INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 The Future of Foreign Exchange www.moneyswap.com
CONTENTS Page Company Information 2 Chief Executive Officer s Statement 3-4 Consolidated Statement of Comprehensive Income 5 Consolidated Statement of Financial Position 6 Consolidated Statement of Cash Flows 7 Consolidated Statement of Changes in Equity 8 Notes to the Interim Consolidated Financial Statements 9-17 1
COMPANY INFORMATION Directors Kung-Min Lin Non-Executive Chairman Richard Victor Proksa Chief Executive Officer Chee Boon Lee Group Finance Director Saihua Xu Executive Director Richard O Dell Poulden Non-Executive Director Javier Amo Fernández de Ávila Non-Executive Director All c/o 13/15 Giro s Passage, Gibraltar Company Secretary Principal Place of Business Prime Secretaries Limited 901, 9/F., China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central Hong Kong SAR Telephone: +852 3919 9888 Website: www.moneyswap.com Nominated Adviser Broker Auditors to the Group Auditors to the Company Registrars Depository Allenby Capital Limited Claridge House 32 Davies Street Mayfair London W1K 4ND United Kingdom Old Park Lane Capital Plc 49 Berkeley Square Mayfair London W1J 5AZ United Kingdom Nexia Smith & Williamson 25 Moorgate London EC2R 6AY United Kingdom Benady Cohen & Co Limited 21 Engineer Lane Gibraltar Capita Registrars (Guernsey) Limited Mont Crevelt House Bulwer Avenue St Sampson Guernsey GY2 4LH Capita IRG Trustees Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU United Kingdom 2
CHIEF EXECUTIVE OFFICER S STATEMENT The interim six month financial period ended 30 September 2012 was marked by the Group developing its products and procedures to launch its three licensed China UnionPay payment products. Revenue in the current period (US$14,000) was similar to the six months ended 30 September 2011 (US$17,000). It showed a decrease from the year ended 31 March 2012 (US$1.8 million) which was mainly due to the inclusion of revenues from sales of Suisse Black Visa of US$1.7 million. Provision was made against this US$1.7 million in the current period as discussed below. During the period, sales of additional Suisse Black Visa prepaid cards of US$2.2 million were billed, however, collection is still pending. Thus, the management has decided not to recognise these amounts in the current period s financial results, albeit management will continue to pursue the collection of these funds. Indeed, the Company believes the relationship with Suisse Black Visa is strategically important to maintain as it will provide a unique selling feature to Chinese travellers when integrated with the China UnionPay suite of services available from MoneySwap. Operating expenses decreased for the period, after excluding the effect of the US$1.7 million provision made against the trade receivables, to US$2.4 million (operating expenses for the six months ended 30 September 2011: US$3.2 million). As the Group has not received the outstanding US$1.7m trade receivable, the Group has been required to secure debt funding in order to continue its business operations. During the period the Group received US$1.5 million of unsecured loans (the Unsecured Loans ), which are repayable at the Group s discretion. Interest on the Unsecured Loans is payable at 5%. Subsequent to the period the Group announced on 19 December 2012 that it had secured additional funding of $350,000 through the issue of a convertible loan note. The Group has also received a further US$435,000 of Unsecured Loans on the same terms as those received during the period under review. The Directors remain in discussions with investors with the intention of seeking further debt funding and remain confident that, with these loans and additional funds, sufficient working capital is available to support the Group s operations and to launch MoneySwap s China UnionPay products. After the China UnionPay products are put into full operations, the Board anticipates that the Group will be funded internally from the revenues generated and repayment of these various loans will then commence. Business review Current Trading The Company has been unable to collect the US$1.7 million trade receivable from selling of Suisse Black Card, reported in the audited financial report for the year ended March 2012. In light of this, operating