and duties of this Committee were taken up by the Board during the year. The Board believes a separate audit committee in a company of this size with the absence of independent Directors would be of little value. The small size of the company and the hands on approach of the Board enable it to handle particular issues relevant to verifying and safeguarding the integrity of the Company s financial reporting with the same efficiency as an audit committee. 11

15 The Board is committed to following the Best Practice Recommendation 4.3, and will establish an independent Audit & Risk Management Committee once the Company increases in size. Principle 5: Make timely and balanced disclosure Historically, the Company's market disclosure policy is to ensure that shareholders and the market are fully informed of the Company's strategy performance and details of any information or events that could be material to the value of the Company s securities. The Company is committed to ensuring that all information that may have a material impact on the Company's share value is disclosed to the market in a timely and balanced manner. The Chief Executive Officer and the Company Secretary, in consultation with the Board, are responsible, for the review, authorisation and disclosure of information to the ASX and for overseeing and coordinating information disclosures to the ASX, shareholders, brokers, analysts, the media and the public. The Company ensures that it also complies with the requirements of the Listing Rules of the Australian Stock Exchange ("ASX") and the Corporations Act in providing information to shareholders through: The half-yearly report to the ASX; The annual Report which is distributed to the ASX and to shareholders prior to the AGM; The AGM and other meetings called to obtain approval from shareholders where appropriate; Ad-hoc releases to the ASX as required under the ASX Listing Rules. For the reasons outlined above, this principle previously adopted by the Company was not consistently adhered to when the Company was in Administration. It is the Board s intention to apply all principles previously adopted in a timely manner on the resumption of quotation on the ASX and achieve all of the Best Practice Recommendations in stages as the Company grows and its circumstances change over time. Principle 6: Respect the rights of shareholders Communication to shareholders The Company recognises the rights of its shareholders and other interested stakeholders to have easy access to balanced, understandable and timely information concerning the operations of the Group. The Chief Executive Officer and the Company Secretary are primarily responsible of ensuring communications with shareholders are delivered in accordance with this strategy and with our policy of continuous disclosure. The Company strives to communicate with shareholders and other stakeholders in a regular manner as outlined in Principle 5 of this statement. However as stated above, in the period from July 2008 to November 2014 the Company did not communicate with shareholders and other stakeholders in a timely manner. The Board encourages participation of shareholders at the Annual General Meeting or any other shareholder meetings to ensure a high level of accountability and identification with the Company's strategy and goals. Shareholders are requested to vote on the appointment and aggregate remuneration of Directors, the granting of options and shares to Directors, issue of shares and changes to the constitution. Annual General Meeting Historically, the Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company's strategy and goals. The Board has also requested representatives from HLB Mann Judd, the Company's external auditor, to be present at the Annual General Meeting to answer questions that shareholders might have about the scope and conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by the Company and the independence of the auditor. It is the Board s intention to apply all principles previously adopted on the resumption of quotation on the ASX and implement all of the Best Practice Recommendations in stages as the Company grows and its circumstances change. 12

16 Principle 7: Recognise and manage risk Risk management responsibilities The Company's risk management framework is designed to identify, assess, monitor and manage material business risks, both financial and non-financial, to minimise their impact on the achievement of organisational goals. As no member has been appointed to the Audit & Risk Management Committee, the Board is responsible for reviewing and ratifying the system of risk management, internal compliance and control, codes of conduct and legal compliance. Historically, the Board delegates to the Chief Executive Officer and the Chief Financial Officer the responsibilities for the establishment, implementation and maintenance of the system of risk management including measures of its effectiveness. In the period when the Company was under Administration, the Board did not receive a report from management as required under section 295A of the Corporation Act that the Company's risk management framework is effective for the Company's purpose. For the reasons outlined above, this principle previously adopted by the Company was not consistently adhered to when the Company was in Administration. It is the Board s intention to apply all principles previously adopted on the resumption of quotation on the ASX and achieve all of the Best Practice Recommendations in stages as the Company grows and its circumstances change over time. Principle 8: Remunerate fairly and responsibly Remuneration responsibilities The Company s remuneration policy is disclosed in the Director s Report. The policy has been set out to ensure that the performance of Directors, key executives and staff reflect each person s accountabilities, duties and their level of performance, and to ensure that remuneration is competitive in attracting, motivating and retaining staff of the highest quality. A program of regular performance appraisals and objective setting for key executives and staff is in place. These annual reviews take into account individual and company performance, market movements and expert advice. The Board determines any changes to the remuneration of key executives on an annual basis. Due to the size of the Board of Directors the Company does not have a remuneration committee. The Board determines and reviews compensation arrangements for the Directors and the executive team. 13

17 Statement of Profit or Loss and Other Comprehensive Income for the Year ended 30 June 2008 Note 2008 $ $ 000 Revenue 2 N/A 1,025,255 Changes in inventories of finished goods N/A (15,624) Raw materials and consumables used N/A (951,669) Employee benefits expense N/A (4,664) Depreciation and amortisation Expenses N/A (23,146) Finance costs N/A (6,305) Other expenses N/A (21,635) Impairment Loss Group company N/A (1,075) Gain on deconsolidation of subsidiary N/A 939 Profit/(Loss) before income tax expense 3 N/A 2,076 Income tax expense 4 N/A (1,674) Profit/(Loss) for the year N/A 402 Other comprehensive income, net of tax N/A - Total comprehensive income for the year N/A 402 Profit/(Loss) attributable to: - outside equity interest N/A 3,250 - members of the parent N/A (2,848) N/A 402 Total comprehensive income attributable to: - outside equity interest N/A 3,250 - members of the parent N/A (2,848) N/A 402 Earnings per share Basic (cents per share) 25 N/A (4.3) Diluted (cents per share) 25 N/A (3.8) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 14

