MOAB MINERALS LIMITED — Annual Report 2012

Oct 25, 2012

DELECTA LIMITED ABN 92 009 147 924

Annual Financial Report

FOR THE YEAR ENDED 30 JUNE 2012

Delecta Limited

General Information

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Directors		Bradley Moore	Non-Executive Chairman
		Malcolm Day	Managing Director
		Hans-Rudolf Moser	Non-Executive Director
Company Secretary		John Burness
Registered Offce		170-180 Buckhurst Street
		South Melbourne, Victoria, 3205
		Telephone: (61 3) 9695 5858
		Facsimile: (61 3) 9686 0644
Principal Business Offce		170-180 Buckhurst Street
		South Melbourne, Victoria, 3205
		Telephone: (61 3) 9695 5858
		Facsimile: (61 3) 9686 0644
Share Register		Advanced Share Registry Services
		150 Stirling Highway
		Nedlands, Western Australia, 6009
		Telephone: (61 8) 9389 8033
Quoted on:	Australian Stock Exchange	Code: DLC
	German Stock Exchanges	WKN 873083

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Delecta Limited Table of Contents

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Charman’s Report	4
Managing Director’s Report	5
Directors’ Report	6
Auditor’s Independence Declaration	16
Consolidated Statement of Comprehensive Income	17
Consolidated Statement of Financial Position	18
Consolidated Statement of Cash Flow	19
Consolidated Statement of Changes in Equity	20
Notes to the Financial Statements	21
Directors’ Declaration	66
Independent Audit Report	66
Corporate Governance Policy	68
Additional Shareholder Information	72

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Delecta Limited Charman’s Report

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Dear Shareholders,

I am pleased to present to you the Annual Report for Delecta Limited (“Delecta” or the “ Company”) for the year ending 30 June 2012.

Despite a disappointing start to the year with the termination of the proposed Stiletto transaction during October, which the Company invested considerable time, energy and money to bring together, the Company has made two significant inroads, being:

• The acquisition of approximately a 25% stake in Paynes Find Gold Limited, a listed exploration Company focused on gold exploration in Western Australia; and

• The posting of a $664,000 profit for the group following strong returns from the Calvista Australia division.

The above two points are important as they serve to highlight the success in the executive team and Board of Directors in remaining committed to a strategy of identifying opportunities within non-core sectors to unlock value for shareholders, whilst rationalising its existing core business units to reduce costs and improve returns.

The Paynes Find Gold investment has provided the Company and its shareholders with exposure to the potentially lucrative resources sector. Obtained through a loan and underwriting agreement, Delecta has invested $2 million to acquire the largest shareholding in Paynes Find Gold, and looks forward to realising the potential of its assets through systematic exploration and continued project generation.

Calvista Australia Pty Ltd, Australia’s largest wholesaler of Adult Products, has performed excellently this year with growing sales, and reducing overheads, driving the wholesale division’s result to a profit of $1.036 million, up $549,000 or 113% on 2011. Product line growth, combined with an extension to sales channels to incorporate more mainstream and on-line customers, have been the key to the improvement in sales.

Calvista’s results are even more encouraging in light of tough retail trading conditions for its customer base, and persistent barriers to equitable competition in the form of parallel importing and unclassified imports into Australia.

The Board of Directors look forward to delivering strong results again in 2013, and to further improve the Company’s net tangible asset position which underpins value in the Company, and that provides the platform for opportunistic acquisitions as they are identified.

The Board thanks you for your continued support.

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Bradley Moore

Chairman

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Delecta Limited Managing Director’s Report

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The 2011/2012 year was a year in which the Company changed direction.

As a result of a strategic review of the Companies operations in February 2010 by an external party, the Company sold the adultshop.com branded stores and websites effective from November 2010. The Companies core business during the 2011/2012 financial year was the wholesale of Adult products through its wholly owned subsidiaries, Calvista Australia Pty Ltd and Calvista New Zealand Ltd (Calvista).

In October 2011 the Company terminated the agreements to purchase Stiletto Nominees Pty Ltd (operator of Stiletto) and Dalway Enterprises Pty Ltd (owner of the premises from which Stiletto operates).

Calvista’s wholesale businesses continue to trade well in a somewhat difficult retail environment in both Australia, where it is the largest wholesaler of adult products, and New Zealand. Financial performance has improved and is reflected in the wholesale division’s net profit of $1,036,000 for the financial year compared to $487,000 last financial year. Whilst adult DVD sales continue to fall in Australia and New Zealand, Calvista has replaced these falling sales with further penetration into main stream (non adult retailers) markets like lingerie stores and pharmacy chains. With the continued growth of online sales Calvista has also been able to increase it’s sales to etailers.

Calvista began wholesaling lingerie late last financial year. The Company views this as a growth opportunity for Calvista both with adult stores and main stream markets.

In February 2012 the Company announced that it had entered into a loan and sub-underwriting agreement with Paynes Find Gold Limited (ASX code PNE). In June 2012 the Company was issued $2,000,000 of shares and options in PNE pursuant to the loan and sub-underwriting agreement (100,000,000 fully paid shares and 50,000,000 options). In July 2012 I was appointed as a non-executive director of PNE.

The Company posted a net profit of $664,000 for the financial year compared to a loss of $699,000 the previous financial year.

