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INTEGRATEDLEGALHOLDINGSLIMITED
ACN120394194
(ASX:IAW)
FinancialReport
Fortheperiodfromincorporationon
26June2006to30June2007
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INTEGRATEDLEGALHOLDINGSLIMITED
ACN120394194
Contents
Corporateinformation
.............................................................................................................
1
Directorsreport......................................................................................................................2
Balancesheet.........................................................................................................................12
Incomestatement..................................................................................................................13
Cashflowstatement..............................................................................................................14
Statementofchangesinequity.............................................................................................15
Notestothefinancialstatements.........................................................................................16
Directorsdeclaration
............................................................................................................
35
Auditorsindependencedeclaration.....................................................................................36
Independentauditreport......................................................................................................37
ASXadditionalinformation....................................................................................................39
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INTEGRATEDLEGALHOLDINGSLIMITED
ACN
120
394
194
CorporateInformation
1
ABN20120394194
Directors
TheHonJohnDawkins,Chairman
AnneTregonning,NonexecutiveDirector
ThomasHenn,ManagingDirector
CompanySecretary
BrettDavies
Registeredoffice
GroundFloor
201Adelaide
Terrace
Perth WA 6000
Principalplaceofbusiness
GroundFloor
201AdelaideTerrace
Perth WA 6000
Tel:(08)94634343
ShareRegister
SecurityTransferRegistrarsPtyLtd
770Canning
Highway
Applecross WA 6153
Tel: (08)93152333
IntegratedLegalHoldingsLimitedsharesarelistedontheAustralianStockExchange.
Solicitors
SteinepreisPaganin
Level4,NextBuilding
16MilliganStreet
Perth WA 6000
Bankers
BankofWesternAustraliaLimited
108StGeorgesTerrace
Perth WA 6000
Auditors
Ernst&Young
11MountsBayRoad
Perth WA 6000
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DirectorsReport(continued)
3
ThomasHenn,FTIA,GAICD,MTax,MESC,LLB(Munich)LLB(UWA)(ManagingDirector)
Appointed:26June2006
MrHenn
practiced
as
a
lawyer
in
Munich,
before
emigrating
from
Germany
to
Australia
in
1993.
AfterfinishingalawdegreeinAustralia,MrHennpracticedinaBigFouraccountingfirmandalso
variouslawfirms. HeisapracticinglawyerandcurrentlyworksforBrettDaviesLawyers. MrHenn
hasalsoservedasaboardmemberofapublicunlistedcompany.
MrHennisagraduateofTheUniversityofMunichandholdsaMasterofTaxationandaBachelorof
LawsdegreefromTheUniversityofWesternAustralia.
He is a Graduate Member of the Australian Institute of Company Directors and a Fellow of the
TaxationInstituteofAustralia.
WarrenBlack,
B.Com,
LLB
(Hons)
Appointed:26June2006
Resigned:6October2006
Mr Black is a qualified lawyer and accountant with nearly 18 years experience in taxation and
business law. He worked for 10 years at the Australian Taxation Office and has worked for eight
yearsasalawyer.
MrBlackhasexpertise intheareasoftaxplanningandstructuring inAustraliaand internationally,
asset protection, commercial law, accounting and superannuation, and more recently, internet
marketing.HewontheMallesonsStephenJacquesprizeforhisHonoursthesisonIncomeTaxand
CapitalGainsTax.
HemalModi,BSc(SoftwareEng),Dip.IT,MCP
Appointed:26June2006
Resigned:6October2006
Hemal is the Systems Development Manager at Brett Davies Lawyers. He is currently pursuing his
Honours inComputerSciencefromCurtinUniversityofTechnologyandhe isalsoworkingtowards
MCSD(MicrosoftCertifiedSystemsDeveloper)Certification.
Beneficialinterestsinthesharesofthecompanyandrelatedbodiescorporate
Asatthedateofthisreport,thebeneficialinterestsofthedirectorsinthesharesofIntegratedLegal
HoldingsLimitedwere:
Numberof
Ordinary
Shares
JDawkins 1,626,398
ATregonning 300,000
THenn 140,000
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INTEGRATEDLEGALHOLDINGSLIMITED
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DirectorsReport(continued)
4
COMPANYSECRETARY
ThomasHenn,FTIA,GAICD,MTax,MESC,LLB(Munich)LLB(UWA)
MrHenn
resigned
as
company
secretary
on
29
August
2007.
He
remains
a
director
of
the
company.
BrettDavies,FTIA,BJuris,LLB,LLM,BA(Hons),DipEd,MBA
MrDavieswasappointedcompanysecretaryon29August2007.
MrDaviesistheprincipalofBrettDaviesLawyers,ataxationandsuperannuationspecialistlawfirm
which has operated since 1994. He holds four degrees including both a Master of Business
Administration and Master of Laws and he is currently completing his Doctorate parttime at the
UniversityofWesternAustralia.
MrDavieswasNationalChairoftheLawCouncilofAustralia'sLegalPracticeManagementGroup.He
waselected
by
his
peers
to
the
Law
Council's
Legal
Practice
Section
executive
and
he
sits
on
the
Council's Taxation SubCommittee. He is the Deputy Convenor of the Law Society of WA Legal
Management and Development Committee and sits on the State's Taxation Committee. His
committee memberships also extend to nonlegal organisations including Chairman of the Art
GalleryofWesternAustraliaFoundation,pastpresidentofTheFriendsoftheArtGalleryofWestern
AustraliaandpastPresidentofhislocalRotaryClub.
MrDaviesisaregularpublicspeakeronpropertyandtaxationandhaslecturedattheUniversityof
WesternSydneyandatCurtinUniversityinPerth.
He is a director of Tax Lawyers Services Australia Pty Ltd, Tax Lawyers Australia Pty Ltd, Fortuna
FundsManagement
Ltd,
Law
Central
Co
Pty
Ltd
and
the
Customer
Service
Institute
of
Australia
Ltd.
DIVIDENDS
Nodividendsweredeclaredorpaidduringtheperiod.
PRINCIPALACTIVITIES
Thecompanywasformedtoactasalegalpracticeholdingcompany,althoughduringtheperiodno
legalpracticeshadyetbeenacquired.
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INTEGRATEDLEGALHOLDINGSLIMITED
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DirectorsReport(continued)
5
OPERATINGANDFINANCIALREVIEW
GroupOverview
IntegratedLegalHoldingsLimitedwasincorporatedon26June2006.
Thecompanysbusinessstrategyistoacquireandownhighquality,profitablelawfirms. Underthis
model,IntegratedLegalHoldingsLimitedseekstodeliverinvestorsexcellentcapitalgrowthreturns
basedontheacquisitionof legalpracticesandsecureyieldbasedreturnsfromdividendpayments
ontheprofits.
During the period, the company moved to commence its listing on the Australian Stock Exchange
(ASX)throughtheissueofaProspectus,dated16May2007,forthepurposesofraising$12,000,000
in new equity. The company listed on 17 August 2007 and the offer was oversubscribed with
$12,416,660raised
as
a
result.
The
success
of
the
initial
public
offering
represents
an
endorsement
ofthecompanysbusinessmodelandstrategicplan.
IntegratedLegalHoldingsLimitedactsasaholdingcompanyforlawfirmswhichareacquiredeither
asstandaloneentitiesorastuckinsforexistinglawfirms. Acquiredlawfirmsassetsaresoldto
IntegratedLegalHoldingsLimitedforapaymentbasedonhistoricalrevenueandnetprofitaftertax
availabletoequitypartners. Whereacquiredasastandalonefirm,theacquiredlawfirmcontinues
topracticeunderitsownname,withthesamestaffandinitscurrentlocation.
Integrated Legal Holdings Limiteds intention is to support the growth of individual member
practices, both organically and by acquisition, and to provide each firm with the ability to achieve
strongpractice
and
profit
improvement
as
a
result
of
the
competitive
advantages
offered
as
part
of
aleadingnationalgroup.
PerformanceIndicators
ManagementandtheBoardmonitorthecompanysoverallperformance,fromtheexecutionofits
strategicplanthroughtotheperformanceofthecompanyagainstoperatingplans,financialbudgets
andkeyperformanceindicators(KPIs).
OperatingResultsforthePeriod
Having successfully issued the Prospectus for the raising of $12,000,000 in equity, the period was
oneinwhichstrongfoundationswerelaidforthefuturegrowthofthecompany.