expenses came under budget but overall business growth was not realized as the Group was unable to implement its planned investments in marketing and sales resources. The Group did however continue to develop its technology and procedures for MoneySwap s China UnionPay products. The Group has commenced revenue generating trial projects for these products post period end. Expanding Marketing and Sales Coverage Post Period For the Suisse Black Card issued by Corner Bank, Switzerland in association with Visa we have added additional sales agents inside as well as outside of China. The ability of China UnionPay cardholders to transfer funds from their UnionPay card to their Suisse Black Card is a compelling and unique feature which the Directors believe will drive sales. A number of international merchants are already integrating the MoneySwap UnionPay Online payment system into their websites, to enable cardholders of UnionPay in China to purchase goods and services online from non-china domiciled merchants. MoneySwap s online payment gateway was completed on time and incorporated a number of features requested by major potential merchants. MoneySwap holds a global license for this product and is working with payment partners such as DataCash UK, who already serve an existing community of online merchants with other payment gateways. 3
CHIEF EXECUTIVE OFFICER S STATEMENT Meanwhile, MoneySwap s Point-of-Sale terminals, which accept UnionPay cards, have been installed in a limited number of stores in the United Kingdom and are receiving an increasing flow of transactions. Discussions are ongoing with owners of a large number of retail outlets across Asia for the installation of the terminals. In addition, MoneySwap is in the process of securing additional licenses from China UnionPay to serve additional countries, such as Australia and Thailand. Separately, we have made excellent progress on the MoneyExpress product. MoneyExpress is an unique offering which enables funds to be remitted from abroad to cardholders of China UnionPay in China. Our MoneyExpress payment gateway has been the largest software development project undertaken by the Group since its IPO in August 2011. The product came in on time and under budget and with better than expected performance. Initial trials indicate that remittances are completed within an average of 60 seconds; far quicker than the time taken for remittances by traditional methods, which can take hours if not days. Initial trials will be with remittance partners in Hong Kong and other parts of Asia who have a large customer base of individuals who regularly remit funds to China. Outlook We believe we now have the people, products and strategy to drive revenue. Our challenge is to execute on our marketing strategy and generate revenues. I have every confidence in our team to do so. Thank you, the shareholder, for your continuing support. Richard V. Proksa Chief Executive Officer Date: 21 December 2012 4
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Six months Six months Year ended ended ended Notes Unaudited Unaudited Audited Revenue 2 13,738 17,373 1,783,793 Cost of sales (733) - (93,483) Gross profit 2 13,005 17,373 1,690,310 Other income 2, 3 168 9,847 11,153 Provision for impairment loss on trade receivables 8 (1,752,866) - - Administrative expenses (2,369,023) (3,243,546) (6,611,321) Loss before taxation (4,108,716) (3,216,326) (4,909,858) Taxation 4 (679) (1,539) (12,179) Loss for the period/year (4,109,395) (3,217,865) (4,922,037) Other comprehensive income/(loss) for the period/year Exchange difference on translation of financial statements of overseas subsidiaries 14,630 (6,063) (68,217) Total comprehensive loss for the period/year (4,094,765) (3,223,928) (4,990,254) Loss for the period/year attributable to: Equity holders of the Company (4,074,168) (3,123,730) (4,731,782) Non-controlling interest (35,227) (94,135) (190,255) (4,109,395) (3,217,865) (4,922,037) Total comprehensive loss for the period/year attributable to: Equity holders of the Company (4,059,538) (3,132,288) (4,803,106) Non-controlling interest (35,227) (91,640) (187,148) (4,094,765) (3,223,928) (4,990,254) Loss per share: US Cent US Cent US Cent Basic and diluted 5 (0.97) (0.91) (1.27) 5