18 Statement of Financial Position as at 30 June 2008 ASSETS CURRENT ASSETS Note 2008 $ 2007 $ 000 Cash and cash equivalents 6 N/A 7,197 Trade and other receivable 7 N/A 119,313 Inventories 8 N/A 5,514 Other assets 9 N/A 4,312 Assets classified as held for sale 10 N/A 12,168 TOTAL CURRENT ASSETS N/A 148,504 NON-CURRENT ASSETS Trade and other receivables 7 N/A 8,708 Deferred tax assets 11 N/A 1,376 Investment accounted for using equity method 12 N/A 5,020 Financial assets 13 N/A 15 Plant and equipment 14 N/A 52,066 Intangible assets 15 N/A 64,783 Other assets N/A 283 TOTAL NON-CURRENT ASSETS N/A 132,251 TOTAL ASSETS N/A 280,755 LIABILITIES CURRENT LIABILITIES Trade and other payables 16 N/A 122,327 Interest bearing loans and borrowings 17 N/A 21,359 Current tax liabilities 18 N/A 1,595 Employee benefits 19 N/A 714 Other liabilities 20 N/A 541 TOTAL CURRENT LIABILITIES N/A 146,536 NON-CURRENT LIABILITIES Interest bearing loans and borrowings 17 N/A 61,049 Deferred tax liabilities N/A 4,734 Employee benefits 19 N/A 15 Other liabilities 20 N/A 451 TOTAL NON CURRENT LIABILITIES N/A 66,249 TOTAL LIABILTIES N/A 212,785 NET ASSETS N/A 67,970 EQUITY Issued capital 21 24,147 24,147 Retained profit 22 N/A 1,078 Share option reserve 23 N/A 30 Outside equity interest N/A 42,715 TOTAL EQUITY N/A 67,970 The Statement of Financial Position should be read in conjunction with the accompanying notes. 15

19 Statement of Changes in Equity for the year ended 30 June 2008 Issued Capital Retained Earnings Share option reserve Minority Interest Total $ 000 Balance at 1 July ,100 3, ,495 67,481 Total comprehensive income - (2,848) - 3, Share based payments Shares issued Transfer from outside equity interest (55) - Balance at 30 June ,147 1, ,715 67,970 Total comprehensive income - N/A N/A N/A N/A Balance at 30 June ,147 N/A N/A N/A N/A The Statement of Changes in Equity should be read in conjunction with the accompanying notes. 16

20 Statement of Cash Flows for the year ended 30 June 2008 CASH FLOWS RELATING TO OPERATING ACTIVITIES Note 2008 $ 2007 $ 000 Receipts from customers N/A 964,658 Payments to suppliers and employees N/A (964,554) Interest received N/A 485 Borrowing costs paid N/A (6,305) Net cash used in operating activities 24 N/A (5,716) CASH FLOWS RELATING TO INVESTING ACTIVITIES Proceeds from sale of plant and equipment N/A 2,611 Acquisition of plant and equipment N/A (15,118) Development expenditure acquired N/A (5,274) Acquisition of intangibles N/A (13,778) Net cash used in investing activities N/A (31,559) CASH FLOWS RELATING TO FINANCING ACTIVITIES Proceeds from issue of share capital N/A 47 Proceeds from borrowings N/A 38,199 Repayment of borrowings N/A (296) Repayment of finance lease N/A (2,040) Receipt from a related party N/A 1,686 Net cash from financing activities N/A 37,596 Net increase in cash and cash equivalents N/A 321 Cash and cash equivalents at beginning of financial year N/A 6,876 Cash and cash equivalents at end of financial year 6 N/A 7,197 The Statement of Cash Flows should be read in conjunction with the accompanying notes. 17

21 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (the Company ) is a company domiciled in Australia. The consolidated financial report of the Company for the financial year ended 30 June 2008 comprises the Company and its subsidiaries (together referred to as the consolidated entity ) and the consolidated entity s interest in associates and jointly controlled entities. (a) Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards ( AASBs ) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board ( AASB ) and the Corporations Act International Financial Reporting Standards ( IFRSs ) form the basis of Australian Accounting Standards ( AASBs ) adopted by the AASB, and for the purpose of this report are called Australian equivalents to IFRS ( AIFRS ) to distinguish from previous Australian GAAP. The financial report of the consolidated entity complies with IFRSs and interpretations adopted by the International Accounting Standards Board. (b) Maintenance of accounting records The company was placed into voluntary administration on 28 July 2008 and subsequently placed into liquidation on 23 December A Deed of Company Arrangement (DOCA) was entered into on 12 March The Company was released from DOCA on 27 November The current directors were all appointed in 3 September 2014 and have since arranged the statutory financial statements to be prepared and brought up to date for the purposes of satisfying the company s reporting requirements. The current directors have prepared the financial report based on available information provided to them following their appointment. The current Directors have not been able to locate the records pertaining to the period prior to their appointment. Given voluntarily administration of the Company there is only limited information available to support the transactions and account balances of the current period to prepare accounts. The available information included, but is not limited to, the following: The June 2007 financial report The December 2007 half year interim financial report ASX announcements during the financial period and up to the date of this report Given the circumstances and the Company's current position (as effectively a 'shell'), the statutory accounts have been prepared on limited available information. Where insufficient information is available for disclosure this is noted in the financial statements and notes as N/A (not available). (c) Basis of Presentation The financial report is presented in Australian dollars, which is the Company s functional currency. The financial report has been prepared on an accruals basis and is based on historical cost convention except for certain assets and liabilities which are stated at fair value as described in the accounting policies. The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated. The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 18

22 The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The accounting policies have been applied consistently by all entities in the consolidated entity. (d) Principles of consolidation Subsidiaries Subsidiaries are entities controlled by the Company. Control exits when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. When a subsidiary makes a new issue of capital and the consolidated entity s percentage ownership changes, the share of retained profits and reserves is attributed to the Company and outside equity interest reflecting the new ownership interest. The adjustment is not reflected in net profit but as a direct adjustment to the specific equity accounts. Investments in subsidiaries are carried at their cost of acquisition in the Company s financial statements. Associates Associates are those entities in which the consolidated entity has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the consolidated entity s share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the consolidated entity s share of losses exceeds its interest in an associate, the consolidated entity s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the consolidated entity has incurred legal or constructive obligations or made payments on behalf of an associate. In the Company s financial statements, investments in associates are carried at cost. Transactions eliminated on consolidation Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the associates or, if not consumed or sold by the associate, when the consolidated entity s interest in such entities is disposed of. (e) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: 19

23 Sale of Goods Revenue from the sale of goods is recognised in the profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. Revenue is recognised on sale of telecommunications products at the value invoiced to retail resellers, reflecting the fact that the Company is acting as principal and bearing full credit risk pursuant to contractual arrangements in place. Rendering of Services Revenue from the rendering of a service is recognised upon the delivery of the service to the customer. Interest Interest revenue is recognised on a proportional basis taking into account the effective yield applicable to the financial assets. Dividends Revenue from dividends and distribution from controlled entities are recognised by the parent entity when they are declared by the controlled entities. Revenue from dividends from other investments are recognised when received. Dividends received out of pre-acquisition reserves are eliminated against the carrying amount of the investment and not recognised in revenue. Rental income Rental income from terminals is recognised in the income statement on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Software licensing income Software licensing income is recognised based on the substance of the contractual arrangements entered into. Up front non-refundable fees for the right to utilise software and technology, where the consolidated entity has no ongoing contractual obligations, are recognised fully in the profit or loss at the time the contractual commitment is entered into. Software licensing fees where the licensee has the right to use the software and technology over a specified period of time or on a refundable basis is recognised in the profit or loss on a straight line basis over the agreed term of the Licence. Access Fees Fees for the right to access the consolidated entity s electronic network systems where the consolidated entity has no ongoing contractual obligations, are recognised fully in the profit or loss at the time the contractual commitment is entered into. Hosting Fees Up front non-refundable fees for the right to system hosting services, where the consolidated entity has no ongoing contractual obligations, are recognised fully in the profit or loss at the time the contractual commitment is entered into. System hosting fees applicable to a specified period of time or which are dependent on the fulfilment of certain obligations is recognised in the profit or loss on a straight line basis over the agreed term of service provision. 20