The companys net loss for the period after income tax is $18,723,247. The figure includes the
followingexpenses:
Sharebasedpaymentexpensesof$6,519,355pertainingtotheissueofsharesatadeemed
valueof50centspersharetodirectors,supportersandemployees;and
Impairment loss of $12,204,097 on the shares issued at a deemed value of 50 cents per
sharetovendorsofTalbotOlivierbusinessassets,BrettDaviesLawyersbusinessassetsand
LawCentralCoPtyLtdshareholders.
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INTEGRATEDLEGALHOLDINGSLIMITED
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DirectorsReport(continued)
OPERATINGANDFINANCIALREVIEW(continued)
6
ShareholderReturns
Thecompanysreturntoshareholdersisasfollows:
Basiclosspershare(cents) (64.5801)
Unfortunately,17August2007,thedateoflistingwasoneoftheworstintheprevioussevenyears
history of the market. The companys share price, which listed at 50 cents per share, steadily
declinedandiscurrentlytradingatapproximately25centspershare. Thedirectorsbelievethatthe
businessmodelsetoutintheProspectusremainsstrongandthecompanyisontargettoachieveits
objectives. Improvementinthesharepriceisanticipatedinthecomingyear.
Reviewof
Financial
Condition
LiquidityandCapitalResources
TheCashFlowStatementillustratesthereceiptof$8,788,530subscriptionmoniespriortolistingon
17August2007,representingthemajorityofthecashandcashequivalentsbalanceatthebalance
sheetdate. Thesefundsaresetasidefortheacquisitionoffoundationlawfirmsimmediatelyprior
tolisting,forcapitalraisingexpensesandforworkingcapitalforthecompanysacquisitionstrategy
goingforwardanddaytodayrunningexpenses.
Assetandcapitalstructure
Debts:
Interestbearingloansandborrowings
IPOapplication
monies
received
and
held
in
trust
8,788,735
Netdebt 8,788,735
Totalequity 205
Totalcapitalemployed $8,788,940
Shareissuesduringtheperiod
Thecompanyhasissued37,446,904sharessinceincorporation:
1shareissuedonincorporationofthecompanyon26June2006;
24,408,193shares issuedtovendorsofTalbotOlivierbusinessassets,BrettDaviesLawyers
businessassetsandLawCentralCoPtyLtdshareholderson29August2006;
8,611,802
shares
to
directors,
supporters
and
employees
of
the
company
on
29
August
2006;
606,398sharestodirectorsandemployeesofthecompanyon28February2007;and
3,820,510sharestosupportersofthecompanyon28February2007.
RiskManagement
Thecompanytakesaproactiveapproachtoriskmanagement.TheBoardisresponsibleforensuring
thatrisks,aswellasopportunities,areidentifiedonatimelybasisandthatthecompanysobjectives
andactivitiesarealignedwiththerisksandopportunities identifiedbytheBoard. Keyoperational
risksandtheirmanagementwillberecurringitemsfordeliberationatBoardmeetings.
Statementof
Compliance
This operating and financial review is based on the guidelines in The Group of 100 Incorporated
publicationGuidetotheReviewofOperationsandFinancialCondition.
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INTEGRATEDLEGALHOLDINGSLIMITED
ACN120394194
DirectorsReport(continued)
7
SIGNIFICANTCHANGESINTHESTATEOFAFFAIRS
Totalequityofthecompanyis$205. SeeNote9tothefinancialstatementsforfurtherinformation
onmovements
in
equity.
SIGNIFICANTEVENTSAFTERTHEBALANCEDATE
The company listed on the Australian Stock Exchange (ASX) on 17 August 2007. The initial public
offering (IPO) was for subscriptions of 24,000,000 ordinary shares at an issue price of 50 cents to
raise $12,000,000. The IPO was oversubscribed and the company exercised its right to accept
oversubscriptionsuptoafurther4,000,000.
Ultimately,24,833,320shareswereissuedat50centseach,raising$12,416,660.
Thecompany
also
made
an
offer
in
the
prospectus
to
shareholders
of
Law
Central
Co
Pty
Ltd
for
the
acquisition of 100% of the ordinary shares. Consideration for the offer was 0.10528 fully paid
ordinaryshares inIntegratedLegalHoldingsLimitedtogetherwithacashpaymentof$0.04736011
forevery1LawCentralCoPtyLtdshare. AllshareholdersofLawCentralCoPtyLtdagreedtothe
saleoftheirsharesandIntegratedLegalHoldingsLtdissued1,258,096sharestothoseshareholders.
Thefirsttwo lawfirmstojointhe IntegratedLegal HoldingsLimitedgroupwereTalbotOlivierand
BrettDaviesLawyers. Theacquisitionofthesepracticesoccurreduponcompletionofthe IPOand
receipt of subscription moneys under the IPO pursuant to the terms of an Option Deed that it
enteredintowiththeFoundationPartnersoftherelevantfirms.
Sincelisting
on
the
ASX,
the
company
has
acquired
two
further
law
firms
which
were
tucked
in
to
theTalbotOlivierbusiness:
1. PeterMarksSuccessionLawyerson19September2007;and
2. ShayneLeslieon28September2007.
Furtherdetailsoftheaboveacquisitionsaredisclosedinnote19ofthefinancialstatements.
LIKELYDEVELOPMENTSANDEXPECTEDRESULTS
IntegratedLegalHoldingsLimitedwillcontinuetoseekgrowthinrevenueandearningsthroughthe
acquisition of additional law firms in New South Wales, Victoria, the Australian Capital Territory,
Queenslandand
Western
Australia.
If
and
when
other
States
allow
non
lawyers
to
own
law
firms
andshareintheprofitsoflawfirms,thenthecompanywillpursueacquisitionsinthosejurisdictions
asopportunitiesarise.
SHAREOPTIONS
Unissuedshares
Asatthedateofthisreport,therewerenoordinarysharesunderoptions.
INDEMNIFICATIONANDINSURANCEOFDIRECTORSANDOFFICERS
Eachof
the
directors
of
the
company
will
enter
into
a
deed
with
the
company
whereby
the
company
has provided certain contractual rights of access to books and records of the company to those
directors and to effect and maintain insurance in respect of the directors and officers liability and
providecertainindemnitiestoeachofthedirectors,totheextentpermittedbylaw.
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INTEGRATEDLEGALHOLDINGSLIMITED
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DirectorsReport(continued)
REMUNERATIONREPORT
8
TheBoard
of
Directors
of
the
company
is
responsible
for
determining
and
reviewing
remuneration
arrangementsfortheBoardandexecutives.
TheBoardwillassesstheappropriatenessofthenatureandamountofremunerationofexecutives
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, high
performingBoardandexecutiveteam.
Remunerationphilosophy
The performance of the company depends upon the quality of its directors and executives. To
prosper,thecompanymustattract,motivateandretainhighlyskilleddirectorsandexecutives.
Tothisend,thecompanyintendstoconsiderthefollowingprincipalsinitsremunerationframework:
Providecompetitiverewardstoattracthighcalibreexecutives;
Linkexecutiverewardtoshareholdervalue;
Haveaportionofexecutiveremunerationatrisk;and
Establishappropriate,demandingperformancehurdlesforvariableexecutiveremuneration.
Remunerationstructure
Inaccordancewithbestpracticecorporategovernance,thestructureofnonexecutivedirectorand
executiveremunerationisseparateanddistinct.
Nonexecutivedirectorremuneration
Objective
TheBoardseekstosetaggregateremunerationatalevelthatprovidesthecompanywiththeability
to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to
shareholders.
Structure
TheConstitutionandtheASXListingRulesspecifythattheaggregateremunerationofnonexecutive
directorsshallbedeterminedfromtimetotimebyageneralmeeting. Thefirstdeterminationwill
be at the AGM to be held on 30 November2007when shareholders will be asked toapprovethe
aggregateremuneration
for
non
executive
directors
for
the
period.
The amount of aggregate remuneration sought to be approved by shareholders and the fee
structurewillbereviewedannually. TheBoardconsidersadvicefromexternalconsultantsaswellas
the fees paid to nonexecutive directors of comparable companies when undertaking the annual
reviewprocess.
Nonexecutivedirectorsdonotparticipateinanyincentiveprograms.
