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1 Re-Issued Annual Special Purpose Financial Report 30 June 2015

2 Contents Page Trustees' report 1 Statement of profit or loss and other comprehensive income 3 Statement of financial position 4 Statement of changes in equity 5 6 Trustees' declaration 22 Independent auditor s report 23

3 Trustee s report For the year ended 30 June 2015 The Trustee presents their report together with the special purpose financial report of the ("the Group") for the year ended 30 June 2015 and the auditor's report thereon. The (the Group ) is a non-statutory group consisting of the following entities: - Kogan Australia Pty Ltd - Kogan Mobile Pty Ltd - Kogan Technologies UK Pty Ltd - Kogan International Holdings Pty Ltd - Kogan HK Limited - Kogan Travel Pty Ltd; - Kogan Mobile Australia Pty Ltd; and - Kogan HR Pty Ltd Kogan.com Pty Ltd is the Trustee of the Kogan Technologies Unit Trust, being the parent entity of the Kogan Group. 1. Principal activities The principal activities of the Group during the course of the financial year were the online sale of products in Australia, New Zealand, the United Kingdom and various other geographies. There were no significant changes in the nature of the activities of the Group during the year. 2. Review of operations and results of those operations During the year, the Group achieved revenue growth of $25.3 million (14.5%) to $200.0 million compared to the prior year (FY14: $174.7 million). This was primarily driven by the growth in our private label sales and the continued expansion of private label product offerings into a variety of new brands and verticals. Private label remains a key area of focus for the Group to drive further growth in future years. In FY15, the Group invested in systems and personnel to support future growth. Management believes the Company now has the resources to leverage future growth without further significant overhead increases. In FY15, the Group achieved EBITDA (1) of $1.8 million. During FY15, the Group launched Kogan Pantry and Kogan Travel. These new business units represent an expansion in the group s operations into new areas, being groceries and travel deals. The Company believes that these new business units will drive further revenue growth in future years. (1) EBITDA is calculated using profit before tax and adding back depreciation, amortisation and net interest income/expense. 3. Significant changes in the state of affairs In the opinion of the Trustee there were no significant changes in the state of affairs of the Group that occurred during the financial year other than as noted above. 4. Distributions During the year, the Group made distributions of $500,000, of which $12,998 related to the prior periods. 5. Likely developments The Group will continue to pursue growth objectives during the next financial year. 1

4 Trustee s report For the year ended 30 June 2015 Further information about likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Group. 6. Indemnification and insurance of officers and auditors Indemnification Since the end of the previous financial year, the Group has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been an officer or auditor of the Group. Insurance premiums The does not hold insurance contracts in respect of Trustees and officers liability and legal expenses. 7. Proceedings on behalf of the Group There is ongoing litigation between Kogan Mobile Pty Ltd and ispone. There has been a stay of proceedings following the liquidation of ispone, and Kogan Mobile Pty Ltd is currently in discussion with the liquidators in relation to its claim. Kogan Mobile Pty Ltd expects to receive a small fraction of the total claim. 8. Events subsequent to reporting date Subsequent to the end of the financial year, management successfully refinanced the Group s secured working capital facility (refer Note 16). The new facility has been entered into with Bankwest for a total facility amount of up to $5.5m, and is secured against the assets of the Group. It is subject to certain debt covenant compliance requirements and matures on 31 March In October 2015, the Group launched Kogan Mobile in partnership with Vodafone Hutchison Australia Pty Ltd, offering prepaid mobile plans. On 11 March 2016 the Group agreed to acquire the on-line business of Dick Smith Electronics (receivers and managers appointed) through the purchase of goodwill, brand and intellectual property. The total purchase price was $2.61 million. On 11 March 2016 the Group executed a variation to its BankWest banking facility, which has the effect of extending the facility expiry date to 31 March 2019 and amending certain other terms including facility review events. Other than the above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Trustees of the Group, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. This report is made out in accordance with a resolution of the Trustee: David Shafer Director Place: Melbourne Date: 15 March