As at 31st August the Company had cash reserves of $4,563,000 and is cash flow positive.

As previously announced, the Company continues to identify and review other investment opportunities with a focus on resource and mining exploration projects.

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Malcom Day

Managing Director

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Delecta Limited Directors’ Report

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The directors of Delecta Limited (“the Company”) submit their report for the year ended 30 June 2012.

DIRECTORS

The directors in office at the date of this report and at any time during the financial year are as follows. Directors were in office for the entire year unless otherwise stated.

Current Directors

Bradley Moore Malcolm Day

Hans-Rudolf Moser

INFORMATION ON DIRECTORS

Bradley Moore (Non-Executive Chairman)

Mr Moore was appointed as the Company’s Non-Executive Chairman on 5 August 2010.

Mr Moore holds a Bachelor of Commerce in accounting and corporate administration and has in excess of ten years accounting, strategic analysis, financial management, general management and corporate experience

Mr Moore spent seven years at News Limited’s Western Australian newspaper, “The Sunday Times”, following which he played an integral role in the management of several listed public companies for the next 10 years. Currently Mr Moore is the Western Australian State Manager for one of Australia’s largest privately owned transport and logistics organisations. He is a director of Ontel Communications Pty Ltd and has acted as a non-executive director and chairman of numerous listed entities, and their subsidiaries.

Malcolm Day (Managing Director)

Mr Day worked in the civil construction industry for approximately ten years, six of which were spent in senior management roles, as a Licensed Surveyor and then later as a Civil Engineer.

In January 1996, Mr Day joined the Barbarellas group of companies as an executive director. At the same time Mr Day co-founded Adult Communication Services Pty Ltd (“ACS”), which grew to be one of Australia’s largest providers of adult telephone services. Mr Day is a Member of the Australian Institute of Company Directors.

In July 2012, Mr Day was appointed as a non-executive director of Paynes Find Gold Limited.

Hans-Rudolf Moser (Non-Executive Director)

Mr Moser is a resident of Switzerland with over 20 years’ experience in the Swiss banking and finance industry. He is currently a principal of a European portfolio manager.

COMPANY SECRETARY

John Burness , B.Compt. (Hons), C.A.

Mr Burness is the Group’s Chief Financial Officer and was appointed Company Secretary in November 2004. He is a Chartered Accountant with 25 years post qualification experience in public practice and commerce and industry. He has a total of 12 years experience acting as company secretary for publicly listed companies.

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Delecta Limited Directors’ Report

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DIRECTORS’ INTERESTS IN SHARES

As at the date of this report, the interests of the directors in shares and options of the Company were:

Ordinary Shares - Indirect

M Day 152,690,662 H Moser 53,794,943 B Moore 50,794,943

CORPORATE INFORMATION

Corporate structure

Delecta Limited is a company limited by shares that is incorporated and domiciled in Australia. Delecta Limited has prepared a consolidated financial report incorporating the entities that it controlled or had significant influence over during the financial year (the “Group”). The principal subsidiaries are outlined in the following illustration of the Group’s corporate structure:

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----- Start of picture text -----

DELECTA LIMITED
Wholly owned Australian Wholly owned Business Wholly owned Overseas
Investment in Associates
Subsidiaries Division Subsidiaries
- Calvista Australia Pty Ltd - Phone - Adultshop.com (NZ) Limited Paynes Find
(incorporating AXIS Australia, Services (New Zealand) (Dormant) Gold Limited
& DVD Rental div.) - Calvista New Zealand Limited
- Today’s Success Pty Ltd (New Zealand)
(dormant)
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Employees

The consolidated entity employed 63 employees as at 30 June 2012 (2011: 66 employees).

Nature of operations and principal activities

The principal activities during the year of entities within the consolidated entity were:

Continuing Operations

• The wholesale distribution of adult products;

• The sale of adult products via mail order and a factory outlet;

• The provision of adult telephone services.

• Investment in gold exploration company

GROUP OVERVIEW

Wholesale

In September 2000, the Company entered the adult products wholesale market with the acquisition of Calvista Australia Pty Ltd. Calvista, which has been in operation for over 20 years, operates from its head office in Melbourne, with a warehouse in Canberra and showroom in Sydney.The Company holds exclusive Australian rights to acquire the copyright to titles from a number of leading production studios

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Delecta Limited Directors’ Report

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in the adult industry which are classified and reproduced for sale in the Australian market.

It is the largest wholesaler of adult products in Australia with in excess of 50% of the legal market.

The acquisition in May 2005 of Video Wholesalers in New Zealand included a wholesale operation which the group continues to operate under the name Calvista New Zealand Limited.

Retail

On 1 August 2000, the Company acquired 100% of Canberra based business, Axis, Australia’s largest adult DVD, video and erotic product mail order business. Sales are secured via the distribution to members of regular mail order catalogues and through its website at www.axisshop.com.

The Company also operates a factory retail outlet from its Canberra warehouse.

Phone Services

The Company operates a small adult telephone service and premium rate SMS content and chat services which is in the process of being wound up.

Mining Investment

In June 2012, the Company acquired a 24.91% interest in Paynes Find Gold limited (PNE). PNE is an Australian registered publicly listed mineral exploration company focused on exploring for viable mineral deposits at Paynes Find, an historically significant gold producing region 420 km north-east of Perth, Western Australia, and where it holds a significant tenement package.