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INTEGRATEDLEGALHOLDINGSLIMITED
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DirectorsReport(continued)
REMUNERATIONREPORT
9
Executiveremuneration
Objective
Thecompanyaimstorewardexecutiveswitha levelandmixofremunerationcommensuratewith
theirpositionandresponsibilitieswithinthecompanysoasto:
Reward executives for company, business unit and individual performance against targets
setbyreferencetoappropriatebenchmarks;
Aligntheinterestsofexecutiveswiththoseofshareholders;and
Ensuretotalremunerationiscompetitivebymarketstandards.
Structure
In determining the level and makeup of executive remuneration, the Board engages external
consultantsas
needed
to
provide
independent
advice.
ThecompanyhasenteredintoacontractofemploymentwiththeManagingDirector.
Employmentcontracts
ManagingDirector
There isanemploymentcontractinplacebetweenMrHennandIntegratedLegalHoldingsLimited
forMrHennsappointmentasManagingDirectorofthecompany. Thecontractwassignedon31
October2006andcommencesfrom1July2007.Thetermofthecontractis12months. Afterthat
timeitisthensubjecttonegotiationbetweentheparties. TheappointmentasManagingDirectoris
subjecttoaprobationaryperiodofthreemonthsduringwhichtimeeitherIntegratedLegalHoldings
Limitedor
Mr
Henn
may
terminate
the
employment
without
reason
on
two
days
notice.
Underthetermsofthecontract,MrHennsdutiesinclude,butarenotlimitedto:
Implementingthebusinessplanasdeterminedbythecompany;
Carryingoutsuchlawfuldirectionsasgivenbythecompany;and
Expandinganddevelopingthebusiness.
TheagreementmaybeterminatedwithoutnoticebyIntegratedLegalHoldingsLimitedif:
MrHenncommitsaseriousbreachoftheagreement;
MrHenncommitsanyactthatamountstoarepudiationoftheagreement;
MrHennengagesinseriousorwilfulmisconduct;or
It
is
permitted
by
theWorkplace
Relations
Act
1996
and
for
any
reason
under
that
legislation.
RemunerationofKeyManagementPersonnel
Duringtheperiod,thefollowingshareswereissuedtodirectorsasremuneration:
Director
Numberof
OrdinaryShares* $
JDawkins 1,626,398 813,199
ATregonning 300,000 150,000
THenn 139,999 70,000
WBlack
10,000
5,000
HModi 40,000 20,000*Thesesharesaresubjectto24monthsvoluntaryescrowrestrictionfrom17August2007,whichisthedatethecompany
listedontheASX.
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INTEGRATEDLEGALHOLDINGSLIMITED
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DirectorsReport(continued)
10
DIRECTORSMEETINGS
Thenumberofmeetingsofdirectors(includingmeetingsofcommitteesofdirectors)heldduringthe
periodand
the
number
of
meetings
attended
by
each
director
was
as
follows:
Directors
MeetingsEligibleto
attend
Attended
THenn 17 17
WBlack 11 11
HModi 11 11
JDawkins 7 7
ATregonning 7 7
Committeemembership
On29August2007,anAuditCommitteeandanAcquisitionCommitteeoftheBoardofDirectorswas
established. Membersappointedtothecommitteesareasfollows:
AuditCommittee AcquisitionCommittee
ATregonning Chairman BDaviesChairman
JDawkins ATregonning
THenn JDawkins
THenn
AUDITORINDEPENDENCEANDNONAUDITSERVICES
Acopyoftheauditorsindependencedeclarationinrelationtotheauditfortheperiodisprovided
withthisreportonpage38.
NONAUDITSERVICES
Thefollowingnonauditserviceswereprovidedbytheentitysauditor,Ernst&Young. Thedirectors
are satisfied that the provision of nonaudit services is compatible with the general standard of
independence for auditors imposed by theCorporationsAct2001. The nature and scope of each
typeofnonauditserviceprovidedmeansthatauditorindependencewasnotcompromised.
Ernst&Youngreceivedorareduetoreceivethefollowingamountsfortheprovisionofnonaudit
services:
Preparation of the Independent Accountants Report
containedintheProspectusdocument. $145,067
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INTEGRATEDLEGALHOLDINGSLIMITED
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DirectorsReport(continued)
11
Signedinaccordancewitharesolutionofthedirectors.
THenn
Director
Perth,30October2007
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INTEGRATEDLEGALHOLDINGSLIMITED
ACN120394194
BalanceSheet
ASAT30JUNE2007
Theabovebalancesheetshouldbereadinconjunctionwiththeaccompanyingnotes.
12
Note
2007
$
ASSETS
CurrentAssets
Cashandcashequivalents 5 8,788,735
Capitalisedexpenditure 6 506,872
Totalcurrentassets 9,295,607
TOTALASSETS 9,295,607
LIABILITIES
CurrentLiabilities
Tradeand
other
payables
7
9,295,402
TotalCurrentLiabilities 9,295,402
TOTALLIABILITIES 9,295,402
NETASSETS 205
EQUITY
Issuedcapital 9 18,723,452
Accumulatedlosses 10 (18,723,247)
TOTALEQUITY 205
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ACN120394194
IncomeStatement
FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
Theaboveincomestatementshouldbereadinconjunctionwiththeaccompanyingnotes.
13
Note
2007
$
Interestrevenue 205
Impairmentloss 12 (12,204,097)
Sharebasedpaymentsexpense (6,519,355)
Lossbeforeincometax (18,723,247)
Incometaxexpense 8
Lossafterincometax (18,723,247)
Netlossfortheperiod (18,723,247)
Basiclosspershare(cents) 11 (64.5801)
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CashFlowStatement
FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
Theabovecashflowstatementshouldbereadinconjunctionwiththeaccompanyingnotes.
14
Note
2007
$
Cashflowsfromoperatingactivities
Interestreceived 205
Netcashflowsfromoperatingactivities 205
Cashflowsfrominvestingactivities
Netcashflowsfrominvestingactivities
Cashflowsfromfinancingactivities
Proceedsfromissueofshares 8,788,530
Proceedsfromloansreceived 506,872Paymentsforshareissueexpenses (506,872)
Netcashflowsfromfinancingactivities 8,788,530
Netincreaseincashheld 8,788,735
Cashatthebeginningofthefinancialperiod
Cashandcashequivalentsattheendofthefinancialperiod 5 8,788,735
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INTEGRATEDLEGALHOLDINGSLIMITED
ACN120394194
StatementofChangesinEquity
FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
Theabovestatementofchangesinequityshouldbereadinconjunctionwiththeaccompanying
notes.
15
Issued
Capital
Accumulated
Losses
Total
Equity
$ $ $
At26June2006
Lossfortheperiod (18,723,247) (18,723,247)
Issueofshares 18,723,452 18,723,452
At30June2007 18,723,452 (18,723,247) 205
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NotestotheFinancialStatements
FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
16
1)
CORPORATEINFORMATION
The financial report of Integrated Legal Holdings Limited (the company) for the period from
incorporation on 26 June 2006 to 30 June 2007 was authorised for issue in accordance with a
resolutionofdirectorson30October2007.
TheCompanyisacompanylimitedbysharesincorporatedinAustraliawhosesharesareunlistedas
atthereportingdate.ThecompanyisdomiciledinAustraliaandwasincorporatedon26June2006
andthisperiodrepresentsthefirstreportingperiodforthecompany. Thefinancialreporttherefore
doesnotincludecomparativeinformation.
ThenatureoftheoperationsandprincipalactivitiesofthecompanyaredescribedintheDirectors'
Report.
2)
SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES
a)
Basisofpreparation
The financial report is a general purpose financial report, which has been prepared in accordance
with the requirements of the CorporationsAct 2001 and Australian Accounting Standards. The
financialreporthasalsobeenpreparedonahistoricalcostbasis.
ThefinancialreportispresentedinAustraliandollars.
b)
Statementof
compliance
The financial report complies with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards ("AIFRS"). The financial report also
complieswithInternationalFinancialReportingStandards("IFRS").
In the current period, the company has adopted all of the new and revised Standards and
Interpretations issued by the Australian Accounting Standards Board (the AASB) and the Urgent
IssueGroupthatarerelevanttoitsoperationsandeffectiveforannualreportingperiodsbeginning
on1July2005. TheadoptionofthesenewandrevisedStandardsandInterpretationsdidnothave
anyeffectonthefinancialpositionorperformanceofthecompany.
AustralianAccounting
Standards
and
Interpretations
that
have
recently
been
issued
or
amended
but
arenotyeteffectivehavenotbeenadoptedbythecompanyfortheannualreportingperiodending
30June2007. Theseareoutlinedinthefollowingtable.