24 Sale of non-current assets Gains on sale of non-current assets are included as income at the date control of the asset passes to the buyer, usually when an unconditional contract of sale is signed. Gains or losses on disposal are calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal. (f) Expenses Operating lease payments Payments made under operating leases are recognised in the profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in the profit or loss as an integral part of the total lease expense and spread over the lease term. Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Net financing costs Net financing costs comprise interest payable on borrowings calculated using the effective interest method, fees and charges attached to financing facilities, interest receivable on funds invested and dividend income. Borrowing costs are expensed as incurred and included in net financing costs. The interest expense component of finance lease payments is recognised in the profit or loss using the effective interest method. (g) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. (h) Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. 21

25 Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend. Income tax benefits are based on the assumption that no adverse change will occur in the income tax legislation and the anticipation that the company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Tax consolidation The consolidated entity and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from July 2004 and are therefore taxed as a single entity from that date. The head entity within the taxconsolidated group is. Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the separate taxpayer within group approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by the head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution. The consolidated entity recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only. Nature of tax funding arrangements and tax sharing arrangements The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable (payable) equal in amount to the tax liability (asset) assumed. The inter-entity receivables (payables) are at call. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity s obligation to make payments for tax liabilities to the relevant tax authorities. 22

26 The head entity in conjunction with other members of the tax-consolidated group has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote. (i) Accounting estimates and judgements Significant areas of estimating uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are set out below: Measurement of the recoverable amount of intangible assets Intangible assets including goodwill, development costs, trademarks, licences and technology, and capitalised expenses are allocated to cash generating units ( CGU ) based on underlying business operations. Value in use calculations are undertaken based on projected cash flows covering a period not exceeding 5 years plus an estimate of terminal values. Management s determination of cash flow projections and gross margins are based on past performance and its expectations for the future. The present value of future cash flows have been calculated using a discount rate of 16% - 20% to determine value-in-use, and growth rates of 2% to 10% have been applied. Assessment of the recoverable amount of receivable The consolidated entity has a credit risk concentration in respect of certain receivables. In assessing the recoverable amount of such receivables the directors have regard to the existence of any impairment indicators, as well as processes in place to mitigate credit loss such as insurance and settlement arrangements entered into. Recognition of Licensing, access and hosting revenue The timing of revenue recognition in respect of licensing, access and hosting activities is based on the contractual arrangements and substance of the transactions. This takes into account such features as fee refundability, the consolidated entity s contractual obligations and whether the contractual arrangement carries a specific term. (j) Cash and cash equivalents Cash and cash equivalents comprise cash balances, short term bills and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. (k) Trade and other receivables Trade and other receivables are stated at their amortised cost less impairment losses. (l) Inventories Inventories primarily represent inventory of prepaid telecommunication products and terminal equipment purchased for the purpose of resale. Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of electronic warehousing inventories (prepaid telecommunication products) is based on first-in first-out principal. The cost of other inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. 23

27 (m) Plant and equipment Owned assets Items of plant and equipment are measured at cost less accumulated depreciation (see below) and impairment losses. Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of plant and equipment. Leased assets Leases in terms of which the consolidated entity assumes substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised, recording at the inception of the lease an asset and liability equal to the present value of the minimum lease payments, and disclosed as plant and equipment under lease. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Subsequent costs The consolidated entity recognises in the carrying amount of an item of plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other costs are recognised in the profit or loss as an expense as incurred. Depreciation The depreciable amount of all fixed assets including capitalised leased assets are depreciated on both a straight line and a diminishing value basis over their estimated useful lives to the consolidated entity commencing from the time the asset is held ready for use. Leased assets are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives in the current and comparative periods are as follows: Computer equipment 2½ - 5 years Straight Line Furniture, fixtures and fittings 10 years Straight Line Capitalised leased assets 4-5 years Straight Line The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually. When changes are made adjustments are reflected prospectively in current and future periods only. (n) Intangible assets Goodwill on consolidation All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised, but is tested annually for impairment. Negative goodwill arising on an acquisition is recognised directly in profit or loss. 24

28 Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the profit or loss as an expense as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the consolidated entity has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the profit or loss as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation (see below) and impairment losses. Other intangible assets Other intangible assets that are acquired by the consolidated entity are stated at cost less accumulated amortisation and impairment losses. Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Amortisation Intangible assets (other than goodwill) are amortised from the date they are available for use. Amortisation is charged to the profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. The estimated useful lives are as follows: Capitalised development cost 3 7 years (o) Investments Investments in debt and equity securities Financial instruments held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the profit or loss. Other financial instruments held by the consolidated entity are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss being recognised directly in equity, except for impairment losses and, in the case of monetary items such as debt securities, foreign exchange gains and losses. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the profit or loss. The fair value of financial instruments classified as held for trading and available-for-sale is their quoted bid price at the balance sheet date. Financial instruments classified as held for trading or available-for-sale investments are recognised/derecognised by the consolidated entity on the date it commits to purchase / sell the investments. Securities held-to-maturity are recognised / derecognised on the day they are transferred to / by the consolidated entity. 25

29 Investments in unlisted securities Investments on other unlisted entities are measured at the lower of cost and recoverable amount. Investments in associates Investments in unlisted shares of associates are carried in the consolidated entity s financial statements at the lower of cost and recoverable amount. (p) Impairment The carrying amounts of the consolidated entity s assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in profit or loss even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss. Calculation of recoverable amount The recoverable amount of the consolidated entity s investments in held-to-maturity securities and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant receivables are individually assessed for impairment. Impairment testing of significant receivables that are not assessed as impaired individually is performed by placing them into portfolios of significant receivables with similar risk profiles and undertaking a collective assessment of impairment. Non-significant receivables are not individually assessed. Instead, impairment testing is performed by placing non-significant receivables in portfolios of similar risk profiles, based on objective evidence from historical experience adjusted for any effects of conditions existing at each balance sheet date. The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate of 16% - 20% that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. 26