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2012 Notes Unaudited Unaudited Audited ASSETS Non-current assets Property, plant and equipment 6 431,547 431,524 391,674 Goodwill 7 572,646 553,495 566,328 Intangible assets 387,261 489,480 441,904 Total non-current assets 1,391,454 1,474,499 1,399,906 Current assets Trade receivables 8 482-1,753,132 Other receivables and prepayments 357,446 304,432 336,985 Cash and cash equivalents 205,652 3,052,592 1,140,558 Total current assets 563,580 3,357,024 3,230,675 TOTAL ASSETS 1,955,034 4,831,523 4,630,581 EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Share capital 9 677,285 635,812 677,285 Share premium 9 10,588,310 8,631,983 10,588,310 Share-based payment reserve 10 820,795 342,894 734,817 Foreign currency translation reserve (105,561) (58,037) (120,191) Combination reserve 3,456,928 3,468,033 3,456,928 Retained earnings (16,141,585) (10,124,914) (11,732,966) Total (deficit)/equity attributable to equity holders of the (703,828) 2,895,771 3,604,183 Non-controlling interest - 32,278 (63,842) Total (deficit)/equity (703,828) 2,928,049 3,540,341 Current liabilities Borrowings 1,502,847 - - Trade and other payables 1,156,015 573,395 1,080,399 Provision for taxation - - 9,841 Total current liabilities 2,658,862 573,395 1,090,240 Non-current liabilities Loan payable - 1,330,079 - Total liabilities 2,658,862 1,903,474 1,090,240 TOTAL EQUITY AND LIABILITIES 1,955,034 4,831,523 4,630,581 6
CONSOLIDATED STATEMENT OF CASH FLOWS Six months Six months Year ended ended ended Notes Unaudited Unaudited Audited Net cash outflow from operating activities 11 (2,086,004) (2,665,206) (4,549,558) Cash flow from investing activities Purchase of property, plant and equipment (105,860) (55,533) (76,025) Acquisition of non-controlling interest in subsidiary 14 (314,340) - - Net cash outflow from investing activities (420,200) (55,533) (76,025) Cash flow from financing activities Loans received 1,502,847 1,488,768 1,488,768 Loans repaid - (860,000) (860,000) Proceeds from issue of shares - 5,031,250 5,031,250 Net cash inflow from financing activities 1,502,847 5,660,018 5,660,018 Net (decrease)/increase in cash and cash equivalents (1,003,357) 2,939,279 1,034,435 Cash and cash equivalents at beginning of the period/year 1,140,558 138,663 138,663 Effect of foreign exchange rate changes 68,451 (25,350) (32,540) Cash and cash equivalents at end of the period/year 205,652 3,052,592 1,140,558 7
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital Share premium Sharebased payment reserve Foreign currency translation reserve Combination reserve Retained earnings Noncontrolling interest Total US$ US$ Balance at 1 April 2011 441,424 3,628,694 - (51,974) 3,829,805 (7,001,184) (105,626) 741,139 Loss for the period - - - - - (3,123,730) (94,135) (3,217,865) Exchange difference on translation of foreign operations - - - (6,063) - - - (6,063) Total comprehensive loss for the period - - - (6,063) - (3,123,730) (94,135) (3,223,928) Issue of share capital 189,179 5,003,289 - - - - - 5,192,468 Acquisition of subsidiaries 5,209 - - - (361,772) - 232,039 (124,524) and recognition of noncontrolling interest Equity-settled share-based transactions - charged for the period - - 342,894 - - - - 342,894 Balance at 30 September 2011 (unaudited) 635,812 8,631,983 342,894 (58,037) 3,468,033 (10,124,914) 32,278 2,928,049 Balance at 1 April 2012 677,285 10,588,310 734,817 (120,191) 3,456,928 (11,732,966) (63,842) 3,540,341 Loss for the period - - - - - (4,074,168) (35,227) (4,109,395) Exchange difference on translation of foreign operations - - - 14,630 - - - 14,630 Total comprehensive loss for the period - - - 14,630 - (4,074,168) (35,227) (4,094,765) Acquisition of subsidiary and de-recognition of non-controlling interest - - - - - (413,409) 99,069 (314,340) Equity-settled share-based transactions - charged for the period - - 164,936 - - - - 164,936 - lapsed during the period - - (78,958) - - 78,958 - - Balance at 30 September 2012 (unaudited) 677,285 10,588,310 820,795 (105,561) 3,456,928 (16,141,585) - (703,828) 8