5 Statement of profit or loss and other comprehensive income For the year ended 30 June 2015 In dollars Note Revenue Sale of goods 6, ,985, ,039,543 Revenue Rendering of services 6-4,622,105 Cost of services (18,453) (6,643) Changes in inventory (11,318,083) (3,353,533) Raw materials and consumables used (160,085,352) (144,849,147) Other income 7 303,295 3,750 Employee benefit expense (7,546,020) (5,500,327) Depreciation and amortisation expense (1,403,119) (444,606) Warehouse and dispatch expense (4,257,270) (2,076,803) Advertising expense (5,951,065) (4,904,763) Rent expense (435,968) (544,111) IT expense (1,242,001) (645,316) Occupancy expense (excluding rent) (255,466) (224,841) Other expenses (6,452,816) (3,655,470) Operating profit 1,323,000 8,459,839 Finance income 8 9,561 66,490 Finance costs 8 (1,046,620) (304,033) Net finance costs (1,037,059) (237,543) Profit before tax 285,941 8,222,296 Income tax expense 23 (355,531) (2,841,145) Profit/(Loss) (69,590) 5,381,151 Other comprehensive income Items that will never be reclassified to profit or loss: - - Items that are or may be reclassified subsequently to profit or loss: - - Foreign currency translation differences - (319,606) Other comprehensive income, net of tax - (319,606) Total comprehensive income/(loss) (69,590) 5,061,545 The notes on pages 7 to 21 are an integral part of these financial statements. 3

6 Statement of financial position As at 30 June 2015 In dollars Note Assets Cash and cash equivalents 9 397,781 3,854,587 Trade and other receivables 10 2,201, ,888 Inventories 11 25,072,509 14,074,918 Other current assets , ,005 Current tax receivable ,073 - Total current assets 28,568,225 19,244,398 Trade and other receivables ,320 Property, plant and equipment , ,697 Intangible assets 14 2,497, ,697 Deferred tax asset 296, ,685 Other non-current assets 12-2,000 Total non-current assets 3,505,461 1,565,399 Total assets 32,073,686 20,809,796 Liabilities Trade and other payables 15 7,944,651 4,061,755 Loans and borrowings 16 8,100,000 1,439,266 Current tax liabilities - 1,815,042 Employee benefits , ,885 Provisions , ,100 Deferred income/revenue 23 5,854,873 3,695,732 Total current liabilities 22,523,310 11,433,780 Deferred tax liability 434,804 72,117 Employee benefits 17 15,692 25,520 Deferred income/revenue 378,185 - Total non-current liabilities 828,681 97,637 Total liabilities 23,351,991 11,531,417 Net assets 8,721,695 9,278,379 Equity Issued capital Reserves (290,645) (290,645) Retained earnings 9,011,997 9,568,687 Total equity 8,721,695 9,278,379 The notes on pages 7 to 21 are an integral part of these financial statements. 4

7 Statement of changes in equity For the year ended 30 June 2015 In dollars Share capital Retained earnings Translation reserve Total equity Balance at 1 July ,187,536 28,961 4,216,824 Total comprehensive income Profit - 5,381,151-5,381,151 Total comprehensive income - 5,381,151-5,381,151 Transactions with owners of the Group Issue of ordinary shares Other comprehensive income - - (319,606) (319,606) Distributions Return of capital Total transactions with owners of the Group 10 - (319,606) (319,596) Balance at 30 June ,568,687 (290,645) 9,278,379 Balance at 1 July ,568,687 (290,645) 9,278,379 Total comprehensive income Profit/(Loss) - (69,590) - (69,590) Total comprehensive income - (69,590) - (69,590) Transactions with owners of the Group Issue of ordinary shares Other comprehensive income Distributions - (487,102) - (487,102) Return of capital Total transactions with owners of the Group 6 (487,102) - (487,096) Balance at 30 June ,011,997 (290,645) 8,721,695 The amounts recognised directly in equity are disclosed net of tax. The notes on pages 7 to 21 are an integral part of these financial statements. 5