30 Reversals of impairment Impairment losses, other than in respect of goodwill, are reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimate used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. An impairment loss in respect of a held-to-maturity security or receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss in respect of an investment in an equity instrument classified as available for sale is not reversed through profit or loss. If the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognised in profit or loss. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Derecognising of financial assets and liabilities A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: - the rights to receive cash flows from the asset have expired - the consolidated entity retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party; or - the consolidated entity has transferred its rights to receive cash flows from the asset and either o o has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit and loss. (q) Trade and other payables Trade and other payables are stated at their fair value at inception. Trade payables are non-interest bearing and are normally settled on 60-day terms. (r) Interest bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Ordinary share capital Issued and paid up capital is recognised at the fair value of the consideration received by the company. 27

31 Dividends Dividends are recognised as a liability in the period in which they are declared. Transaction costs Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit. (s) Employee benefits Long-term service benefits The consolidated entity s net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the National Government bonds at the balance sheet date which have maturity dates approximating to the terms of the consolidated entity s obligations. Wages, salaries, annual leave and non-monetary benefits Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the reporting date represent present obligations resulting from employees services provided to reporting date, are calculated at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as cars and free or subsidised goods and services, are expensed based on the net marginal cost to the consolidated entity as the benefits are taken by the employees. Share-based payment transactions The Company s share option programme allows consolidated entity employees to acquire shares in the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to the share price not achieving the threshold for vesting. Profit sharing and bonus plans The company operates a profit sharing and bonus plan. A liability is recognised for profit sharing and bonus plans, including benefits based on the future value of equity instruments and benefits under plans allowing the consolidated entity to settle in either cash or shares. (t) Provisions A provision is recognised in the statement of financial position when the consolidated entity has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. 28

32 Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the consolidated entity from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract. (u) Segment reporting A segment is a distinguishable component of the consolidated entity that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The consolidated entity s primary format for segment reporting is based on business segments. (v) Earnings per share The Company presents basic and diluted earnings per share ( EPS ) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees. (w) Non current assets held for sale Non-current assets that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets are remeasured in accordance with the Group s accounting policies. Thereafter generally the assets are measured at the lower of their carrying amount and fair value less cost to sell. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. (x) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2008 reporting period. The consolidated entity s assessment of the impact of these new standards and interpretation is they will result in no significant changes to the amounts recognised or matters disclosed in the consolidated entity s financial statements. (y) Prior Year Re-statement of outside equity interests The re-statement of the outside equity interest was due to an error in the calculation in prior years. When Bill Express was floated in 2005 the outside equity interest was calculated as 100% of the equity raised when in fact the percentage ownership was 42.8%. This error was carried forward to the 30 June 2006 financial report when minority interest percentage ownership was reflected as 91.8% when in fact the minority interest in Bill Express was 62.3%. The error in the minority interest has been corrected in financial report of year ended 30 June 2007 by restating the opening balance of outside equity interest and retained earnings in the 30 June 2006 comparatives. 29

33 NOTE 2: REVENUE Sale of goods N/A 981,080 Service fees N/A 25,815 Interest (i) N/A 728 Licence / hosting / access fees N/A 11,095 Other revenue N/A 6,537 Total revenue N/A 1,025,255 Interest Bank Interest N/A 486 Interest received from director loans N/A 242 N/A 728 NOTE 3: PROFIT FROM CONTINUING OPERATIONS Profit from continuing operations before income tax expense has been determined after: (a) Expenses: Cost of Sales N/A 967,293 Finance costs - other persons N/A 6,305 Depreciation of non-current assets - furniture, fixtures and fittings N/A 15 - computer equipment N/A 16,303 Total depreciation N/A 16,318 Amortisation of non current assets: - capitalised leased assets N/A 1,185 - research and development N/A 4,447 - other intangibles assets N/A 1,196 Total amortisation N/A 6,828 Bad and doubtful debts: - bad debts written off - trade debtors N/A movement in provisions for doubtful debts N/A 300 Net expense - bad and doubtful debts N/A 676 Employee benefit expenses: - wages and salaries N/A 4,027 - employee entitlements expense including movements in provision N/A 138 for employee entitlements - superannuation N/A share based payments N/A 39 - other costs N/A 282 Total employee benefit expenses: N/A 4,664 30

34 Rental expense on operating leases - minimum lease payments N/A 1,478 (b) Significant Expenses The following significant expense item is relevant in explaining the financial performance: Impairment loss group loan N/A 1,075 NOTE 4: INCOME TAX a) Recognised in the profit or loss Current tax expense Current year N/A 920 Deferred tax expense Origination and reversal of temporary difference N/A 810 Over provision in prior year N/A (56) N/A 754 Total income tax expenses in income statement N/A 1,674 (b) Numerical reconciliation between tax expense and pre-tax net profit Profit/(loss) before tax N/A 2,076 Income tax using the domestic corporation tax rate of 30% (2007: 30%) N/A 623 Increase in income tax due to: Tax losses not carried forward as deferred tax assets N/A 1,489 Non-deductible expenses N/A (4) Decrease in income tax due to: Concessional R&D deduction N/A (396) Other deductible expenses N/A (38) Income tax expense N/A 1,674 NOTE 5: DIVIDENDS No dividends have been paid or proposed for ordinary shares during the current year and comparative year. Dividend franking account 30 per cent franking credits available to shareholders of ON Q Group Limited for subsequent financial years N/A 55 The above available amounts are based on the balance of the dividend franking account at year-end adjusted for: a) franking credits that will arise from the payment of the current tax liabilities; b) franking debits that will arise from the payment of dividends recognised as a liability at the yearend; c) franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated group at the year-end; and d) franking credits that the entity may be prevented from distributing in subsequent years. 31

35 The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. In accordance with the tax consolidation legislation, the Company as the head entity in the tax consolidated group has also assumed the benefit of N/A (2007: $55,000) franking credits. NOTE 6: CASH AND CASH EQUIVALENTS Bank balances N/A 4,647 Cash on Deposits N/A 2,550 N/A 7,197 Amount held pursuant to certain contractual arrangements classified as cash on deposits NOTE 7: TRADE AND OTHER RECEIVABLES CURRENT Trade debtors N/A 82,787 Less provision for doubtful debts N/A (900) N/A 81,887 Other debtors Amounts receivable from: N/A 34,418 -director related N/A 2,939 - wholly owned entities N/A 1,075 - associate company N/A 69 Less provision for diminution N/A (1,075) N/A 119,313 NON CURRENT Other debtors N/A 8,708 NOTE 8: INVENTORIES Electronic equipment inventory at cost N/A 444 Electronic warehousing inventory at cost N/A 5,070 N/A 5,514 NOTE 9: OTHER ASSETS CURRENT GST Receivable N/A 842 Prepayments N/A 3,470 N/A 4,312 NON CURRENT Prepayments N/A