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1 Basis of preparation The interim consolidated financial statements incorporate the results of MoneySwap Plc (the Company ) and entities controlled by the Company (its subsidiaries) (collectively the Group ). The interim consolidated financial statements of the Group have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and do not include all of the information required for full annual financial statements. The interim consolidated financial statements are unaudited, do not constitute statutory accounts within the meaning of Gibraltar Companies (Accounts) Act 1999, and were approved by the Board of directors on 21 December 2012. The consolidated financial statements for the year ended 31 March 2012 were prepared under International Financial Reporting Standards ( IFRS ). The auditors reported on the financial statements. Their report was unqualified and included reference to a matter to which the auditors drew attention by way of emphasis without qualifying their report. The preparation of interim consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing the interim consolidated financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial statements as at and for the year ended 31 March 2012. The accounting policies applied by the Group in the interim consolidated financial statements comply with each International Financial Reporting Standards that is mandatory for accounting for the six months ended 30 September 2012. These policies are consistent with those adopted in the Group s consolidated financial statements for the year ended 31 March 2012 and those which will be adopted in the Group s consolidated financial statements for the year ending 31 March 2013. The principal risks and uncertainties of the Group have not changed since the last annual financial statements where a detailed explanation of such risks and uncertainties can be found. 2 Segmental information In the opinion of the directors, the Group has three business lines as described below, which are managed separately as they require different strategies: - Small and medium-sized entities ( SMEs ) - International remittance - Prepaid cards ( PP cards ) For the Group s internal reporting process, operating performance for SMEs and International remittance are assessed together and therefore, their segmental results are combined. The directors consider that it is neither possible nor meaningful to distinguish aggregate amortisation and depreciation, other administrative expenses and taxation between the business segments, nor segmental net assets and liabilities. As a result these amounts are not reported to the chief operating decision maker on a segmental basis. 9
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 2 Segmental information (continued) Six months Six months Year ended ended ended SMEs and International remittance Revenue 12,328 17,373 30,927 Cost of sales - - - Segmental gross profit 12,328 17,373 30,927 Prepaid cards Revenue 1,410-1,752,866 Cost of sales (733) - (93,483) Segmental gross profit 677-1,659,383 Provision for impairment loss on trade receivables (1,752,866) - - Segmental net loss (1,752,189) Consolidated Revenue 13,738 17,373 1,783,793 Cost of sales (733) - (93,483) Gross profit 13,005 17,373 1,690,310 Other income 168 9,847 11,153 Amortisation (59,432) (59,737) (117,633) Depreciation (66,014) (56,577) (117,635) Provision for impairment loss on trade receivables (1,752,866) - - Other administrative expenses (2,243,577) (3,127,232) (6,376,053) Loss before taxation (4,108,716) (3,216,326) (4,909,858) Taxation (679) (1,539) (12,179) Loss for the period/year (4,109,395) (3,217,865) (4,922,037) The Group is organised around two main geographical areas and a split of the geographical segments is as follows: Segmental information for the six months ended 30 September 2012 Europe Asia-Pacific Total Segmental revenue from external customers - 13,738 13,738 Capital expenditure - 105,860 105,860 Segmental total assets 976,204 978,830 1,955,034 Segmental information for the six months ended 30 September 2011 Segmental revenue from external customers - 17,373 17,373 Capital expenditure - 55,533 55,533 Segmental total assets 604,836 4,226,687 4,831,523 10