8 1 Reporting entity The (the Group ) is a non-statutory group consisting of the following entities: - Kogan Australia Pty Ltd - Kogan Mobile Pty Ltd - Kogan Technologies UK Pty Ltd - Kogan International Holdings Pty Ltd - Kogan HK Limited - Kogan Travel Pty Ltd; - Kogan Mobile Australia Pty Ltd; and - Kogan HR Pty Ltd The Group is a profit orientated group primarily involved in online retail trading. In the opinion of the Trustee, the Group is not a reporting entity. The financial statements of the Group have been drawn up as special purpose financial statements to assist the Group to meet the information requirements of the Trustee and the Unitholder. 2 Basis of preparation (a) Basis of accounting The special purpose financial statements have been prepared to meet the requirements of the Trustee and the Unitholders, and the recognition, measurement and classification aspects of all applicable Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) have been used in preparing these financial statements. The special purpose financial statements include only the disclosure requirements of the following AASBs and those disclosures considered necessary by the Trustee and Unitholders: AASB 101 Presentation of Financial Statements AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors AASB 1048 Interpretation and Application of Standards AASB 1054 Australian Additional Disclosures The financial statements do not comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). (b) Consolidation The Group s consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the Group, being the Company (the parent entity) and its subsidiaries as defined in AASB 10 Consolidated Financial Statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains control until such time as the Company ceases to control such entity. In preparing the financial statements, all intercompany balances, transactions and unrealised profits arising within the Group are eliminated in full, 6

9 2. Basis of preparation (continued) (b) Basis of measurement The financial statements have been prepared on the historical cost basis except for the following material items, which are measured on an alternative basis at each reporting date. Items Derivative financial instruments at fair value through profit or loss Non-derivative financial instruments at fair value through profit or loss Measurement basis Fair value Fair value (c) Functional and presentation currency These financial statements are presented in Australian dollars, which is the functional currency of the majority of the entities in the Group. (d) Use of judgements and estimates In preparing the financial report, the Directors made an assessment of the ability of the group to continue as a going concern, which contemplates the continuity of business operations, realisation of assets and settlement of liabilities in the ordinary course of business and at the amounts stated in the financial report. As disclosed in note 16, the group is funded by a secured loan facility. The loan facility in place at year end matured in August 2015, and accordingly has been classified as current in the financial statements. Subsequent to year end the facility was refinanced through to 31 March Based on forecast trading results and cash flows, the Directors believe that the group will continue to generate sufficient operating results and cash flows necessary to meet financing terms and conditions including relevant covenants. These forecasts are necessarily based on best-estimate assumptions that are subject to influences and events outside of the control of the group. The forecasts, taking into account reasonably possible changes in trading performance, show that the group will continue to operate within the level and terms of the loan facility conditions and covenants. In the normal course of business, the group intend to commence the process of extending its loan facility prior to its expiry on 31 March 2016, and expects to be able to do so on terms that are not disadvantageous to the group. After making enquiries and considering the matters described above, the Directors have a reasonable expectation that the group will continue to have adequate financial resources to continue to meet its obligations as they fall due and remain within the limits of its loan facility conditions and covenants. For these reasons, the financial report has been prepared on a going concern basis. Furthermore, in preparing these financial statements management have made judgements, estimates and assumptions that affect the application of the Company s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively. 7

10 Estimates and judgments that have the most significant effect on the amounts recognised in the financial statements are: Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the year ending 30 June 2015 are: The provision for warranties of $296,485 (2014: $205,718) and sales returns of $50,393 (2014: $49,381) is based on estimates from historical warranty and sales returns data associated with similar products and services. The Group expects to incur most of the liability over this next year. The assessment of the carrying value of non-current assets, including intangible assets, is based on management s assessment of the nature of the capitalised costs and their expected continued contribution of economic benefit to the Group, having regard to forecast performance. and profitability. 3. Significant accounting policies (a) Revenue Sale of goods Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. Revenue is measured net of returns, trade discounts and volume rebates. The timing of transfer of risks and rewards varies depending on the individual terms of the sales agreement. For sale of goods, the transfer usually occurs upon dispatch of the goods, where risks and rewards contractually transfer to the customer. Revenue from the sale of goods is deferred when a customer has paid for the goods however the risks and rewards of ownership are yet to be transferred. (ii) Rendering of services Revenue from the rendering of services is recognised when management has fulfilled its service obligations in providing mobile services to it s the Group s customers, recovery of the consideration is probable and the amount of revenue can be measured reliably. Revenue is measured net of returns and trade discounts The timing of revenue recognition varies depending on the individual terms of the services agreement and the contractual obligations of the Group. Revenue from the rendering of services is deferred when a customer has paid up front but the Group has not yet provided the services to the customer. 8