36 NOTE 10: ASSETS CLASSIFIED AS HELD FOR SALE Plant and equipment N/A 12,168 Assets classified as held for sale represent certain media division display units. In remeasuring the equipment to the lower of its carrying amounts and its fair value less costs to sell, no impairment loss has been recorded. NOTE 11: DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets and liabilities are attributable to the following Assets Liabilities Net Plant and equipment N/A - N/A (2,119) N/A (2,119) Intangible assets N/A - N/A (2,675) N/A (2,675) Finance lease liabilities N/A (450) N/A - N/A (450) Employee benefits N/A 218 N/A - N/A 218 Provisions N/A 292 N/A - N/A 292 Capital raising cost N/A 416 N/A - N/A 416 Tax value of losses carried forward N/A 538 N/A - N/A 538 Other items N/A 362 N/A 60 N/A 422 Net tax assets / (liabilities) N/A 1,376 N/A (4,734) N/A (3,358) A deferred tax asset has not been recognised in relation to the parent entity and consolidated tax groups carry forward tax losses as realisation of such asset is not yet considered probable. A deferred tax asset not recognised in relation to carry forward tax losses is N/A (2007: $3.293 million). NOTE 12: INVESTMENTS IN EQUITY ACCOUNTED INVESTEE NON CURRENT Investment in associate company N/A 5,020 Interest In Associate Ownership interest held by entity ETT Limited N/A 43.44% (i) Principle activity Supplier of retail technologies and services, specialising in transaction processing solutions and ancillary systems and products. (ii) Share of associate's losses - operating losses before income tax N/A (163) - operating losses after income tax N/A (114) 33

37 (iii) Carrying amount of investment in associate - at the beginning of the financial year N/A 5,134 - share of net losses for the financial year N/A (114) - at the end of the financial year N/A 5,020 (iv) Share of associate's assets and liabilities Current assets N/A 2,269 Non-current assets N/A 41 Current liabilities N/A (374) Net Assets N/A 1,936 (v) Retained profits of the consolidated entity attributable to the associate Share of associate's net losses N/A (114) Balance at the end of the financial year N/A (114) Bill Express Limited held 44.1% of the ordinary shares in ETT Limited as at the end of the last financial year. Bill Express Limited did not have the ability to significantly influence the financial and operating decision making process of ETT Limited due to Bill Express Limited providing a standing proxy until 31 March 2007 in respect of its ETT Limited shareholding to the Chairman of ETT Limited, effectively waiving its rights to vote these shares. This contractual arrangement between Bill Express Limited and ETT Limited covering voting rights expired on 31 March Consequently, Bill Express Limited assumed significant influence over ETT Limited and accordingly Bill Express Limited has commenced equity accounting for its investment in ETT Limited from 1 April NOTE 13: FINANCIAL ASSETS NON-CURRENT Unlisted investments at cost N/A 15 These shares were issued by ETT Limited to Bill Express Limited in consideration for various services to be provided by Bill Express Limited, including software procurement licences, software hosting services and consulting fees. Revenue recognised during the period totalled N/A (2007: $541,169), and unearned income at year end totals N/A (2007: $992,142). Bill Express Limited has commenced equity accounting for its investment in ETT Limited from 1 April

38 NOTE 14: PLANT AND EQUIPMENT Computer equipment Furniture, fixtures and fittings Capitalised leased assets Cost Balance at 1 July , ,842 72,857 Reclassifications (7) (179) Acquisitions 16,304-2,738 19,042 Disposals / write offs (2,886) - - (2,886) Balance at 30 June 2007 and 1 July , ,766 89,013 Acquisitions N/A N/A N/A N/A Disposals / write offs N/A N/A N/A N/A Balance at 30 June 2008 N/A N/A N/A N/A Total Depreciation Balance at 1 July , ,591 Reclassifications 93 (93) - - Depreciation for the year 16, ,185 17,503 Disposals / write offs (147) - - (147) Balance at 30 June 2007 and 1 July , ,102 36,947 Depreciation for the year N/A N/A N/A N/A Balance at 30 June 2008 N/A N/A N/A N/A Carrying amounts At 30 June , ,664 52,066 At 30 June 2008 N/A N/A N/A N/A NOTE 15: INTANGIBLE ASSETS Development costs Trademarks, licenses and technology at cost Capitalised expenses Goodwill $ 000 Cost Balance at 1 July ,625 19, ,736 59,858 Acquisitions- through business combinations ,150 2,150 Acquisitions- internally developed 5,275 10, ,575 Other acquisitions Balance at 30 June 2007 and 1 July ,900 30, ,866 77,726 Acquisition N/A N/A N/A N/A N/A Balance at 30 June 2008 N/A N/A N/A N/A N/A Accumulated Amortisation Balance at 1 July , ,299 Amortisation for the year 4, ,644 Balance at 30 June 2007 and 1 July , ,943 Amortisation for the year N/A N/A N/A N/A N/A Balance at 30 June 2008 N/A N/A N/A N/A N/A Carrying amounts At 30 June ,869 29,278-19,636 64,783 At 30 June 2008 N/A N/A N/A N/A N/A Total 35

39 For the purpose of impairment testing, goodwill is allocated to the following cash generating units: Bill Express Limited N/A 2,350 Electronic payment and distribution N/A 14,156 Media N/A 3,130 N/A 19,636 At 30 June 2007 the value in use was determined by discounting future cash flows, and was based on the following key assumptions: - Cash flows were projected based on actual operating results and 5 year business plan plus an estimate of terminal value. - The anticipated annual revenue growth included in cash flow projections was 2 to 10 percent. - The discount rate used to discount estimated cash flows is 20 percent. NOTE 16: TRADE AND OTHER PAYABLES CURRENT Unsecured liabilities Trade creditors N/A 120,260 Sundry creditors and accruals N/A 2,067 N/A 122,327 NOTE 17: INTEREST BEARING LIABILITIES CURRENT Secured liabilities Bank loans* N/A 19,557 Finance lease liability N/A 1,386 Hire purchase liability N/A 416 N/A 21,359 NON-CURRENT Secured liabilities Loan from financier^ N/A 59,287 Hire purchase liability N/A 77 Finance lease liability N/A 1,685 N/A 61,049 * The bank loans are secured on the following basis: 1. First Registered Company Charge (Mortgage Debenture) over all the assets and undertaking of Bill Express Ltd. This is a fixed and floating charge over all present and future assets, undertaking (including goodwill) and unpaid/uncalled capital of the Company excluding inventory and receivables. 2. Deed of Priority between Australia and New Zealand Banking Group Limited (the Bank) and CCH International PLC consenting to the Bank s priority to the amount of all moneys from time to time secured by its first security over the assets of Bill Express Limited. 36