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 2 Segmental information (continued) Europe Asia-Pacific Total Segmental information for the year ended 31 March 2012 Segmental revenue from external customers - 1,783,793 1,783,793 Capital expenditure - 76,025 76,025 Segmental total assets 915,571 3,715,010 4,630,581 The major changes in segment assets during the period mainly relate to the provision for impairment loss made on the trade receivables and decrease in cash and cash equivalents as used in daily operations. 3 Other income Six months Six months Year ended ended ended Bank interest income 168 76 1,190 Government subsidy received - 9,771 9,864 Others - - 99 4 Taxation 168 9,847 11,153 Taxation of the Company and its subsidiaries is recognised based on the rules and regulations of their respective countries of incorporation. A deferred tax asset has not been recognised in respect of all tax losses available to carry forward against suitable future trading profits as the directors consider there is insufficient evidence that all the assets will be recovered. These assets can be recovered against suitable future trading profits. 5 Loss per share Six months Six months Year ended ended ended Net loss attributable to ordinary shareholders (4,074,168) (3,123,730) (4,731,782) Weighted average number of ordinary shares Issued ordinary shares at beginning of the period/year 420,870,655 275,307,513 275,307,513 Effect of share allotments - 69,406,192 98,633,135 Weighted average number of ordinary shares at end of the period/year 420,870,655 344,713,705 373,940,648 Basic and diluted loss per share (US Cents) (0.97) (0.91) (1.27) 11
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 5 Loss per share (continued) Basic loss per share has been calculated by dividing the net results attributable to ordinary shareholders by the weighted average number of shares in issue during the period/year. There are no dilutive potential ordinary shares as at 30 September 2012, 30 September 2011 and 31 March 2012 and thus, the diluted loss per share is the same as basic loss per share. 6 Property, plant and equipment During the six months ended 30 September 2012, the Group acquired assets with a cost of approximately US$106,000 (six months ended 30 September 2011: US$56,000; year ended 31 March 2012: US$76,000). 7 Goodwill The goodwill relates to the excess of consideration paid over the net assets acquired in MoneySwap Limited and MoneySwap FX Limited. The goodwill is tested annually for impairment and the last goodwill impairment test was carried out as at 31 March 2012, where the recoverable amount of the cash-generating unit was determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets prepared by the directors of the Company covering a five-year period and a discount rate of 13% and a growth rate of 2% from 2017 onwards. The discount rate is the average of selected comparable companies weighted average cost of capital. Apart from the existing businesses, the cash flow projections take into account the planned future new businesses, which will largely depend on the same cash-generating unit, that are expected to go live in the year ending 31 March 2013. As at 30 September 2012, the directors did not consider there to be any impairment in respect of the goodwill. Movement in goodwill during the period/year is as follows: Cost At 1 April 566,328 567,889 567,889 Exchange realignment 6,318 (14,394) (1,561) At 30 September/31 March 572,646 553,495 566,328 8 Trade receivables Trade debtors 1,753,348-1,753,132 Less: Provision for impairment loss (1,752,866) - - 482-1,753,132 12
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 8 Trade receivables (continued) All trade receivables are denominated in US dollars and Philippine Peso which are due upon billing. The ageing of trade receivables at the reporting date that were not impaired was as follows: Past due 1-30 days 32-238 Past due 31-90 days 450-1,752,894 482-1,753,132 Provision was made for the trade debtors that are long outstanding for more than half year. The directors consider that the carrying amount of trade receivables approximates to their fair value. 9 Capital and reserves Share capital and share premium Allotted, issued and fully paid, at 0.001 each Number Share Share Number Share Share Number Share Share of shares capital premium of shares capital premium of shares capital premium At beginning of the period/year 420,870,655 677,285 10,588,310 275,307,513 441,424 3,628,694 275,307,513 441,424 3,628,694 Shares issued for acquisition of subsidiaries Shares issued for conversion of loans Shares issued for consultancy and employee services Shares issued for subscription - - - 3,333,333 5,209-3,333,333 5,423 - - - - 4,555,555 7,119 306,298 25,729,809 41,272 1,646,534 - - - 54,000,000 84,388 38,287 54,000,000 88,541 382,457 - - - 62,500,000 97,672 4,658,704 62,500,000 100,625 4,930,625 At end of the period/year 420,870,655 677,285 10,588,310 399,696,401 635,812 8,631,983 420,870,655 677,285 10,588,310 Dividends The directors do not recommend the payment of a dividend for the six months ended 30 September 2012 (six months ended 30 September 2011: US$nil; year ended 31 March 2012: US$nil). 