11 3. Significant accounting policies (continued) (b) Finance income and finance costs The Group s finance income and finance costs include: interest income; interest expense; and the foreign currency gain or loss on financial assets and financial liabilities. Interest income or expense is recognised using the effective interest method. (c) Foreign currency transactions Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognised in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated. (d) Employee benefits Short-term employee benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. (ii) Defined contribution plans Obligations for contributions to defined contribution plans are recognised as the related service is provided. (iii) Other long-term employee benefits The Group s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise. (e) Income tax Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in Other Comprehensive Income. Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. 9

12 3. Significant accounting policies (continued) (ii) Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities Deferred tax assets and liabilities are offset only if certain criteria are met. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (iii) Tax exposures In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. (f) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost principle and includes all direct costs attributable to purchase, such as freight and insurance. (g) Property, plant and equipment Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. 10

13 3. Significant accounting policies (continued) (ii) Subsequent expenditure Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. (iii) Depreciation Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values using either the straight-line basis or reducing balance basis over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. The estimated annual depreciation rate of property, plant and equipment are as follows: computer equipment (reducing balance basis) 67% 67% office equipment and furniture (reducing balance basis) 10-25% 10-25% Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (h) Intangible assets Website development and software costs Website development and software costs are measured at cost less any accumulated amortisation and accumulated impairment losses. Such development costs are only capitalised if they can be reliably measured, the process is technically and commercially feasible, future economic benefits are probably, and the Group has sufficient resources to complete development. (ii) Acquired customer lists Intellectual Property Acquired customer lists which enable direct marketing of Kogan products and services are capitalised to the extent it is probable that expected future economic benefits attributable to the asset will flow to the entity, and the cost can be reliably measured. (iii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. 11

14 3. Significant accounting policies (continued) (h) Intangible assets (iii) Amortisation Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Intangibles that are considered to have indefinite useful lives are not subject to amortisation. The estimated useful lives are as follows: patents and trademarks 2.5 years 2.5 years website development costs 2.5 years 2.5 years software 2.5 years 2.5 years customer lists 2 years 2 years Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Financial instruments Derivative financial assets and financial liabilities The Group uses financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. The Group does not hold or issue financial instruments for trading purposes. Financial instruments are recognised initially at cost. Subsequent to initial recognition, financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognised immediately in profit or loss. The Group does not use hedge accounting. (ii) Non-derivative financial assets and financial liabilities recognition and derecognition The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. The Group classifies non-derivative financial liabilities into the other financial liabilities category. The Group initially recognises loans and receivables issued on the date that they are originated. All other financial assets and financial liabilities are recognised initially on the trade date. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. 12

15 3. Significant accounting policies (continued) Financial instruments (continued) Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. (iii) Non-derivative financial assets measurement Loans and receivables These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. (iv) Non-derivative financial liabilities measurement Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest rate method. (v) Issued capital Share Capital Incremental costs directly attributable to the issue of share capital/trust units, net of any tax effects, are recognised as a deduction from equity. (j) Impairment Non-derivative financial assets Financial assets not classified as at fair value through profit or loss, including an interest in an equity-accounted investee, are assessed at each reporting date to determine whether there is objective evidence of impairment. Objective evidence that financial assets are impaired includes: default or delinquency by a debtor; indications that a debtor or issuer will enter bankruptcy; and adverse changes in the payment status of borrowers or issuers. 13

16 3. Significant accounting policies (continued) (j) Impairment (continued) Non-derivative financial assets (continued) Financial assets measured at amortised cost The Group considers evidence of impairment for these assets measured at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment the Group uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends. An impairment loss is calculated as the difference between an asset s carrying amount and the present value of the estimated future cash flows discounted at the asset s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss. (ii) Non-financial assets At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated to reduce the carrying amount of assets in the CGU on a pro rata basis. 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. 14