40 ^The loan from financier is secured on the following basis: 1. A fixed charge in relation to all Bill Express Limited present and future interest in property, plant and equipment, intangible assets including goodwill and intellectual property rights, marketable securities, capital and securities and instruments (negotiable or otherwise). 2. A floating charge over specific trade receivables identified in accordance with the agreement with the financier that is not subject to a fixed charge. 3. Bank Loans are secured by shares held by ON Q Group Ltd in the controlled entity Bill Express Ltd, details as follows: 2008: N/A 2007 Funder Terms & Conditions Number of Shares as Collateral Balance Outstanding $ 000 Chimaera Capital Limited LVR 30% 101,500,000 5, Opes Prime Stockbroking Ltd LVR 45% 27,000,000 2, Tricom Securities Lending & ShortInvest LVR 70% 21,000,000 1, Total 9, Interest Paid $ 000 Finance Leases Bill Express has entered into various computer equipment finance leases expiring within 3 to 18 months. The interest rates for the finance leases vary from 5.45% to 9.18%. At the conclusion of the lease period the Company has the ability to acquire the equipment at the residual value. NOTE 18: TAX LIABILITIES CURRENT Income tax N/A 1,595 The current tax liability for the consolidated entity represents the amount of income taxes payable in respect of current and prior financial periods. In accordance with the tax consolidation legislation, the Company as the head entity of the Australian tax-consolidated group has assumed the current tax liability (asset) initially recognised by the members in the tax-consolidated group. NOTE 19: EMPLOYEE BENEFITS CURRENT Employee benefits N/A 714 NON-CURRENT Employee benefits N/A 15 Aggregate employee benefits liability N/A 729 Employees at year end N/A 31 37

41 NOTE 20: OTHER LIABILITIES CURRENT Unearned revenue N/A 541 NON CURRENT Unearned revenue N/A 451 NOTE 21: ISSUED CAPITAL 73,950,146 (2007:66,554,831) fully paid ordinary shares 24,147 24,147 (a) Ordinary shares At the beginning of reporting period 24,147 24,100 Shares issued during the year - options exercised - 47 At reporting date 24,147 24,147 Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Options of Bill Express Ltd In July 2004, 75,000,000 options were granted to the holders of ordinary shares to accept ordinary shares at an exercise price of 0.25c. The options are exercisable on or before 30 June In August 2005, a further 600,000 options were issued to Newsagents Solutions to accept ordinary shares at an exercise price of 0.25c. The options are exercisable on or before 30 June In August 2006, a further 600,000 options were issued to Newsagents Solutions to accept ordinary shares at an exercise price of 0.25c. The options are exercisable on or before 30 June Options of ON Q Group Ltd 212,496 shares were issued when options were exercised on 30th March NOTE 22: RETAINED EARNINGS Retained profits at the beginning of the financial year as re-stated N/A 3,871 Net loss attributable to members of the entity N/A (2,848) Transfer from outside equity interest N/A 55 Retained profits at reporting date N/A 1,078 38

42 NOTE 23: RESERVES Option Reserve Balance at the beginning of the financial Year N/A 35 Current year provision N/A 39 N/A 74 Outside equity interest N/A (44) Balance at the reporting date N/A 30 On 27 June 2005 and 14 October 2005, 375,000 and 684,500 share options were issued to key executives respectively. The options are exercisable at a price of 25 cents on or before 30 June NOTE 24: CASH FLOW INFORMATION (a) Reconciliation of the net profit after tax to the net cash flows from operations Net profit N/A 402 Non-Cash Items: Depreciation of non-current assets N/A 16,318 Amortisation of non-current assets N/A 6,828 Gain on consolidation N/A (939) Bad and doubtful debts expenses N/A 300 Share of associates net losses N/A 114 Options remuneration N/A 39 Non-cash receipt interest N/A (243) Non-cash receipt licence fees N/A (541) Write down of group loan to recoverable amount N/A 1,075 Changes in assets and liabilities (Increase) in trade receivables N/A (59,028) decrease in inventory N/A 9,871 Increase in tax related balances N/A 1,499 (Increase) in prepayments/other receivables N/A (2,759) Increase in trade and other creditors N/A 33,457 Increase in employee entitlements N/A 59 (Increase) in assets held for sale N/A (12,168) Net cash inflow from operating activities N/A (5,716) (b) Reconciliation of Cash Cash balance comprises: - Cash at bank N/A 4,647 - Deposits N/A 2,550 N/A 7,197 (c) Non cash Financing and Investing Activities During the year, the company undertook the following non cash transactions: - Acquisition of plant and equipment with an aggregate value of N/A (2007: $2,611,195) which has been lease financed. 39

43 (d) Financing facility Bill Express Limited has a variable interest facility available with a financier to the extent of N/A (2007: $83,050,000). As at 30 June 2008 Bill Express Limited have used N/A (2007: $59,376,990) of the facility. Bank Loans are secured by shares held by ON Q Group Ltd in the controlled entity Bill Express Ltd for N/A (2007: $9.064 million). The consolidated entity and the Company have the following facility with a bank at 30 June 2008: Bill Express Ltd - Interchangeable Facility N/A (2007: $2,000,000) used N/A (2007: $2,000,000) - Indemnity/Guarantee Facility N/A (2007: $1,100,000) used N/A (2007: $nil) - Documentary Credit N/A (2007: $500,000) used N/A (2007: $nil) - Online Facility N/A (2007: $13,200,000) used N/A (2007: $nil) - Lease Finance Facility N/A (2007: $3,606,000) used N/A (2007: $nil) - Money Market Line Uncommitted Facility N/A (2007: $6,500,000) used N/A (2007: $6,100,000) Bopo Cards (Australia) Pty Ltd Variable Rate Commercial Bill Acceptance Discount Facility N/A (2007: $2,335,000) used N/A (2007: $2,300,000). NOTE 25: EARNINGS PER SHARE (a) Reconciliation of Earnings to Net Profit or Loss Net profit N/A (2,848) Earnings used in the calculation of basic EPS N/A (2,848) Earnings used in the calculation of dilutive EPS N/A (2,848) (b) Weighted average number of ordinary shares outstanding N/A 66,555 during the year used in calculation of basic EPS Weighted average number of options outstanding N/A 8,601 Weighted average number of ordinary shares outstanding during the year used in calculation of dilutive EPS N/A 75,156 The options have been classified as potential ordinary shares and are included in determination of dilutive EPS. NOTE 26: COMMITMENTS & CONTINGENCIES (a) Leases (i) Operating lease (non-cancellable) Minimum lease payments -Less than one year N/A 2,019 -Between one and five years N/A 3,053 N/A 5,072 The consolidated group has entered into various computer equipment non-cancellable operating leases with lease terms of 12 to 48 months. 40