RESULTS OF OPERATIONS

The consolidated entity recorded a net profit of $664,000 from continuing operations (2011: loss $767,000) and total operations (2011: loss $699,000).

The total earnings per share for the year was 0.11 cents (2011: loss 0.11 cents).

The following summarised operating results is non IFRS information that has been disclosed to assist users in understanding the entities operations:

Year ended 30 June 2012 (unaudited)

Operating Segment	Sales and services revenues to external customers $’000 Other income $’000 Earnings before interest, tax, depreciation, amortisation and impairment $’000 Depreciation, amortisation and impairment $’000 Net Interest received $’000 Proft / (loss) before income tax $’000
Retail	718 - 282 (50) - 232
Wholesale	21,724 673 1,264 (238) - 1,036
Phone Services & Online	42 - (19) - - (19)
Unallocated Total	- 133 (839) - 254 (585)
	22,484 806 688 (288) 254 664

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Delecta Limited

Directors’ Report

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Year ended 30 June 2011 (unaudited)

Year ended 30 June	2011 (unaudited)
Operating Segment	Sales and Services Revenues to External Customers $’000 Other income $’000 Earnings before interest, tax, depreciation, amortisation and impairment $’000 Depreciation, amortisation and impairment $’000 Net Interest paid $’000 Proft / (loss) before income tax $’000
Retail	899 - 392 (52) - 340
Wholesale	20,031 673 811 (324) - 487
Phone Services & Online	296 - 157 - - 157
Unallocated	- 118 (1,840) (12) 101 (1,751)
	21,226 791 (480) (388) 101 (767)
Discontinued Operations Total	3,665 14 148 (80) - 68
	24,891 805 (332) (468) 101 (699)

REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Wholesale

Whilst the sale of media products continued to decline during the year, growth in non-media sales resulted in a net increase in the wholesale segment’s total revenues of 8% over the prior year.

This increase in revenues, combined with a tight control over expenses, resulted in a net increase in the segment’s profit for the year from $487,000 to $1,036,000.

Retail

As a result of the continuing decline in the mail order business, the Group’s retail revenues continued to decrease with revenue down from $899,000 to $718,000 and profit down from $340,000 to $232,000 for the year.

Mining Exploration

On the 27 June 2012 the company acquired a 24.91% interest in gold mining exploration company, Paynes Find Gold Limited, for a cost of $2,000,000.

Unallocated Expenditure

The decrease in unallocated non segment expenditure has resulted from a decrease in the unallocated Group costs following the disposal of the Adultshop.com Retail and Online divisions with effect from 1 November 2010.

REVIEW OF FINANCIAL CONDITION

Capital Structure

During the current financial year 5,899,605 (2011: 13,146,332) ordinary shares were issued on the exercise of the options.

No further ordinary shares have been issued between the year end and the date of this report.

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Delecta Limited Directors’ Report

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Cash from Operations

The Group recorded a net operating cash inflow of $1,114,000 (2011: $705,000) for the year.

Liquidity and Funding

The Group has sufficient cash resources and forecast cash flows to fund its current and anticipated level of operations.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The Company will continue to focus on increasing profitability by concentrating on its core wholesale operations and reviewing and potentially acquiring new business opportunities.

DIVIDENDS

No dividends have been paid or recommended during or since the end of the current financial year (2011: Nil).

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

No matter or circumstance has arisen since the end of the financial year to the date of this report which has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in future financial years.

TAX CONSOLIDATION LEGISLATION

For the purposes of income tax in Australia, Delecta Limited and its 100% owned Australian subsidiaries have formed a tax consolidated group from 1 July 2003. The head entity of the tax consolidated group is Delecta Limited.

CORPORATE GOVERNANCE

In recognising the need for the highest standard of corporate behaviour and accountability, the directors of Delecta Limited support and have endeavoured to adhere to the principles of corporate governance.

The Company’s corporate governance statement is set out elsewhere in this annual report commencing on page 68.

DIRECTORS’ MEETINGS

The following table sets out the number of meetings of the Company’s directors during the year ended 30 June 2012 and the number of meetings attended by each director.

	Maximum Possible	Number Attended
Mr M Day	11	11
Mr H R Moser	11	5
Mr B Moore	11	11

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Delecta Limited Directors’ Report

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Audit and Remuneration Committees

With the board consisting of only three directors, it was considered to be neither beneficial nor practical to maintain separate audit and remuneration committees and they were disbanded during the current financial year without a meeting being held.

SHARE OPTIONS

Unissued shares

At the date of this report, there were no options over unissued ordinary shares in the company.

Full details of movements in share options are disclosed in Note 19 of the financial statements.

Shares issued as a result of the exercise of options

During the current year 5,899,605 ordinary shares in Delecta Limited were issued at $0.008 per share on the exercise of the options. No further ordinary shares have been issued between the year end and the date of this report.

ENVIRONMENTAL REGULATIONS

The consolidated entity’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company indemnifies all directors and officers of the Company against liability for costs and expenses incurred in defending proceedings brought against them in their role as a director or officer of the Company to the extent permitted under the law. In the current and prior years no insurance policies were taken out to cover these costs.