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Reference Title Summary Application
dateof
standard*
Impactoncompany
financialreport
Application
datefor
company*
AASB
200510
Amendmentsto
AustralianAccounting
Standards[AASB132,
AASB101,AASB114,
AASB117,AASB133,
AASB139,AASB1,AASB
4,AASB1023&AASB
1038]
Amendmentsarisefrom
thereleaseinAugust
2005ofAASB7Financial
Instruments:Disclosures
1January
2007
AASB7isadisclosure
standardsowillhaveno
directimpactonthe
amountsincludedinthe
companysfinancial
statements.However,the
amendmentswillresultin
changestothefinancial
instrumentdisclosures
includedinthecompanys
financialreport.
1July2007
AASB
20071
Amendmentsto
AustralianAccounting
Standardsarisingfrom
AASBInterpretation11[AASB2]
Amendingstandard
issuedasaconsequence
ofAASBInterpretation
11GroupandTreasuryShareTransactions.
1March 2007 Thisisconsistentwiththe
companysexisting
accountingpoliciesforshare
basedpaymentssowillhavenoimpact.
1July2007
AASB
20073
Amendmentsto
AustralianAccounting
Standardsarisingfrom
AASB8[AASB5,AASB6,
AASB102,AASB107,
AASB119,AASB127,
AASB134,AASB136,
AASB1023&AASB1038]
Amendingstandard
issuedasaconsequence
ofAASB8Operating
Segments
1January
2009
AASB8isadisclosure
standardsowillhaveno
directimpactonthe
amountsincludedinthe
companysfinancial
statements.Howeverthe
newstandardmayhavean
impactonthesegment
disclosuresincludedinthe
companysfinancialreport.
1July2009
AASB
20074
Amendmentsto
AustralianAccounting
StandardsarisingfromED
151and
Other
Amendments
Thestandardisaresult
oftheAASBdecision
that,inprinciple,all
accountingpolicy
optionscurrently
existinginIFRSshould
beincludedinthe
Australianequivalentsto
IFRSandtheadditional
Australiandisclosures
shouldbeeliminated,
otherthanthose
consideredparticularly
relevantinthe
Australianreporting
environment.
1July2007 Asthecompanydoesnot
anticipatechanginganyofits
accountingpolicychoicesas
aresult
of
the
issue
of
AASB
20074thisstandardwill
havenoimpactonthe
amountsincludedinthe
companysfinancial
statements.
Changestodisclosure
requirementswillhaveno
directimpactonthe
amountsincludedinthe
companysfinancial
statements.Howeverthe
newstandardmayhavean
impactonthedisclosures
includedin
the
companys
financialreport.
1July2007
AASB
20076
Amendmentsto
AustralianAccounting
Standardsarisingfrom
AASB123[AASB1,AASB
101,AASB107,AASB111,
AASB116&AASB138and
Interpretations1&12]
Amendingstandard
issuedasaconsequence
ofAASB123(revised)
BorrowingCosts.
1January
2009
Asthecompanydoesnot
currentlyconstructor
produceanyqualifying
assetswhicharefinancedby
borrowingstherevised
standardwillhaveno
impact.
1July2009
AASB
20077
Amendmentsto
AustralianAccounting
Standards[AASB1,AASB
2,AASB4,AASB5,AASB
107&AASB128]
Amendingstandard
issuedasaconsequence
ofAASB20074.
1July2007 RefertoAASB20074above. 1July2007
AASB7 FinancialInstruments:
Disclosures.
Newstandardreplacing
disclosurerequirements
ofAASB132.
1January
2007
RefertoAASB200510
above.
1July2007
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Reference Title Summary Application
dateof
standard*
Impactoncompany
financialreport
Application
datefor
company*
AASB8 OperatingSegments Thisnewstandardwill
replaceAASB114
SegmentReportingand
adoptsamanagement
approachtosegment
reporting.
1January
2009
RefertoAASB20073above. 1July2009
AASB101
(revised
October
2006)
PresentationofFinancial
Statements
Manyofthedisclosures
frompreviousGAAPand
alloftheguidancefrom
previousGAAParenot
carriedforwardinthe
October2006versionof
AASB101.Therevised
standardincludessome
textfromIAS1thatisnotintheexistingAASB
101andhasfewer
additionalAustralian
disclosurerequirements
thantheexistingAASB
101.
1January
2007
AASB101isadisclosure
standardsowillhaveno
directimpactonthe
amountsincludedinthe
companysfinancial
statements.However,the
revisedstandardmayresult
inchangestothedisclosures
includedinthecompanysfinancialreport.
1July 2007
AASB123
(revisedJune
2007)
BorrowingCosts AASB123previously
permittedentitiesto
choosebetween
expensingallborrowing
costsandcapitalising
thosethatwere
attributabletothe
acquisition,construction
orproduction
of
a
qualifyingasset.The
revisedversionofAASB
123requiresborrowing
coststobecapitalisedif
theyaredirectly
attributabletothe
acquisition,construction
orproductionofa
qualifyingasset.
1January
2009
RefertoAASB20076above. 1July2009
AASB
Interpretation
10
InterimFinancial
ReportingandImpairment
Addressesan
inconsistencybetween
AASB134Interim
FinancialReportingand
theimpairment
requirementsrelating
to
goodwillinAASB136
ImpairmentofAssets
andequityinstruments
classifiedasavailablefor
saleinAASB139
FinancialInstruments:
Recognitionand
Measurement
1November
2006
Theprohibitionsonreversing
impairmentlossesinAASB
136andAASB139totake
precedenceoverthemore
generalstatementinAASB
134that
interim
reporting
is
notexpectedtohaveany
impactonthecompanys
financialreport.
1July2007
AASB
Interpretation
11
GroupandTreasuryShare
Transactions
Specifiesthatashare
basedpayment
transactioninwhichan
entityreceivesservices
asconsiderationforits
ownequityinstruments
shallbe
accounted
for
as
equitysettled.
1March 2007 RefertoAASB20071above. 1July2007
*designatesthebeginningoftheapplicableannualreportingperiod
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c)
Businesscombinations
Thepurchase
method
of
accounting
is
used
to
account
for
all
business
combinations
regardless
of
whetherequity instrumentsorotherassetsareacquired.Cost ismeasuredasthefairvalueofthe
assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs
directly attributable to the combination. Where equity instruments are issued in a business
combination, the fair value of the instruments is their published market price as at the date of
exchangeunless,inrarecircumstances,itcanbedemonstratedthatthepublishedpriceatthedate
ofexchange isanunreliable indicatoroffairvalueandthatotherevidenceandvaluationmethods
provide a more reliable measure of fair value. Transaction costs arising on the issue of equity
instrumentsarerecogniseddirectlyinequity.
Except for noncurrentassetsor disposalgroupsclassifiedasheldforsale(whichare measured at
fairvalue
less
costs
to
sell),
all
identifiable
assets
acquired
and
liabilities
and
contingent
liabilities
assumedinabusinesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate,
irrespective of the extent of any minority interest. The excess of the cost of the business
combinationoverthenetfairvalueofthecompanysshareoftheidentifiablenetassetsacquiredis
recognisedasgoodwill.Ifthecostofacquisitionislessthanthecompanysshareofthenetfairvalue
ofthe identifiablenetassetsofthesubsidiary,thedifference isrecognisedasagain inthe income
statement, but only after a reassessment of the identification and measurement of the net assets
acquired.
Where settlement of any part of the consideration is deferred, the amounts payable in the future
are discounted to their present value as at the date of exchange. The discount rate used is the
entitysincremental
borrowing
rate,
being
the
rate
at
which
a
similar
borrowing
could
be
obtained
fromanindependentfinancierundercomparabletermsandconditions.
d) Segmentreporting
A business segment is a distinguishable component of the entity that is engaged in providing
productsorservicesthataresubjecttorisksandreturnsthataredifferenttothoseofotherbusiness
segments. A geographical segment is a distinguishable component of the entity that is engaged in
providingproductsorserviceswithinaparticulareconomicenvironmentandissubjecttorisksand
returnsthataredifferentthanthoseofsegmentsoperatinginothereconomicenvironments.
e)
Cashandcashequivalents
Cash
and
cash
equivalents
in
the
balance
sheet
comprises
shortterm
deposits
with
an
original
maturityofthreemonthsor lessthatarereadilyconvertibletoknownamountsofcashandwhich
aresubjecttoaninsignificantriskofchangesinvalue.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash
equivalentsasdefinedabove.
f)
Tradeandotherpayables
Tradepayablesandotherpayablesarecarriedatamortisedcost.Theyrepresentliabilitiesforgoods
andservicesprovidedtothecompanypriortotheendofthefinancialyearthatareunpaidandarise
whenthecompanybecomesobligedtomakefuturepayments inrespectofthepurchaseofthese
goodsand
services.