44 Leases generally provide the consolidated group with a right of renewal at which time all terms are renegotiated. (ii) Finance leases Minimum lease payments - Less than one year N/A 1,526 - Between one and five years N/A 1,744 N/A 3,270 Less future finance charges N/A (234) Total Lease Liability N/A 3,036 (iii) Hire purchase agreements Minimum hire purchase payments - Less than one year N/A Between one and five years N/A 207 N/A 661 Less future finance charges N/A (40) Total Hire Purchase Liability N/A 621 (b) Employee compensation commitments Key management personnel Commitments under non-cancellable employment contracts not provided for in the financial statements and payable: - Within one year N/A Between one and five years N/A 775 N/A 1,075 (c) Contingent liabilities Bill Express Limited has provided a guarantee of N/A (2007: $2.3million) on behalf of its subsidiary Bopo Cards (Australia) Pty Ltd in relation to funds drawn down by Bopo Cards (Australia) Pty Ltd from a third party. NOTE 27: KEY MANAGEMENT PERSONNEL DISCLOSURES Remuneration of key management personnel Short-term employee benefits N/A 1,400 Post-employment benefits N/A 94 N/A 1,494 Key management personnel information for the correct year is not available (N/A). Refer to the remuneration report set out within the Directors Report for individual details of key management personnel remuneration for the year ended 30 June

45 NOTE 28: RELATED PARTY DISCLOSURES (a) Director-related entity transactions The spouse of a director and the brother of a director are employed by Bill Express Limited. Total employment benefits paid/payable are as follows: Spouse of a director N/A 147 Brother of a director N/A 85 Both of these employees are paid on normal commercial terms for the positions they fulfil and services they provide. Both of these employees commenced employment with the company during the 2006 financial year. (b) Other related party transactions Loans The aggregate amounts receivable from an equity accounted investment by the parent entity at balance date: ETT Limited N/A 69 Amounts owing are unsecured and repayable at call. NOTE 29: AUDITOR S REMUNERATION $ $ Audit services of ON Q Group Ltd Auditors of the company Moore Stephens N/A 90,000 Auditors of the company HLB Mann Judd 4,500 Auditors of Bill Express Ltd KPMG Australia - Audit and review of financial reports N/A 287,000 Other Audit services of ON Q Group Ltd Auditors of the company Moore Stephens N/A 5,000 Auditors of Bill Express Ltd KPMG Australia Other assurance services N/A 125,839 Regulatory audit services N/A 10,000 Taxation services N/A 31,296 N/A 549,135 42

46 NOTE 30. SEGMENT INFORMATION Business segments The consolidated entity comprises of the following main business segments: Electronic payment and distribution Bill Express operates in the management and development of automated ordering, delivery and inventory control for prepaid mobile, landline and internet services and processing payments for bills that are presented for payment at Bill Express outlets across Australia. Media Pod TV (point of decision TV) and Xip Media are the developers of narrowcast digital retail television networks in Australia. Pod TV and Xip Media design and install entire TV networks in retail precincts delivering effective and integrated marketing, creative content and media solutions. Prepaid card The Bopo Prepaid Visa Card is a prepaid fully functional Visa consumer prepaid card that can be topped up at physical terminal networks. Geographical segments Geographically, the group operates predominately in Australia. Business segments 2008: N/A 2007 Electronic payment & distribution Media Prepaid Card Revenue Sales to external customers 1,013,210 4,591 6,362 1,024,163 Inter segmental revenues Other revenue Total revenue 1,014,762 4,592 6,366 1,025,255 Results Net profit/(loss) before tax (1,148) 42 3,182 2,076 Income tax expense (906) (14) (754) (1,674) Net profit after tax from continuing operations (2,054) 28 2, Assets Segment assets 260,201 7,465 8, ,735 Investment in equity accounted investee 5, ,020 Total assets 265,221 7,465 8, ,755 Liabilities Segment liabilities 201,301 6,911 4, ,785 Other segment information: Acquisition of non-current segment assets 18, ,367 24,331 Depreciation and amortisation of segment assets 21, ,146 Other non-cash expenses 1, ,794 43

47 NOTE 31: FINANCIAL INSTRUMENTS Exposure to interest rate, credit and currency risks arises in the normal course of the group business. (a) Interest rate risk The consolidated entity's exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both recognised and unrecognised at the balance date, are as follows: 2008: N/A 2007 Floating Within 1 year 1 to 5 years Over 5 years Noninterest bearing Total Weighted average effective interest rate % (i) Financial assets Cash 4,647 2, , % Trade and other receivables , ,013 - Receivables related Parties - 2, , % Total financial assets 4,647 5, , ,218 (ii) Financial liabilities Trade creditors , ,260 - Other creditors ,067 2,067 - Hire Purchase Liability Finance lease liability - 1,386 1, , % Bank and other loans 78, , % Employee benefits Total financial liabilities 78,844 1,802 1, , ,464 The following methods and assumptions are used to determine the net fair values of financial assets and liabilities. The group s investments in fixed-rate debt securities and its fixed-rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The consolidated entity s investments in variable-rate debt securities and its variable-rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Investments in equity securities and short-term receivables and payables are not exposed to interest rate risk. (b) Credit risk exposures Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The consolidated entity does not require collateral in respect of financial assets. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount of those assets, net of any provisions for doubtful debts of those assets, as disclosed in the balance sheet and notes to the financial statements. Concentrations of credit risk The consolidated entity minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers. 44