ROUNDING

The amounts contained in this report and the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies.

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

Auditor Independence

Section 307C of the Corporations Act 2001 requires the Company’s auditors to provide the Directors of Delecta Limited with an Independence Declaration in relation to the audit of the full year financial report. The Independence Declaration is attached to and forms part of this Directors’ Report (see page 16).

Non Audit Services

No non audit services were provided by the entity’s auditor, Ernst & Young, during the year under review or up until the date of this report.

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Delecta Limited Directors’ Report

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REMUNERATION REPORT (AUDITED)

This Remuneration Report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the Parent company.

For the purposes of this report, the term ‘executive’ encompasses the Chief Executive, senior executives, general managers and secretaries of the Parent and the Group.

Details of Key Management Personnel

(i) Directors

B Moore Chairman (non-executive) M R Day Managing Director H R Moser Director (non-executive)

(ii) Executives

M Basset Chief Executive Officer - Calvista Australia Pty Ltd J Burness Chief Financial Officer and Company Secretary – Delecta Limited Financial Controller – Calvista Australia Pty Ltd

There were no changes in directors or key executives after reporting date and before the date the financial report was authorised for issue.

Remuneration Policy

The performance of the Company and the Group depends upon the quality of its directors and executives. To prosper, the consolidated entity must attract, motivate and retain appropriately skilled directors and executives. To this end, the consolidated entity embodies the following principles in its remuneration framework:

• Provide competitive rewards to attract high calibre directors and executives;

• Establish appropriate performance hurdles against which performance is measured in arriving at executive’s remuneration levels;

• Align the interests of executives with those of shareholders; and

• Ensure total remuneration is competitive by market standards.

There is a link between variable remuneration and Group performance. The Group performance over the past 5 years is as follows:

past 5 years is as follows:
Year ended 30 June:	2012	2011	2010	2009	2008
Netproft / (loss)	664	(699)	(2,208)	(847)	(2,577)
Closingshareprice	$0.005	$0.010	$0.009

Remuneration Committee

The Board of Directors is responsible for reviewing and recommending compensation arrangements of directors, the managing director and the executive team.

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Delecta Limited Directors’ Report

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The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team.

Non-Executive Director Remuneration

The Company’s constitution and the ASX Listing Rules specify that the aggregate remuneration of nonexecutive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was at the Annual General Meeting held on 28 November 2006 when shareholders approved an aggregate remuneration of $300,000 per annum.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed from time to time. The board considers the time commitment and expertise of the individual directors and fees paid to non-executive directors of comparable companies when undertaking the review process.

Non-executive directors are not required to hold shares in the Company, nor are they encouraged or precluded from doing so. Non-executive directors may also be issued options from time to time as approved by shareholders in general meeting. There are no performance requirements attached to these options once issued as the exercise price of the options are set at a level in excess of the market value at date of issue.

Senior Manager and Executive Director Remuneration

It is the Board’s policy that employment contracts are entered into with the Managing Director and key executives. Employment contracts have no set termination dates and require six months notice in the case of the Managing Director and three months for the other executives. The employment contracts allow for payments in lieu of notice equal to the entitlements that the executive would have been entitled to had they remained employed for the notice period.

Remuneration of executives consists of fixed remuneration and variable remuneration. Variable remuneration consists of both long term incentives and predetermined short term incentives.

Fixed Remuneration

Fixed remuneration is reviewed annually by the Board. The process consists of a review of the Company, business unit and individual performance and relevant comparative remuneration in the market and internally.

Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating an additional cost for the consolidated entity.

Variable Remuneration – Short Term Incentives

Short term incentives (STI) paid in the form of cash bonuses link the achievement of the consolidated entity’s operational targets with the remuneration received by executives, other than the executive director, charged with meeting these targets. The potential incentive available is set at a level so as to provide sufficient incentive to the executive to achieve and then exceed operational targets and such that the cost to the Group is reasonable in the circumstances. These measures are chosen as they represent the key drivers for short term success of the business and provide a framework for delivering long term value.

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Delecta Limited Directors’ Report

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Actual incentive payments granted to executives depends on the extent to which specific operating targets set at the beginning of the year are met. The operational target consist of a number of Key Performance Indicators (KPIs) covering both financial and non-financial performance such as contribution to financial results, utilisation of the Group resources and contribution to the development of new business units. The Group has predetermined benchmarks which must be met in order to trigger payments under the short term incentive scheme, with due allowance to be made for unforseen events, or events outside of the executives control as approved by the Board. In the current year no awards were made under the STI, however, a once off fixed amount was paid in the form of a cash bonus to executives in February 2012 as a reward for the positive results to budget for the half year of Calvista Australia Pty Ltd.

Variable Remuneration – Long Term Incentives

An Employee Share Incentive Plan which allows for the issue of options to employees and for which senior executives qualify was established with the objective being to align this element of remuneration with the creation of shareholder wealth. There are no performance requirements attached to these options once issued as the exercise price of the options are set at a level in excess of the market value at date of issue. The share options vest over a period of 1 to 2 years, are forfeited on resignation, and expire 5 years from the date of issue.

Executives cannot hedge equity instruments that are unvested or subject to restrictions.

There are currently no employee options on issue.