The
amounts
are
unsecured
and
are
usually
paid
within
30
days
of
recognition.
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g)
Sharebasedpaymenttransactions
Equitysettled
transactions
Thecompanymeasuresthecostofequitysettledtransactionswiththedirectorsandsupportersby
reference to the fair value of the equity instruments, being shares in the company, at the date at
whichtheyaregranted. Thefairvaluehasbeenbasedontheproposedlistingpriceof50centsper
sharewhichwasdeterminedinconsultationwithexternaladvisors.
h)
ContributedequityandIPOcosts
Ordinarysharesareclassifiedasequity. CostsassociatedwiththeIPOprocess,includingcorporate
advisory, legal and accounting fees are recognised as an asset to the extent the IPO will proceed.
UponthesuccessfullistingontheASX,thecostswillbeoffsetagainsttheequityraisedaspartofthe
capitalraisingprocess(refernote19 eventsafterthebalancesheetdate).
i) Incomeandothertaxes
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities based on the current period's
taxableincome.Thetaxratesandtaxlawsusedtocomputetheamountarethosethatareenacted
orsubstantivelyenactedbythebalancesheetdate.
Deferredincometaxisprovidedonalltemporarydifferencesatthebalancesheetdatebetweenthe
taxbasesofassetsandliabilitiesandtheircarryingamountsforfinancialreportingpurposes.
Deferredincometaxliabilitiesarerecognisedforalltaxabletemporarydifferencesexcept:
whenthedeferredincometaxliabilityarisesfromtheinitialrecognitionofgoodwillorofan
assetorliabilityinatransactionthatisnotabusinesscombinationandthat,atthetimeof
thetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss;or
when the taxable temporary difference is associated with investments in subsidiaries,
associates or interests injoint ventures, and the timing of the reversal of the temporary
differencecanbecontrolledanditisprobablethatthetemporarydifferencewillnotreverse
intheforeseeablefuture.
Deferredincometaxassetsarerecognisedforalldeductibletemporarydifferences,carryforwardof
unusedtaxcreditsandunusedtaxlosses,totheextentthatitisprobablethattaxableprofitwillbe
availableagainst
which
the
deductible
temporary
differences
and
the
carry
forward
of
unused
tax
creditsandunusedtaxlossescanbeutilised,except:
when thedeferred incometaxassetrelatingtothedeductibletemporarydifferencearises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxableprofitorloss;or
when the deductible temporary difference is associated with investments in subsidiaries,
associatesorinterestsinjointventures,inwhichcaseadeferredtaxassetisonlyrecognised
totheextentthatitisprobablethatthetemporarydifferencewillreverseintheforeseeable
future and taxable profit will be available against which the temporary difference can be
utilised.
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The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reducedto
the
extent
that
it
is
no
longer
probable
that
sufficient
taxable
profit
will
be
available
to
allowallorpartofthedeferredincometaxassettobeutilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are
recognised to the extent that it has become probable that future taxable profit will allow the
deferredtaxassettoberecovered.
Deferredincometaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplyto
theyearwhentheasset isrealisedorthe liability issettled,basedontaxrates(andtax laws)that
havebeenenactedorsubstantivelyenactedatthebalancesheetdate.
Incometaxes
relating
to
items
recognised
directly
in
equity
are
recognised
in
equity
and
not
in
profit
orloss.
Deferredtaxassetsanddeferredtax liabilitiesareoffsetonly ifa legallyenforceablerightexiststo
set off current tax assets against current tax liabilities and the deferred tax assets and liabilities
relatetothesametaxableentityandthesametaxationauthority.
Othertaxes
Revenues,expensesandassetsarerecognisednetoftheamountofGSTexcept:
when the GST incurred on a purchase of goods and services is not recoverable from the
taxationauthority,
in
which
case
the
GST
is
recognised
as
part
of
the
cost
of
acquisition
of
theassetoraspartoftheexpenseitemasapplicable;and
receivablesandpayables,whicharestatedwiththeamountofGSTincluded.
ThenetamountofGSTrecoverablefrom,orpayableto,thetaxationauthorityisincludedaspartof
receivablesorpayablesinthebalancesheet.
CashflowsareincludedintheCashFlowStatementonagrossbasisandtheGSTcomponentofcash
flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxationauthorityisclassifiedaspartofoperatingcashflows
Commitments
and
contingencies
are
disclosed
net
of
the
amount
of
GST
recoverable
from,
or
payableto,thetaxationauthority.
j)
Losspershare
Basicearningspershareiscalculatedasnetprofitattributabletomembersofthecompany,divided
bytheweightedaveragenumberofordinarysharesoutstandingduringtheperiod.
There were no dilutive or potentially dilutive shares for the period and therefore diluted loss per
shareneednotbedisclosed.
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3)
FINANCIALRISKMANAGEMENTOBJECTIVESANDPOLICIES
The
proceeds
of
the
public
capital
raising
will
provide
sufficient
capital
resources
to
enable
the
companytoachieveitsinitialbusinessobjectivestomaintainahealthyworkingcapitalbalanceand
tofundfutureacquisitionsoflawfirms.
4)
SIGNIFICANTACCOUNTINGJUDGEMENTS,ESTIMATESANDASSUMPTIONS
i)
Valuationofsharebasedpayment
Thecompanymeasuresthecostofequitysettledtransactionswiththedirectorsandsupportersby
reference to the fair value of the equity instruments, being shares in the company, at the date at
which they are granted. The fair value is determined by sponsors and external advisors with
referencetotheproposedlistingpriceforthecompanyinAugust2007.
ii) Impairmentofoptionstoacquirelawfirms
An impairment loss of $12,204,097 was recognised during the period in respect of the companys
financial assets, being the option to acquire the respective legal entities from the foundation
shareholders. Thevalueoftheimpairmentwasrecognisedasthedifferencebetweenthefairvalue
ofthesharesissuedforthefinancialasset,andtheconsiderationsreceivedorreceivableonissue.
5)
CURRENTASSETSCASHANDCASHEQUIVALENTS
2007
$
Moneymarketdeposit 8,788,735
8,788,735
Money market deposits are made for varying periods, depending on the immediate cash
requirementsofthecompany,areatcallandearninterestattherespectivemoneymarketdeposit
rates. This amount represents IPO application monies received and held in trust prior to the
companys listing with the ASX. In the event that the companys listing was unsuccessful, the
application monies above would need to be returned to applicants in full as soon as practicable
(refernote19 eventsafterthebalancesheetdate).
2007
$
Reconciliation of net cash inflow from operations to loss for the
period:
Netcashinflowfromoperations 205
Noncashitems
Sharebasedpayments (6,519,355)
Impairmentloss (12,204,097)
Lossfortheperiod (18,723,247)
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6)
CURRENTASSETS CAPITALISEDEXPENDITURE
2007
$
Capitalisedexpenditure 506,872
Capitalised expenditure represents share issue costs that will be shown in equity as a deduction
from the proceeds in the event of a successful capital raising (refer note 19 events after the
balancesheetdate).
7)
CURRENTLIABILITIESTRADEANDOTHERPAYABLES
2007
$
Otherpayables (a) 8,788,530
LoanfromLawCentralCoPtyLtd (b) 506,872
Totaltradeandotherpayables 9,295,402
a)
Otherpayables
Other payables are nontrade and noninterest bearing. The amount relates to IPO application
moniesreceivedandheldintrustpriortolistingwiththeASXon17August2007. Intheeventthat
thecompanyslistingwasunsuccessful,theapplicationmoniesabovewouldneedtobereturnedto
applicantsinfullassoonaspracticable(refernote19 eventsafterthebalancesheetdate).
b)
Loansfrom
Law
Central
Co
Pty
Ltd
During the period, a loan of $506,872 was made from Law Central Co Pty Ltd pertaining to costs
associatedwiththecapitalraising. Theloanisatcallandinterestisnotpayable.