48 (c) Net fair values The net fair value of financial assets and financial liabilities approximates their carrying amounts as disclosed in the statement of financial position and notes to the financial statements. Recognised financial instruments Cash, cash equivalents and short-term investments: The carrying amount approximates fair value because of their short-term to maturity. Trade receivables, trade creditors and dividends receivable: The carrying amount approximates fair value. Short-term borrowings: The carrying amount approximates fair value because of their short-term to maturity. Long-term loans and receivable: The fair values of long-term loans receivable are estimated using discounted cash flow analysis, based on current incremental lending rates for similar types of lending arrangements and are recognised at fair value in the financial statements. The interest rates used to discount estimated cash flows, where applicable, are based on the government bond rate and are N/A (2007: 7%). NOTE 32: CONTROLLED ENTITIES Country of Percentage owned Incorporation Parent Entity: Australia Subsidiaries of ON Q Group Ltd Bill Express Ltd Australia N/A 37.7% Australian Pure Fruits (SA) Pty Ltd Australia N/A 100% Ozzie Juices Pty Ltd Australia N/A 100% ON Q Company Pty Ltd Australia N/A 100% Motorlink Systems Pty Ltd Australia N/A 100% Cash4Biz Pty Ltd Australia N/A 100% ON Q Technologies Pty Ltd Australia N/A 100% Aussie Pure Fruits Pty Ltd (In Liquidation) Australia N/A 100% Mon Beverages Pty Ltd (In Liquidation) Australia N/A 100% The results of Bill Express for financial year ended 30 June 2007 have been consolidated by virtue of the shareholding which ON Q holds (37% with the option to increase to 44%) compared to the comparatively small holdings of all other shareholders. 50% of the directors of Bill Express are also directors of ON Q Group and as such have the power to veto any resolutions proposed by the balance of the board. At 30 June 2007, Hal Christiansen was also CEO of both Companies and as such directed the day to day operations of Bill Express. As a result of Aussie Pure Fruits Pty Ltd and Mon Beverages Pty Ltd being in liquidation the companies have been deconsolidated since financial year ended 30 June

49 NOTE 33: PARENT ENTITY INFORMATION Statement of financial position Parent 2008 $ $ 000 ASSETS CURRENT ASSETS Cash and cash equivalent N/A 432 Trade and other receivables N/A 5,729 Other assets N/A 12 TOTAL CURRENT ASSETS N/A 6,173 NON-CURRENT ASSETS Financial assets N/A 27,518 TOTAL NON-CURRENT ASSETS N/A 27,518 TOTAL ASSETS N/A 33,691 LIABILITIES CURRENT LIABILITIES Trade and other payables N/A 1,297 Interest-bearing loans and borrowings N/A 9,481 TOTAL CURRENT LIABILITIES N/A 10,778 NON-CURRENT LIABILITIES Interest-bearing loans and borrowings N/A 205 Deferred tax liabilities N/A 2,854 TOTAL NON-CURRENT LIABILITIES N/A 3,059 TOTAL LIABILITIES N/A 13,837 NET ASSETS N/A 19,854 EQUITY Contributed Equity 24,147 24,147 Retained earnings/(losses) N/A (21,338) Reserves N/A 17,045 TOTAL EQUITY N/A 19,854 Statement of profit or loss and other comprehensive income Parent 2008 $ $ 000 Revenue N/A 263 Employee benefits expense N/A (411) Finance cost N/A (2,008) Other expenses N/A (2,334) Profit/(loss) before income tax N/A (4,490) Income tax N/A - Profit/(loss) for the year N/A (4,490) Other comprehensive income N/A - Total comprehensive income N/A (4,490) NOTE 34: SUBSEQUENT EVENTS Refer to the Directors Report for subsequent events. NOTE 35: COMPANY DETAILS The registered office of is: Level 2, 350 Kent Street, Sydney NSW, Australia. 46

50 DIRECTORS DECLARATION FOR THE YEAR ENDED 30 JUNE 2008 In the directors opinion: 1. The financial statements and notes set out on pages 14 to 46 are in accordance with the Corporations Act 2001, including: i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and ii. giving a true and fair view of the consolidated entity s financial position as at 30 June 2008 and of its performance for the financial year ended on that date. 2. As previously disclosed, the Chief Executive Officer and Chief Finance Officer have resigned from their positions and are unable to declare that: i. The financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; ii. The Financial statements and notes for the financial year comply with the Accounting standards, and iii. The Financial statements and notes for the financial year give a true and fair view. 3. In relation to the statements that there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable, attention is drawn to the directors report section on review of operations and note 1(b) to the financial statements. This declaration is made in accordance with a resolution of the directors. Khoo Gee Choo, Jamie Director Sydney 30 April

51 ON Q GROUP LIMITED FOR THE YEAR ENDED 30 JUNE 2008 INDEPENDENT AUDITOR S REPORT To the members of On Q Group Limited Report on the Financial Report We have audited the accompanying financial report of On Q Group Limited ( the company ), which comprises the consolidated statement of financial position as at 30 June 2008, 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, for the consolidated entity. The consolidated entity comprises 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. Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. Because of the matters discussed in the Disclaimer of Opinion paragraph, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act Disclaimer of Opinion Incomplete Accounting and Statutory Records As disclosed in the directors report, on 5 May 2008 the company s securities were suspended from official quotation by the Australian Securities Exchange. On 28 July 2008, the company, under section 436A of the Corporations Act 2001, was placed under administration and appointed Messrs Paul Andrew Burness and Matthew James Jess Joint and Several Administrators of the Company. On 12 March 2014, the company executed a deed of arrangement with its creditors and was released from the deed of creditors arrangement on 27 November The accounting and statutory records prior to the appointment of new directors in September 2014 were not adequate to permit the application of necessary audit procedures. As such, we are unable to obtain all the information and explanations we require in order to form an opinion on the financial report. 48

52 ON Q GROUP LIMITED FOR THE YEAR ENDED 30 JUNE 2008 INDEPENDENT AUDITOR S REPORT (CONTINUED) Disclaimer of Opinion Because of the significance of the matters described in the Disclaimer of opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial report. Report on Other Legal and Regulatory Requirements Due to the matters described in the Disclaimer of Opinion paragraph, we have not been given all information, explanation and assistance necessary for the conduct of the audit and we are unable to determine whether the company has kept: (a) financial records sufficient to enable the financial report to be prepared and audited; and (b) other records and registers as required by the Corporations Act Report on the Remuneration Report We were engaged to audit the Remuneration Report included in pages 4 to 6 of the directors report for the year ended 30 June 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 Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Disclaimer of Auditor s Opinion In our opinion, because of the existence of the limitation of the scope of our work as described in the Basis for Disclaimer Auditor s Opinion paragraph and the effects of such adjustments, if any, as might have been determined to be necessary had the limitation not existed, we are unable to and do not express an opinion as to whether the Remuneration Report is in accordance with section 300A of the Corporations Act HLB Mann Judd Assurance (NSW) Pty Ltd Chartered Accountants A G Smith Director Sydney, NSW 30 April