Remuneration of Key Management Personnel

Details of the nature and amount of each element of the emolument of each director of the Company and each of the executive officers of the Company and the consolidated entity receiving the highest emoluments for the financial year are as follows:

Emoluments of Directors of Delecta Limited

Name	Offce during the year	Short-term	Short-term	Post Employment	Long-term Benefts	Total $
		Salary / Dir. Fees $	Consultancy Fees $	Super- annuation $	Long Service Leave $
30 June 2012 M R Day H R Moser B Moore 30 June 2011 K Heitman M R Day H R Moser B Moore	Managing Director Non-Executive Director Non-Executive Director Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director	80,000 22,000 80,000	240,000 - 120,000	7,200 - 7,200	- - -	327,200 22,000 207,200
		182,000	360,000	14,400	-	556,400
		11,451 188,949 22,000 76,838	- 160,000 - 170,000	1,031 15,205 - 5,715	- 2,260 - -	12,482 366,414 22,000 252,553
		299,238	330,000	21,951	2,260	653,449

No emoluments paid or payable to directors in respect of the 2012 year (2011: nil) were performance related and no short term incentive scheme is or was in place for directors.

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Delecta Limited Directors’ Report

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Emoluments of other Key Management Personnel of the consolidated entity

Name	Offce during the year	Short-term	Short-term	Post Employment	Long-term Benefts		% Perfomance related
		Salary / Fees $	Bonus $	Super- annuation $	Long Service Leave $	Total $
30 June 2012 M Bassett J Burness 30 June 2011 M Bassett J Burness	CEO – Calvista Australia CFO / Company Secretary (Delecta) & Financial Controller (Calvista) CEO – Calvista Australia CFO / Company Secretary (Delecta)	249,502 204,227	40,000 10,000	20,655 18,501	4,158 3,404	314,315 236,132	13% 4%
		453,729	50,000	39,156	7,562	550,447
		218,964 98,695	- -	17,728 8,883	3,316 1,645	240,008 109,223	0% 0%
		317,659	-	26,611	4,961	349,231

No portion of emoluments paid or payable in the 2011 year were performance related.

Compensation options: Granted and vested during the year

No compensation options were granted during the year or in the prior year and no compensation options were exercised during the current or prior year.

End of audited Remuneration report.

Signed in accordance with a resolution of the directors.

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M R Day

Director

Perth, Western Australia

19 September 2012

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Auditor’s Independence Declaration to the Directors of Delecta Limited

In relation to our audit of the financial report of Delecta Limited for the financial year ended
30 June 2012, 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.

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Ernst & Young
R J Curtin
Partner
19 September 2012

RC:DR:DELECTA:019

Delecta Limited

Consolidated Statement of Comprehensive Income for the year ended 30 June 2012

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Note	2012 $’000 2011 $’000
Continuing operations Revenue Sale of goods Rendering of services Rental income Finance income Revenue 4(a) Cost of sales Gross proft Other income 4(b) Distribution expenses Marketing expenses Administrative expenses Occupancy expenses Other expenses Share of proft of associate 13(b) Proft / (loss) from continuing operations before tax and fnance costs Finance costs Proft / (loss) from continuing operations before income tax Income tax expense 5 Proft / (loss) from continuing operations after income tax Discontinued operations Proft from discontinued operations after tax 6 Net proft / (loss) for the period Other comprehensive income Foreign currency translation Other comprehensive income for the period Total comprehensive income for the period Proft / (loss) per share from continuing operations attributable to ordinary equity holders of the company: Basic earnings / ( loss) per share 7 Diluted earnings / (loss) per share 7 Earnings / (loss) per share attributable to ordinary equity holders of the company: Basic earnings / ( loss) per share 7 Diluted earnings / (loss) per share 7	22,401 20,973 35 160 48 93 260 111
	22,744 21,337 (14,465) (13,670)
	8,279 7,667
	806 791 (270) (117) (764) (750) (5,431) (5,950) (1,021) (1,045) (929) (1,353) - -
	670 (757) (6) (10) 664 (767) - -
	664 (767) - 68
	664 (699) 7 54
	7 54
	671 (645)
	0.11 cents (0.12) cents 0.11 cents (0.12) cents 0.11 cents (0.11) cents 0.11 cents (0.11) cents

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Delecta Limited

Consolidated Statement of Financial Position as at 30 June 2012

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Note	2012 $’000 2011 $’000
ASSETS Current Assets Cash and cash equivalents 8 Trade and other receivables 9 Inventories 10 Prepayments and deposits Total Current Assets Non-current Assets Property, plant and equipment 11 Goodwill Investment in associate 12 13 Total Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 16 Interest-bearing loans and borrowings 17 Provisions 18 Total Current Liabilities Non-current Liabilities Interest-bearing loans and borrowings 17 Provisions 18 Total Non-current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to equity holders of the Parent Contributed equity 19 Accumulated losses 19 Reserves 19 TOTAL EQUITY	4,744 6,097 3,309 3,154 4,839 4,468 992 1,179
	13,884 14,898
	900 722 441 2,000 441 -
	3,341 1,163
	17,225 16,061
	1,774 1,242 28 25 250 268
	2,052 1,535
	14 41 241 285
	255 326
	2,307 1,861
	14,918 14,200
	69,493 69,446 (54,926) (55,590) 351 344
	14,918 14,200