8)
INCOMETAX
2007
Themajorcomponentsofincometaxare: $
IncomeStatement
Currentincometax
Currentincome
tax
charge
Currentincometaxbenefitnotrecognised
Deferredincometax
Relatingtooriginationandreversaloftemporarydifferences
Deferredincometaxnotrecognisedduetothecurrentincometaxbenefit
Areconciliationbetweentaxexpenseandtheproductofaccountinglossbefore
incometaxmultipliedbythecompany'sapplicableincometaxrateisasfollows:
Accountinglossbeforeincometax (18,723,247)
Atthestatutoryincometaxrateof30% (5,616,974)
Nondeductible
expenses
5,616,974
Incometaxexpensereportedintheincomestatement
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9)
ISSUEDCAPITAL
a)
Ordinaryshares
2007
$
37,446,904ordinaryfullypaidshares 18,723,452
b) Movementsinordinarysharecapital
Shares $
Openingbalanceat26June2006
Issuedonincorporation 1 1
Issue of shares at a deemed value of 50 cents per
share to vendors of Talbot Olivier Business Assets,
BrettDaviesLawyersBusinessAssets,LawCentralCo
PtyLtdshareholderson29August2006 24,408,193 12,204,096
Issue of shares at a deemed value of 50 cents per
shareon29August2006sharebasedpayments
Todirectors
Tosupporters
1,529,999
7,081,803
764,999
3,590,902
Issue of shares at a deemed value of 50 cents per
shareon28February2007sharebasedpayments
Todirectors
Tosupporters
586,398
20,000
293,199
10,000
Issue of shares at a deemed value of 50 cents per
shareon28February2007sharebasedpayments
Tosupporters 3,820,510 1,910,255
Balanceat
30
June
2007
37,446,904 18,723,452
Effective1July1998,theCorporations legislationabolishedtheconceptsofauthorisedcapitaland
parvalueshares. Accordingly,thecompanydoesnothaveauthorisedcapitalorparvalueinrespect
ofitsissuedcapital.
Fullypaidordinarysharescarryonevotepershareandcarrytherighttodividends.
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10)
ACCUMULATEDLOSSES
2007
$
Accumulatedlosses (18,723,247)
Balanceat26June2006
Lossfortheperiod* (18,723,247)
Balanceat30June2007 (18,723,247)
*Includedinthelossfortheperiodwerethefollowing:
a)
Impairmentloss
of
$12,204,097
on
the
shares
issued
at
a
deemed
value
of
50
cents
per
share
to
vendorsofTalbotOlivierBusinessAssets,BrettDaviesLawyersBusinessAssetsandLawCentral
CoPtyLtdshareholderson29August2006(refernote12);
b) Sharebasedpaymentexpenseof$4,305,901 sharesissuedatadeemedvalueof50centsper
sharetodirectorsandsupporterson29August2006;and
c)
Share based payment expense of $2,213,454 shares issued at deemed value of 50 cents per
sharetodirectorsandsupporterson28February2007.
11)
LOSSPER
SHARE
2007
$
Lossusedincalculatingbasiclosspershare (18,723,247)
Weighted average number of ordinary shares used in the calculation of
basiclosspershare 28,992,300
Effectofdilutivesecurities:
Therewerenodilutiveorpotentialdilutivesharesfortheperiod.
12)IMPAIRMENTLOSSES
Optiontoacquirelawfirms
On29August2006thevendorsoftheTalbotOlivierbusinessassets,BrettDaviesLawyersbusiness
assets and Law Central Co Pty Ltd shareholders received 24,408,193 shares for a consideration of
$0.000001pershare. Onissuedate,thedeemedvalueoftheseshareswere50centspershareor
$12,204,097intotal.
Theissueofthesesharesprovidedthecompanywiththeoptiontopurchasethelawfirmsfromthe
vendors. TheoptionrepresentsafinancialassetasdefinedunderAASB139FinancialInstruments:
Recognitionand
Measurement
and
the
$12,204,097
represents
the
option
premium
paid.
The
optiontosecuretherighttoacquirethelawfirmdidnotresultinanyfinancialbenefitintheformof
areductioninthesalepriceofthelawfirms.
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Thedifference
between
the
consideration
paid
and
the
deemed
value
has
been
fully
expensed
as
an
impairmentlossduringtheperiod.
13)
SEGMENTINFORMATION
The company operates predominantly in one business and geographical segment, being the
identification,acquisitionand integrationof lawfirmsand informationtechnologyorganisationsto
provideanetworkedservicetoclients.
14)
CONTINGENTLIABILITY
Thereare
no
material
contingent
liabilities
of
the
company
at
the
reporting
date.
15)
SHAREBASEDPAYMENTPLANS
EmployeeShareOptionPlan
The company has established an employee share option plan (ESOP) on 5 October 2006 and the
objectiveoftheESOPistoassistintherecruitment,reward,retentionandmotivationofemployees
ofthecompany.
Consideration
Eachoption
will
be
issued
free
of
charge.
Exerciseprice
TheexercisepriceforemployeeoptionsgrantedundertheESOPwillbethepricefixedbytheBoard
priortothegrantoftheemployeeoptionandshallnotbelessthantheweightedaveragesaleprice
of shares sold on the ASX during the five business days prior to the issue date of the employee
optionsorsuchotherperiodasdeterminedbytheBoard(initsdiscretion).
Exerciserestrictions
TheoptionsgrantedundertheESOPmaybesubjecttosuchotherrestrictionsnexerciseasmaybe
fixedbythedirectorspriortothegrantoftheemployeeoptionsincluding,withoutlimitation,length
of
service
by
the
employee
and
threshold
prices
at
which
shares
are
traded
on
the
ASX.
Anyrestrictionssoimposedbythedirectorswillbesetoutontheemployeeoptioncertificate.
Participationinrightsissuesandbonusissues
Theemployee optionsgrantedundertheESOP do notgiveany right toparticipate in dividendsor
rightsissuesuntilsharesareallottedpursuanttotheexerciseoftherelevantemployeeoption. The
numberofshares issuedontheexerciseoftheemployeeoptionswillbeadjustedforbonus issues
madepriortotheexerciseoftheemployeeoptions.
Eligibility
Under the ESOP, the directors may invite employees to participate in the ESOP and receive
employee
options.
An
employee
may
receive
the
employee
options
or
nominate
a
relative
orassociate to receive the employee options. The plan is open to directors of the company or its
subsidiaries.
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ACN120394194
NotestotheFinancialStatements(continued)FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
27
Termof
employee
options
TheemployeeoptionsgrantedundertheESOPhaveatermspecifiedonthefaceofeachcertificate.
Restrictionsontransfer
Employeeoptionsarenottransferrable.
NooptionswereissuedundertheESOPduringtheperiod.
EmployeeSharePlan
Thecompanyestablishedanemployeeshareplan(Plan)on5October2006.
Planshares
Thecompanymay makeanoffertoeligible employeestoparticipate inthePlanandborrowfrom
thecompanyonthe loanterms(whichformpartofthetermsofthePlan)fromtimetotime in its
discretion. Thetermsofsuchanoffershallbedeterminedbythecompanyandbespecifiedinthe
offertoeligibleemployees.
Eligibleemployees
Eligibleemployees includeadirectorofthecompanyor itssubsidiaries,anemployee,aconsultant
oranemployeeofaconsultantofthecompanyoritssubsidiaries.
Issueprice
EachPlan
share
will
be
issued
at
an
issue
price
determined
by
the
Board,
provided
that
the
issue
price is not less than the market price of the companys shares, being the weighted average sale
priceofordinarysharessoldthroughtheASXonthefivetradingdayspriortotheproposeddateof
theoffermadeunderthePlan.
AcquisitionofPlanshares
UponreceiptbythecompanyofanapplicationforPlanshares(inresponsetoanoffermade),the
companymustdeterminetomakealoantotheparticipantonthetermsofanamountequaltothe
issuepricemultipliedbythenumberofPlansharesappliedforand,uponsuchdeterminationbeing
made,aloanagreementshallarisebetweenthecompanyandtheparticipantwithoutfurtheraction
being required. The company must make such a loan and apply the moneys so lent towards
paymentto
the
company
of
the
issue
price
of
the
Plan
shares,
which
Plan
shares
will
be
credited
as
fully paid shares in the capital of the company, and the company will issue and allot those Plan
sharestotheparticipant.
RightsinrespectofPlanshares
Aparticipantwill,fromthedatethePlansharesare issuedandallotted,bethe legalownerofthe
Plan shares issued orallottedunder thePlan,subjecttotheprovisionsofthe loan agreementand
the terms of the loan agreement while the advance made under the loan agreement remains
outstanding,bebindingupontheparticipantinrespectofhisorherPlanshares.