17 3. Significant accounting policies (continued) (k) Provisions Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability (where material). The unwinding of the discount is recognised as finance cost. Warranties A provision for warranties is recognised when the underlying products or services are sold, based on historical warranty data and a specific review of warranty claims outstanding. (ii) Sales returns A provision for sales returns is recognised for the expected value of returns, based on historical sales return data and a specific review of the profile of sales for the year and post year end. (l) Leases Leased assets Assets held by the Group under leases, which transfer to the Group substantially all the risks and rewards of ownership are classified as finance leases. The leased asset is measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognised in the Group s statement of financial position. Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense 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. 15

18 4. New standards and interpretations adopted or not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2018, and have not been applied in preparing these financial statements. Those which may be relevant to the Company are set out below. The Company does not plan to adopt these standards early: - AASB 9 Financial Instruments; - AASB 15 Revenue from contracts with Customers. 5. Capital Management The Trustee s policy is to maintain a strong capital base so as to sustain future development of the business. Capital consists of total equity. The Trustee seeks to maintain an appropriate level of capital to support the group s current and planned operations, including through the use of external loan facilities and other financial instruments. 6. Revenue in dollars Revenue Sale of goods 199,985, ,039,543 Revenue Rendering of services - 4,622, ,985, ,661,648 The revenue balances have been restated to reflect the adjustment discussed further in note Other income in dollars Net gain on sale of property, plant and equipment Other income 303,295 3, ,295 3, Finance Income and expenses in dollars Finance income 9,561 66,490 Finance expense (1,046,620) (304,033) Net finance income/expense (1,037,059) (237,543) 9. Cash and cash equivalents In dollars Bank balances 397,781 3,854, Trade and other receivables in dollars Current Trade receivables 1,353, ,030 Other receivables 847, ,859 2,201, ,888 16

19 Non-current `14 Other receivables - 293, Inventories in dollars Stock in transit 4,030,519 2,771,184 Stock on hand 21,041,990 11,303,734 Carrying amount of inventories 25,072,509 14,074, Other assets in dollars Current Prepayments 106, ,907 Rental bonds 29, ,440 Other current assets 3,333 11, , ,005 Non-current Rental bonds - - Other non-current assets - 2,000-2, Property, plant and equipment in dollars Carrying amounts Computer equipment Office Equipment & furniture Leasehold improvements Total at 30 June ,381 83, ,697 at 30 June , ,014 11, ,682 17

20 14. Intangible assets in dollars Cost Patents and trademarks Website Development costs Software Customer lists Total Balance at 1 July , ,381 1, ,832 Additions 79, ,464 75, ,048 Effect of movements in exchange rates Balance at 30 June ,343 1,333,845 76,692-1,559,880 Balance at 1 July ,343 1,333,845 76,692-1,559,880 Additions 41, , ,285 1,813,022 2,767,236 Effect of movements in exchange rates Balance at 30 June ,934 1,680, ,977 1,813,022 4,327,116 Accumulated amortisation and impairment losses Balance at 1 July , , ,379 Amortisation for the year - 379, ,805 Impairment loss Effect of movements in exchange rates Balance at 30 June , , ,184 Balance at 1 July , , ,184 Amortisation for the year 49, , , ,852 1,211,123 Impairment loss Reversal of impairment loss Effect of movements in exchange rates Balance at 30 June ,146 1,070, , ,852 1,829,307 Carrying amounts at 30 June , ,845 75, ,697 at 30 June , , ,038 1,242,170 2,497,809 18

21 15. Trade and other payables in dollars Current Trade payables 5,395,208 2,586,444 Other payables 2,378, ,463 Accrued expenses 171, ,847 7,944,651 4,061, Loans and borrowings This note provides information about the contractual terms of the Group s interest-bearing loans and borrowings, which are measured at amortised cost. in dollars Current Working capital facility - secured 8,100,000 1,439,266 8,100,000 1,439,266 The Group had an undrawn working capital facility of nil (2014: $1,560,734), available to fund inventory purchases (total facility limit: $11,650,000; 2014: $3,000,000). The Group was in compliance with its debt covenant restrictions as at 30 June 2015 and throughout the period. 17. Employee benefits in dollars Current Annual leave 267, ,885 Long service leave 11, , ,885 Non-current liabilities Long service leave 15,692 25,520 19