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Delecta Limited

Consolidated Statement of Cash Flow for the year ended 30 June 2012

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Note	2012 $’000 2011 $’000
Cash fows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Net cash fows from operating activities 8 Cash fows from investing activities Payment for purchase of property, plant and equipment Proceeds from disposal of fxed assets Investment in associate Cash available from release of security deposits Cash utilised as security deposit Proceeds on disposal of discontinued operations 6 Net cash fows from investing activities Cash fows from fnancing activities Proceeds from exercise of options Repayment of borrowings Net cash fows from fnancing activities Net (decrease) / increase in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 8	26,093 28,282 (25,215) (27,703) 242 136 (6) (10)
	1,114 705
	(484) (110) 5 - (2,000) - - 334 (55) - - 1,000
	(2,534) 1,224
	47 105 (24) (37)
	23 68
	(1,397) 1,997 44 (12) 6,097 4,112
	4,744 6,097

19

Delecta Limited

Consolidated Statement of Changes in Equity for the year ended 30 June 2012

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	Attributable to equity holders of the Company
	Issued capital $’000 Accumulated losses $’000 Other reserves $’000 Total $’000
CONSOLIDATED At 1 July 2010 Other comprehensive income - Foreign currency translation Loss for the year Total comprehensive income for the year Proceeds from exercise of options At 30 June 2011 Other comprehensive income - Foreign currency translation Proft for the year Total comprehensive income for the year Proceeds from exercise of options At 30 June 2012	69,341 (54,891) 290 14,740 - - 54 54 - (699) - (699)
	- (699) 54 (645)
	105 - - 105
	69,446 (55,590) 344 14,200 - - 7 7 - 664 - 664
	- 664 7 671
	47 - - 47
	69,493 (54,926) 351 14,918

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Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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1. CORPORATE INFORMATION

The financial report of Delecta Limited (the Company) for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of the directors on 19 September 2012. Delecta Limited is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian and German stock exchanges.

The nature of the operations and principal activities of the Group are described at page 7.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also been prepared on a historical cost basis and has been prepared using the same accounting policies as used in the previous year.For the purpose of preparing the financial report the company is a For Profit Entity.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to the Company under ASIC Class Order 98/100. The Company is an entity to which the class order applies.

(b) Statement of compliance

Accounting policies adopted are consistent with those adopted in the prior year. The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

(c) Adoption of new Accounting standards

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for annual reporting periods beginning on 1 July 2011. The adoption of these new and revised Standards and Interpretations did not have any effect on the financial position or performance of the Group.

Applicable Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by Delecta Limited for the annual reporting period ending 30 June 2012. A full assessment has not yet been completed of the impact of all the new or amended Accounting Standards and interpretations issued but not effective. These are outlined in the table below:

21

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(c) Adoption of new Accounting standards (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2011-9	Amendments to Australian Accounting Standards – Presentation of Other Comprehensive Income [AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]	This Standard requires entities to group items presented in other comprehensive income on the basis of whether they might be reclassifed subsequently to proft or loss and those that will not.	1 July 2012	1 July 2012
AASB 10	Consolidated Financial Statements	AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127_Consolidated and Separate Financial Statements_ dealing with the accounting for consolidated fnancial statements and UIG-112_Consolidation – _Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specifc situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. Consequential amendments were also made to other standards via AASB 2011-7.	1 January 2013	1 July 2013
AASB 12	Disclosure of Interests in Other Entities	AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgments made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non- controlling interests.	1 January 2013	1 July 2013

22

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(c) Adoption of new Accounting standards (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 13	Fair Value Measurement	AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this defnition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. Consequential amendments were also made to other standards via AASB 2011-8.	1 January 2013	1 July 2013
AASB 119	Employee Benefts	The main change introduced by this standard is to revise the accounting for defned beneft plans. The amendment removes the options for accounting for the liability, and requires that the liabilities arising from such plans is recognized in full with actuarial gains and losses being recognized in other comprehensive income. It also revised the method of calculating the return on plan assets. The revised standard changes the defnition of short-term employee benefts. The distinction between short-term and other long-term employee benefts is now based on whether the benefts are expected to be settled wholly within 12 months after the reporting date. Consequential amendments were also made to other standards via AASB 2011-10.	1 January 2013	1 July 2013

23

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(c) Adoption of new Accounting standards (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 2012-5	Annual Improvements 2009–2011 Cycle	This standard sets out amendments to various accounting standards and the related bases for conclusions and guidance. The following items are addressed by this standard: AASB 1 First-time Adoption of International Financial Reporting Standards • Repeated application of IFRS 1 • Borrowing costs AASB 161 Presentation of Financial Statements • Clarifcation of the requirements for comparative information AASB 116 Property, Plant and Equipment • Classifcation of servicing equipment AASB 132 Financial Instruments: Presentation • Tax effect of distribution to holders of equity instruments AASB 134 Interim Financial Reporting Interim fnancial reporting and segment information for total assets and liabilities	1 January 2013	1 July 2013
AASB 2012-2	Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities	AASB 2012-2 principally amends AASB 7 Financial Instruments: Disclosures to require disclosure of information that will enable users of an entity’s fnancial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised fnancial assets and recognised fnancial liabilities, on the entity’s fnancial position.	1 January 2013	1 July 2013