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ACN120394194
NotestotheFinancialStatements(continued)FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
28
Restrictionontransfer
A
participant
may
only
dispose
of
or
grant
an
encumbrance
over
a
Plan
share
as
set
out
in
the
followingtableorasotherwisedeterminedbythedirectorsatthetimeofissueasfollows:
Within1yearofissuedate 33.3% of Plan shares may be
disposedoforencumbered
Within2yearsofissuedate 66.6% of Plan shares may be
disposedoforencumbered
After2yearsofissuedate 100% of Plan shares may be
disposedoforencumbered
Firstrightofrefusal
Until
the
loan
to
the
participant
is
repaid,
the
participant
grants
to
the
company
a
right
of
first
refusal over the participants Plan shares the subject of the loan which must be exercised by the
companywithin24hoursoftheparticipantsoffer.
Righttoparticipateinbonusissuesandentitlementissues
HoldersofPlansharesshallbeentitledtoparticipateinbonusissuesandentitlementissuesmadeby
thecompanyonthesamebasisasotherissuedfullypaidordinarysharesinthecompanyfromthe
dateofissue.
Termsofloan
Insummary,thetermsoftheloanmadetoaparticipantinthePlanareasfollows:
a)
Theborrowercanrepaythebalanceoutstandingontheadvanceatanytime;
b)
The borrower is entitled to all dividends declared and paid on the Plan shares but will be
deemedbyhisorherconfirmationsetoutintheapplicationforPlansharestohaveirrevocably
directed the company to pay and the company to receive and apply those dividends towards
repaymentoftheadvancemade;
c)
The borrower must repay the outstanding balance of the advance to the company within 30
daysoftheterminationoftheemploymentoftheeligibleemployeetowhomtheoriginaloffer
wasmade;
d)
Wheretheborrowerceasestobeemployedbythecompanyorasubsidiaryandtheaggregate
marketpriceofthesamenumberofsharesinthecompanyasthenumberofPlansharesheldby
theborrower
is,
upon
the
date
of
cessation,
less
than
the
outstanding
advance
owed
by
the
borrowerinrespectofsuchPlanshares,themaximumliabilityinrespectoftheadvanceshallbe
thelesseroftheamountoftheadvancethenowingandthemarketvalueofthePlanshares. In
that event the borrower authorises the company secretaryto sell the Plan shares asagentfor
theborrowerandapplythenetproceedsofsaleinfullsatisfactionoftheadvance;and
e)
Theloanisinterestfree.
NoshareswereissuedunderthePlanduringtheperiod.
Foundationsharesissuedon29August2006and28February2007,asnotedinnote9,arenotpart
oftheESP.
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NotestotheFinancialStatements(continued)FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
30
17)
FAIRVALUE
AND
INTEREST
RATE
RISK
a)
Fairvalues
Allassetsand liabilitiesrecognised inthebalancesheet,whethertheyarecarriedatcostoratfair
value, are recognised at amounts that represent a reasonable approximation of fair value unless
otherwisestatedintheapplicablenotes.
b)
Interestraterisk
Interestrateriskrepresentstheriskthatthevalueofafinancialinstrumentwillfluctuateasaresult
of changes in market interest rates. The exposure of the company to interest rate risk and the
effectiveweightedaverageinterestrateforclassesoffinancialassetsissetoutbelow.
Weighted
average
effective
interestrate
Periodended30June
2007
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ACN120394194
NotestotheFinancialStatements(continued)FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
31
ii)
Acquiredlegalfirms
TalbotOlivier
On 11 January 2006, the company (through its agent, Law Central Co Pty Ltd) and the foundation
partnersofTalbotOlivierenteredintoanOptionAgreementwherebyanoptionwasgrantedtothe
company, exercisable through its wholly owned subsidiary Talbot Olivier Pty Ltd, to acquire the
TalbotOlivierbusinessassets. Thisagreementwassubsequentlyvariedbyanagreementdated19
September 2006 and was further amended by agreements between the same parties dated 12
March2007and15May2007.
Theoptionwasexercisedon10August2007andthepurchasepriceagreedtobepaidincashupon
theexerciseoftheoptionwas$3,194,648.
TalbotOlivier
Pty
Ltd,
trading
as
Talbot
Olivier,
was
incorporated
on
10
August
2007
and
is
a
wholly
ownedsubsidiaryofIntegratedLegalHoldingsLimited.
Thefollowingconstitutesthecalculationoftheconsiderationgivenandthefairvalueofnetassets
acquiredinTalbotOliver:$
Consideration
Cash 3,194,648
Deferredcashconsideration
Costsassociatedwithacquisition 166,294
Totalcashconsideration 3,360,942
Sharesissuedasconsideration
Totalacquisitioncost 3,360,942
Fair
Value
$
Carrying
Amount
$
Netassetsacquired
Assets
Plantandequipment 174,169 174,169
Workinprogress 200,000 200,000
Otherassets
Totalassetsacquired 374,169 374,169
Netassetsacquired 374,169 374,169
Goodwillonacquisition 2,986,773
Astheintegrationofthebusinessisstilloccurringtheremaybesomemovementintheprovisional
calculation.
BrettDaviesLawyers
On30March2007,thecompany(throughitsagent,LawCentralCoPtyLtd)andBrettDavies,owner
oftheBrettDaviesLawyersbusinessassets,enteredintoanOptionAgreementwherebyanoption
wasgrantedtothecompany,exercisablethroughitswhollyownedsubsidiaryTaxLawyersAustralia
PtyLtd,toacquiretheBrettDaviesLawyersbusinessassets.
Theoptionwasexercisedon10August2007andthepurchasepriceagreedtobepaidincashupon
the
exercise
of
the
option
was
$804,000.
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INTEGRATEDLEGALHOLDINGSLIMITED
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NotestotheFinancialStatements(continued)FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
32
TaxLawyersAustraliaPtyLtd,tradingasBrettDaviesLawyers,was incorporatedon8August2007
andis
a
wholly
owned
subsidiary
of
Integrated
Legal
Holdings
Limited.
Thefollowingconstitutesthecalculationoftheconsiderationgivenandthefairvalueofnetassets
acquiredinBrettDaviesLawyers:$
Consideration
Cash 804,000
Deferredcashconsideration
Costsassociatedwithacquisition 37,116
Totalcashconsideration 841,116
Sharesissuedasconsideration
Totalacquisitioncost 841,116
Fair
Value
$
Carrying
Amount
$
Netassetsacquired
Assets
Plantandequipment 18,676 18,676
Totalassetsacquired 18,676 18,676
Netassetsacquired 18,676 18,676
Goodwillonacquisition 822,440
Thegoodwilldisclosedabove,beingtheexcessofthecostoftheacquisitionovertheidentifiablenet
assetsacquired,isnotfullysupportedbyfutureearningsandwillbewrittendownto$704,000. The
impairmentexpense
that
will
be
recognised
post
acquisition
is
$118,440.
Astheintegrationofthebusinessisstilloccurringtheremaybesomemovementintheprovisional
calculation.
PeterMarksSuccessionLawyers
On 19 September 2007, the company, through its wholly owned subsidiary Talbot Oliver Pty Ltd,
acquiredthelegalpracticeofthelatePeterMarkstradingasPeterMarksSuccessionLawyers. This
acquisition was merged into the existing practice of Talbot Olivier. The acquisition promotes the
companys business strategy which encourages acquired practices to enhance their own growth
aspirationsviatheacquisitionofcomplementarypractices.
The assets purchased include goodwill and business assets excluding all work in progress and
outstandingdebtors.
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NotestotheFinancialStatements(continued)FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
33
Thefollowingconstitutesthecalculationoftheconsiderationgivenandthefairvalueofnetassets
acquiredin
the
practice
of
Peter
Marks
Succession
Lawyers:
$
Consideration
Cash 50,000
Deferredcashconsideration 75,000
Costsassociatedwithacquisition
Totalcashconsideration 125,000
Sharesissuedasconsideration
Totalacquisitioncost 125,000
Fair
Value
$
Carrying
Amount
$
Netassets
acquired
Assets
Plantandequipment 10,000 10,000
Totalassetsacquired 10,000 10,000
Netassetsacquired 10,000 10,000
Goodwillonacquisition 115,000
Astheintegrationofthebusinessisstilloccurringtheremaybesomemovementintheprovisional
calculation.