22 18. Provisions in dollars Warranties Sales Refund Gift Vouchers Balance at 1 July ,719 49, ,100 Balance at 30 June ,966 50,393 60, ,732 Total Current 233,966 50,393 60, ,732 Non-current ,966 50,393 60, ,732 Warranties The provision for warranties relates mainly to the contractual obligations to fulfil warranty claims in accordance with terms of sale. The provision is based on estimates made from historical warranty data associated with similar products and services. The Group expects to settle the liability over the next year. Sales returns The provision for sales returns is recognised for the expected value of returns, based on historical sales return data and a specific review of the profile of sales for the year. The Group expects to settle the liability over the next year. 19. Capital and reserves (a) Issued capital Share capital The Group does not have authorised capital or par value in respect of its issued trust units. Holders of these units are entitled to Distributions as declared from time to time and their rights are determined by the Kogan Technologies Unit Trust Deed. (b) Distributions During the year, the Group made distributions of $500,000, of which $12,998 related to the prior periods (2014: nil). 20. Auditors remuneration In dollars Fees paid to auditors of the Group KPMG Audit of financial statements Audit of financial statements 62,500 68,750 Other services Other regulatory audit services - Other assurance, taxation and due diligence services 15, ,162 Total fees paid or payable 77, ,912 20

23 21. Contingencies In a prior year Kogan Mobile Pty Ltd s service provider, ispone, went into liquidation. Kogan Mobile Pty Ltd has commenced proceedings against the liquidator and is pursuing a statement of claim. There is also a counter-claim against the company, which was launched prior to ispone entering voluntary administration in August 2013, then stayed as a result of the administration. Whilst the outcome of this matter is uncertain, a commercial negotiation has commenced, and management expects to recover some funds from the liquidator. The only amount brought to account in the financial statements is an amount of $293,320 for counter-enforced recovery of costs owing from the liquidator and supported by a Court Order, which the Trustee is satisfied will be recovered through the settlement process based on information available as at the date of this report. 22. Subsequent Events Subsequent to the end of the financial year, management successfully refinanced the Group s secured working capital facility (refer Note 16). The new facility has been entered into with Bankwest for a total facility amount of up to $5.5m, and is secured against the assets of the Group. It is subject to certain debt covenant compliance requirements and matures 31 March In October 2015, the Group launched Kogan Mobile in partnership with Vodafone Hutchison Australia Pty Ltd, offering prepaid mobile plans. On 11 March 2016 the Group agreed to acquire the on-line business of Dick Smith Electronics (receivers and managers appointed) through the purchase of goodwill, brand and intellectual property. The total purchase price was $2.61 million. On 11 March 2016 the Group executed a variation to its BankWest banking facility, which has the effect of extending the facility expiry date to 31 March 2019 and amending certain other terms including facility review events. Other than the above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Trustees of the Group, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 23. Re-issuance of financial report This special purpose financial report replaces and supersedes the previous financial report authorised by the directors and dated 18 December It has been updated to reflect: - a correction to the balance of current deferred revenue which has increased by $2,376,000, with a commensurate reduction in sales revenue, a reduction to income tax expense of $713,000, a corresponding increase to income tax receivable of $713,000, and an overall reduction in profit and net assets of $1,663,000; - A reduction in sales revenue, and raw materials and consumables used, of $7,300,983 in the Statement of Profit and Loss and Other Comprehensive Income (no impact on profit before tax or to the Statement of Financial Position).. 21

24 Trustees declaration 1. In the opinion of the Trustee of the ( the Group): (a) the Group is not a reporting entity; (b) the financial statements and notes, set out on pages 3 to 21: (c) (ii) present fairly the financial position of the Group as at 30 June 2015 and its performance, as represented by the results of its operations, for the financial year ended on that date in accordance with the statement of compliance and basis of preparation described in Note 2; and comply with Australian Accounting Standards (including the Australian Accounting Interpretations) to the extent described in Notes 1-23; and there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. 2. In respect of the year ended 30 June 2015 the Group has: (a) (b) (c) kept such accounting records as correctly record and explain its transactions and financial position; kept its accounting records that financial statements of the Group that are presented fairly can be prepared from time to time; and kept its accounting records so that the financial statements of the Group can be conveniently and properly audited in accordance with the Trust deed. Signed in accordance with a resolution of the Trustee: David Shafer Director Dated at Melbourne this 15 day of March

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