24

A nnu al R epo rt 2 0 12

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(c) Adoption of new Accounting standards (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 9	Financial Instruments	AASB 9 includes requirements for the classifcation and measurement of fnancial assets. It was further amended by AASB 2010-7 to refect amendments to the accounting for fnancial liabilities. These requirements improve and simplify the approach for classifcation and measurement of fnancial assets compared with the requirements of AASB 139. The main changes are described below. (a) Financial assets that are debt instruments will be classifed based on (1) the objective of the entity’s business model for managing the fnancial assets; (2) the characteristics of the contractual cash fows. (b) Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in proft or loss and there is no impairment or recycling on disposal of the instrument. (c) Financial assets can be designated and measured at fair value through proft or loss at initial recognition if doing so eliminates or signifcantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. (a) Where the fair value option is used for fnancial liabilities the change in fair value is to be accounted for as follows: The change attributable to changes in credit risk are presented in other comprehensive income (OCI) The remaining change is presented in proft or loss If this approach creates or enlarges an accounting mismatch in the proft or loss, the effect of the changes in credit risk are also presented in proft or loss. Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB 2009-11 and superseded by AASB 2010-7 and 2010-10.	1 January 2013	1 July 2013

25

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(c) Adoption of new Accounting standards (continued)

Reference	Title	Summary	Application date of standard	Application date for Group
AASB 1053	Application of Tiers of Australian Accounting Standards	This Standard establishes a differential fnancial reporting framework consisting of two Tiers of reporting requirements for preparing general purpose fnancial statements: Tier 1: Australian Accounting Standards Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements Tier 2 comprises the recognition, measurement and presentation requirements of Tier 1 and substantially reduced disclosures corresponding to those requirements. The following entities apply Tier 1 requirements in preparing general purpose fnancial statements: For-proft entities in the private sector that have public accountability (as defned in this Standard) The Australian Government and State, Territory and Local Governments The following entities apply either Tier 2 or Tier 1 requirements in preparing general purpose fnancial statements: For-proft private sector entities that do not have public accountability All not-for-proft private sector entities Public sector entities other than the Australian Government and State, Territory and Local Governments. Consequential amendments to other standards to implement the regime were introduced by AASB 2010-2, 2011-2, 2011-6, 2011-11 and 2012-1.	1 July 2013	1 July 2013
AASB 2012-3	Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities;	AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identifed in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered equivalent to net settlement.	1 January 2014	1 July 2015

The following amendments are not applicable to the Group and therefore have no impact:

Reference	Title
AASB 11	Joint Arrangements
AASB 2012-4	Amendments to Australian AccountingStandards – Government Loans

26

A nnu al R epo rt 2 0 12

Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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(d) Basis of consolidation

The consolidated financial statements comprise the financial statements of Delecta Limited and its subsidiaries as at 30 June each year (the Group).

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the Parent company, using consistent accounting policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

(e) Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the appropriate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

When the Group acquires a business, it assess the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in the host contracts by the acquiree. Prior to 1 July 2009 the group applied the purchase method to account for the business combinations.

(f) Operating segments

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the board of directors.

Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive management team.

The Group aggregates two or more operating segments when they have similar economic characteristics.

Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements.

27

Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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(g) Foreign currency translation

Both the functional and presentation currency of Delecta Limited and its Australian subsidiaries is Australian dollars ($). Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

All exchange differences arising from the above stated procedures are taken to profit or loss.

The functional currency of the foreign operation Calvista New Zealand Ltd (New Zealand) is New Zealand Dollars (NZD$).

As at the reporting date the assets and liabilities of the subsidiary are translated into the presentation currency of Delecta Limited at the rate of exchange ruling at the balance sheet date and the income statement is translated at the average exchange rate for the year.

The exchange differences arising on the translation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss.

(h) Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits with a maturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(i) Trade and other receivables

Trade receivables, which generally have 30 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be uncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that the Group will not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 90 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to estimated future cash flows.

(j) Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

Raw materials – purchase cost on a first-in, first-out basis; and

Finished goods and work-in-progress – cost of direct materials (including where applicable film copyright and classification costs), direct labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

28

A nnu al R epo rt 2 0 12

Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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(j) Inventories (continued)

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(k) Discontinued operations

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale.

The results of discontinued operations are presented separately on the face of the statement of comprehensive income.

(l) Investments and other financial assets

Financial assets are classified as either financial assets held for trading, loans and receivables, heldto-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value held for trading, directly attributable transactions costs. The Group determines the classification of its financial assets on initial recognition.

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models.

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace.

(i) Financial assets held for trading

Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iii) Available-for-sale investments

Available-for-sale investments are those non-derivative financial assets that are designated as availablefor-sale or are not classified as any of the three preceding categories. After initial recognition available-for sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

29

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(m) Investment in an associate

The Group’s investment in its associate is accounted for using the equity method. An associate is an entity in which the Group has significant influence.

Under the equity method, the investment in the associate is carried on the statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.

The income statement reflects the Group’s share of the results of operations of the associate. When there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The Group’s share of profit of an associate is shown on the face of the income statement. This is the profit attributable to equity holders of the associate and, therefore, is profit after tax and non-controlling interests in the subsidiaries of the associate.