ShayneLeslie
On 28 September 2007, the company, through its wholly owned subsidiary, Talbot Olivier Pty Ltd,
acquiredthe
legal
practice
of
Shayne
Leslie.
This
acquisition
was
merged
into
the
existing
practice
of
TalbotOlivier.
Theconsiderationforthepurchaseisacombinationofcashandshares. Thecashcomponentwillbe
fundedfromgroupworkingcapital. Thesharecomponentispayableprogressivelyoverthreeyears,
subjecttoperformancecriteriabeingmet.
Thefollowingconstitutesthecalculationoftheconsiderationgivenandthefairvalueofnetassets
acquiredinthepracticeofShayneLeslie:$
Consideration
Cash 50,000
Deferredcashconsideration Costsassociatedwithacquisition
Totalcashconsideration 50,000
Sharesissuedasconsideration 250,000
Totalacquisitioncost 300,000
Fair
Value
$
Carrying
Amount
$
Netassetsacquired
Goodwillonacquisition 300,000
Asthe
integration
of
the
business
is
still
occurring
there
may
be
some
movement
in
the
provisional
calculation.
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NotestotheFinancialStatements(continued)FORTHEPERIODFROMINCORPORATIONON26JUNE2006TO30JUNE2007
34
iii)
AcquisitionofLawCentralCoPtyLtd
Underthe
terms
of
the
Prospectus
dated
16
May
2007,
the
company
offered
to
acquire
100%
of
the
fullypaidordinaryshares inthecapital ofLawCentralCoPtyLtd. Theofferwasconditionalupon
theacceptanceoftheofferbyatleast90%oftheLawCentralCoPtyLtdshareholdersby15August
2007.
Thisconditionwassatisfiedinfulland100%oftheLawCentralCoPtyLtdshareholdersacceptedthe
offer.
The consideration offered by Integrated Legal Holdings Limited was 0.105028 fully paid ordinary
sharesinthecompanytogetherwithacashpaymentof$0.04736011forevery1LawCentralCoPty
Ltd share. Settlement took place on 10 August 2007 and Integrated Legal Holdings Limited issued
1,258,096shares
in
the
company
and
paid
$2,700,000
in
cash
to
the
vendors.
Thefollowingconstitutesthecalculationoftheconsiderationgivenandthefairvalueofnetassets
acquiredinLawCentralCoPtyLtd:$
Consideration 2,700,000
Cash
Deferredcashconsideration
Costsassociatedwithacquisition
Totalcashconsideration 2,700,000
Sharesissuedasconsideration 629,048
Totalacquisitioncost 3,329,048
Fair
Value
$
Carrying
Amount
$
Netassetsacquired
Assets
Plantandequipment 23,114 23,114
Unlistedentities 32,500 32,500
Cash 133,154 133,154
Tradereceivables 531,909 531,909
Otherassets 506,872 506,872
Totalassetsacquired 1,227,549 1,227,549
Liabilities
TradePayables
60,860
60,860
Provisions 92,256 92,256
Totalliabilitiesacquired 153,116 153,116
Netassetsacquired 1,074,433 1,074,433
Goodwillonacquisition 2,254,615
Astheintegrationofthebusinessisstilloccurringtheremaybesomemovementintheprovisional
calculation.
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INTEGRATEDLEGALHOLDINGSLIMITED
ACN120394194
DirectorsDeclaration
35
InaccordancewitharesolutionofthedirectorsofIntegratedLegalHoldingsLimited,Istatethat:
1.
Intheopinionofthedirectors:
a. The financial statements and notes to the financial statements of the company are in
accordancewiththeCorporationsAct2001,including:
i.
givingatrueandfairviewofthecompanysfinancialpositionasat30June2007
andofitsperformancefortheperiodendedonthatdate;and
ii.
complying with Australian Accounting Standards and Corporations Regulations
2001;and
b. therearereasonablegroundstobelievethatthecompanywillbeabletopayitsdebtsas
andwhentheybecomedueandpayable.
2.
This declaration has been made after receiving the declarations required to be made to the
directors in accordance with section 295A of the CorporationsAct 2001 for the period from
incorporationon26June2006to30June2007.
Signedinaccordancewitharesolutionofthedirectors.
THenn
Director
Perth,30
October
2007
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36
Auditors Independence Declaration to the Directors of Integrated Legal Holdings Limited
In relation to our audit of the financial report of Integrated Legal Holdings Limited for the period
from the date of incorporation on 26 June 2006 to 30 June 2007, to the best of my knowledge and
belief, there have been no contraventions of the auditor independence requirements of the
Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
G H Meyerowitz
Partner
Perth
30 October 2007
Liability limited by a scheme approved underProfessional Standards Legislation.
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37
Independent auditors report to the members of Integrated Legal Holdings Limited
We have audited the accompanying financial report of Integrated Legal Holdings Limited (the
company) which comprises the balance sheet as at 30 June 2007 and the income statement, statement
of changes in equity and cash flow statement from the date of incorporation on 26 June 2006 to the
period ended on 30 June 2007, a summary of significant accounting policies, other explanatory notes
and the Directors Declaration.
Directors Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with the Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing andmaintaining internal controls relevant to the preparation and fair presentation of the financial report
that is free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances. In Note 2, the directors also state that the financial report, comprising the financial
statements and notes, complies with International Financial Reporting Standards. The directors are
also responsible for the remuneration disclosures contained in the Directors Report .
Auditors Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform theaudit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on our judgment, including the assessment of
the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, we consider internal controls relevant to the entitys preparation and fair
presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys
internal controls. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the directors, as well as evaluating the
overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit we have met the independence requirements of the Corporations Act 2001.
We have given to the directors of the company a written Auditors Independence Declaration, a copy
of which is included in the financial report. In addition to our audit of the financial report and the
remuneration disclosures, we were engaged to undertake the services disclosed in the notes to the
financial statements. The provision of these services has not impaired our independence.
Liability limited by a scheme approved under
Professional Standards Legislation.
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38
Auditors Opinion
In our opinion:
1. the financial report of Integrated Legal Holdings Limited is in accordance with the
Corporations Act 2001, including:(i) giving a true and fair view of the financial position of Integrated Legal Holdings
Limited at 30 June 2007 and of its performance from the period from the date of
incorporation on 26 June 2006 to the period ended on 30 June 2007; and
(ii) complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001; and
2. the financial report also complies with International Financial Reporting Standards as
disclosed in Note 2.
Ernst & Young
G H Meyerowitz
Partner
Perth
30 October 2007
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INTEGRATEDLEGALHOLDINGSLIMITED
ACN120394194
ASXAdditionalInformation
AdditionalinformationrequiredbytheAustralianStockExchangeLimitedandnotshownelsewhere
inthis
report
is
as
follows.
The
information
is
current
as
at
16
October
2007.
a)
Distributionofequitysecurities
Ordinarysharecapital
63,538,320fullypaidordinarysharesareheldby1,015individualshareholders.
Allissuedordinarysharescarryonevotepershareandcarrytherightstodividends.
Thenumbersofshareholdersbysizeofholdingare:
Fullypaid
Ordinary
shares
1
1,000
4
1,0015000 170
5,00110,000 315
10,001100,000 480
100,001andover 46
1,015
Holdinglessthanamarketableparcel 17
b)
Substantialshareholders
Ordinaryshareholders FullyPaid
Number Percentage
DaviesSuperannuationFund 7,497,082 11.80
c)
20largestholdersofquotedequitysecuritiesOrdinaryshareholders FullyPaid
Number Percentage
DaviesSuperannuationFund 7,497,082 11.80
KordicFamilyTrust 3,068,340 4.83
JPOlivier 3,068,340 4.83
TaylorFamilyTrust 3,068,340 4.83
HemeryFamilyTrust 3,068,340 4.83
SkinnerFamilyTrust 3,028,340 4.77
BKDavies 2,710,200 4.27
Sands
Family
Trust
2,268,340
3.57
CatelliPorterFamilyTrust 2,191,672 3.45
JSDawkins 1,626,398 2.56
BBWhitford 1,605,280 2.53
SKaifeng 1,205,000 1.90
MLCITrust 1,110,000 1.75
SandsSuperannuationFund 800,000 1.26
BJMaguire 610,000 0.96
GKPhilipson 510,560 0.80
ANZNomineesLtdCashIncomeTrust 315,700 0.50
RGHarris 305,280 0.48
ZQLiang 284,000 0.45
FengFamilyTrust 270,000 0.42
38,611,212 60.79
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