10 Share-based payments Share benefit charges Six months Six months Year ended ended ended Charges in respect of share options granted 161,311 355,736 733,528 Charges in respect of shares granted - 128,692 470,998 Charge for the period/year 161,311 484,428 1,204,526 13
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 10 Share-based payments (continued) Share options On 17 May 2011, the Group adopted a share option scheme that entitles directors, employees, consultants and professional advisers to purchase shares in the Company. The terms and conditions relating to the grants of share options are as follows, all options are to be settled by physical delivery of shares: Date of grant 12 August 2011 25 August 2011 18 October 2011 Options outstanding at 1 April 2012 19,800,000 5,088,767 4,200,000 Options granted during the period - - - Options lapsed during the period (4,700,000) - - Options outstanding at 30 September 2012 15,100,000 5,088,767 4,200,000 Exercise price 0.03-0.05 0.03-0.05 0.05 Share price at date of grant 0.05 0.05 0.0188 Contractual life (years) 10 5 10 Vesting date 12 February 2012 18 April 2013 31 August 2011 to 12 August 2014 to 18 October 2014 Settlement Shares Shares Shares Expected volatility 53.9% 58.3% 54.1% Expected option life at date of grant (years) 10 5 10 Risk free interest rate 2.87% 1.51% 2.59% Expected dividend yield 0% 0% 0% Fair value per option at date of grant 0.027-0.033 0.025-0.032 0.007 The fair value of the share options granted is measured using the Binomial Model. Valuation of the share options were based on the following conditions: 1. Share price at grant date for the share options granted on 12 August 2011 and 25 August 2011 is based on the subscription price of 0.05 when the Company was admitted to AIM on 31 August 2011. 2. Expected volatility is estimated based on the standard deviation of return on historical share price of selected comparable companies sourced from Bloomberg. 3. Risk free interest rate is based on the market yield of Sterling as of the grant date sourced from Bloomberg. 4. Expected dividend yield and annual departures are assumed to be 0%. At 30 September 2012, 10,588,767 shares options were exercisable (30 September 2011: 5,088,767; 31 March 2011: 8,938,767). 4,700,000 of the share options were lapsed in April 2012 due to resignation of the grantees as employees of the Group. 14
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 11 Net cash outflow from operating activities Six months Six months Year ended ended ended Loss before taxation (4,108,716) (3,216,326) (4,909,858) Foreign exchange translation differences 56,122 (251,285) (28,058) Depreciation and amortisation 125,446 116,314 235,268 Equity-settled share-based payment expenses 161,311 355,736 733,528 Loss on write-off of property, plant and equipment - 3,789 3,730 Provision for impairment loss on trade receivables 1,752,866 - - Salaries and consultancy fees satisfied by issue of shares - 128,692 470,868 (2,012,971) (2,863,080) (3,494,522) Changes in working capital Trade receivables (208) - (1,753,132) Other receivables and prepayments (17,714) 319,304 290,536 Trade and other payables (44,470) (121,430) 412,812 Income tax paid (10,641) - (5,252) Net cash outflow from operating activities (2,086,004) (2,665,206) (4,549,558) 12 Commitments Capital commitments At 30 September 2012, there were capital commitments of US$20,931 (30 September 2011: US$nil; 31 March 2012: US$20,904) that had been contracted but not provided for. Operating lease commitments At 30 September 2012, the Group had total future minimum lease payments under non-cancellable operating leases payable as follows: Within one year 104,886 354,819 246,442 After one year but within five years - 44,374-104,886 399,193 246,442 The Group is the lessee in respect of its office premises and staff quarters held under operating leases. The leases run for an initial period of two months to one year, with an option to renew the leases when all terms are renegotiated. The leases do not include contingent rentals. 13 Contingent liabilities There were no contingent liabilities at 30 September 2012 (30 September 2011: US$nil; 31 March 2012: US$nil). 15
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 14 Investments in subsidiaries The Company holds issued share capital of the following subsidiary undertakings: Company Country of Held directly Class Percentage incorporation or indirectly holding Money Swap Holdings Limited Hong Kong Directly Ordinary 100% MoneySwap Payment Solution Corp. # Philippines Directly Ordinary 100% MoneySwap Limited United Kingdom Indirectly Ordinary 100% MoneySwap FX Limited United Kingdom Indirectly Ordinary 100% MoneySwap Cyprus Limited Cyprus Indirectly Ordinary 100% MS Customer Services Limited Taiwan Indirectly Ordinary 100% Money Swap Exchange Limited Hong Kong Indirectly Ordinary 100% MS Services Center Limited Hong Kong Indirectly Ordinary 100% Money Swap Financial E-Service Peoples (Shanghai) Co., Limited # Republic of China Indirectly Ordinary 100% # Reporting date for these subsidiaries is 31 December, different from the Group due to local statutory requirements. In May 2012, approval was obtained from the local government bureau of the Peoples Republic of China for the acquisition by Money Swap Holdings Limited of the remaining 40% equity interest in Money Swap Financial E- Service (Shanghai) Co., Limited. Money Swap Financial E-Service (Shanghai) Co., Limited is now a wholly owned subsidiary of Money Swap Holdings Limited. As a result, non-controlling interest is derecognised and there is a transfer within equity as follows: Consideration paid 314,340 Less: Non-controlling interest as at date of acquisition (99,069) US$ 413,409 The acquisition contributed loss before tax to the Group of approximately US$71,000 for the period between the date of acquisition and 30 September 2012. 15 Related party transactions Related parties comprise mainly companies which are controlled or significantly influenced by the Group s key management personnel and their close family members. Group Six months Six months Year ended ended ended Note Loans received from Power Capital Forex (a) 350,000 - - Management Limited Loans received from Power Capital - 1,489,254 1,489,254 Exchange Corp. Value of shares issued to Power Capital - - 1,687,806 Exchange Corp. for conversion of loans Value of shares issued for consultancy - 404,846 404,846 services Value of shares issued for employee - 25,000 25,000 services Charges in respect of share options granted to directors and employees (b) 131,977 107,508 461,520 16
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 15 Related party transactions (continued) (a) During the period, Power Capital Forex Management Ltd., in which Kung-Min Lin, the Group s Chairman, has an interest and his brother is a director and major shareholder, loaned US$350,000 to the Group. Loan agreements were signed detailing the terms on which the amounts were loaned. The loans bear interest at 5% per annum, have no fixed repayment terms and are repayable at the Group s discretion. (b) On 12 August 2011 and 18 October 2011, the Company granted options over 24,000,000 ordinary shares to the Group s directors, employees and consultant, exercisable for half to ten years at 0.03 to 0.05 per ordinary share. 16 Ultimate controlling party As at 30 September 2012, the Group had no controlling party. 17 Post balance sheet events On 15 November 2012, the Group acquired a subsidiary in Australia, MoneySwap Australia Pty. Ltd., which was set up by an ex-employee under the Group s instruction. In December 2012, the Group issued 10% convertible loan note of US$350,000 to an independent investor. At maturity, the holder of the two-year note has an option to convert the loan to shares of the Company, with conversion price based on the average closing market price in the preceding ten business days, less 10% discount. Subsequent to the period end, the Group received loans of US$235,000 and US$200,000 from a related company and an individual third party respectively. The loans bear interest at 5% per annum, have no fixed repayment terms and are repayable at the Group s discretion. 17