The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on its investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the ”share of profit of an associate” in the income statement.

Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

(n) Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:

Plant and equipment – over 3 to 15 years

Leasehold improvements – the lease term

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate at each financial year end.

(i) Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

30

A nnu al R epo rt 2 0 12

Delecta Limited Notes to the Financial Statements for the year ended 30 June 2012

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(n) Property, plant and equipment (continued)

(i) Impairment (continued)

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value.

An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

For plant and equipment, impairment losses are recognised in the income statement.

(ii) Derecognition and disposal

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

(o) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense.

(p) Impairment of non-financial assets other than goodwill

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.

31

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(p) Impairment of non-financial assets other than goodwill (continued)

Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).

Non-financial assets other than goodwill that suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed.

(q) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:

• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

• is not larger than an operating segment.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash generating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Impairment losses recognised for goodwill are not subsequently reversed.

(r) Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.

32

A nnu al R epo rt 2 0 12

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(r) Trade and other payables (continued)

Financial Guarantees

Financial Guarantees are initially recognised and measured at fair value. Subsequent to initial recognition they are measured at the higher of a provision, determined in accordance with AASB 137 Provisions, Contingent liabilities and Contingent Assets, and the initial amount less accumulated amortisation recognised in accordance with AASB 118 Revenue.

(s) Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised.

(t) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

(u) Employee leave benefits

(i) Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave due to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.

Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

33

Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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(v) Share-based payment transactions

Equity settled transactions

The Group provides benefits to employees (including senior executives) and directors of the Group in the form of share-based payments, whereby employees and directors render services in exchange for shares or options over shares (equity-settled transactions).

The Employee Share Option Plan (ESOP) provides benefits to employees, other than directors, whilst the issue of options is as approved from time to time by the members in general meeting. The cost of these equity-settled transactions with employees and directors is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the BlackScholes Option Pricing Model, further details of which are given in note 15.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Delecta Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:

(i) the extent to which the vesting period has expired, and

(ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see note 7).

(w) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(x) Significant accounting estimates and assumptions

In applying the Group’s accounting policies management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgments, estimates and assumptions. Significant judgments, estimates and assumptions made by management in the preparation of these financial statements are outlined below:

(i) Significant accounting judgments

Impairment of non-financial assets other than goodwill

The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. These include product and manufacturing performance, technology, economic and political environments and future product expectations. If an impairment trigger exists the recoverable amount of the asset is determined. This involves value in use calculations, which incorporate a number of key estimates and assumptions.

(ii) Significant accounting estimates and assumptions

Impairment of goodwill and intangibles with indefinite useful lives

The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units to which the goodwill and intangibles with indefinite useful lives are allocated. No impairment losses were recognised in the current year. An impairment loss of $100,000 included in the loss from discontinued operations was recognised in the 2011 year in respect of goodwill. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with indefinite useful lives are discussed in note 12.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. The Group measures the cost of cash-settled share-based payments at fair value at the grant date using the BlackScholes formula taking into account the terms and conditions upon which the instruments were granted. See note 15.

Make good provisions

Provision is made for the anticipated costs of future restoration of leased premises. The provision includes future cost estimates associated with returning the premises to their original condition, fair wear and tear excepted. These future cost estimates are discounted to their present value. The calculation of this provision requires assumptions such as cost estimates and vacation dates. The related carrying amounts are disclosed in note 18.

(y) Revenue recognition

Revenue is recognised and measured at the fair value of consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably

35

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(y) Revenue recognition (continued)

measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Risks and rewards of ownership are considered passed to the buyer on the receipt of payment in respect of cash sales and on the delivery of goods in the case of credit sales.

(ii) Rendering of services

Revenue is recognised when the contract outcome can be reliably measured and control of a right to be compensated for the services has been attained. This is taken to be the date on which the payment for services is processed by the consolidated entity’s credit card service providers.

(iii) Interest income

Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

(iv) Rental income

Rental income from DVD rental is received monthly in advance and is accounted for on receipt.

(z) Income tax

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. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes:

• when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

• when the deferred income tax asset relating to the deductible temporary difference arises 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 taxable profit or loss; or

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(z) Income tax (continued)

• when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. 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 deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Tax balances in the tax consolidated group are allocated using the group allocation method.

(aa) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(ab) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the Parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the Parent, adjusted for:

• costs of servicing equity (other than dividends);

37

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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(ab) Earnings per share (continued)

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

3. OPERATING SEGMENTS

Identification of Reportable Segments

The Group has identified its operating segments based on its internal reports used by the executive team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on the manner in which the product is sold, whether retail or wholesale, and the nature of the services provided. Discrete financial information about each of these operating businesses is reported to the executive management team on a monthly basis.

The reportable segments are based on aggregated operating segments determined by the similarity of the manner in which the products or services are sold or provided as these are the sources of the Group’s major risks and have the most effect on the rates of return.

Types of Products and Services

Retail

The retail segment is made up of divisions that sell adult products directly to retail customers and includes the Group’s mail order division and the Group’s discount warehouse outlet in Canberra.

Wholesale

The wholesale segment divisions are those divisions that sell adult products directly to wholesale customers in Australia and New Zealand.

Other

The other segment is made up of the remains of the Group’s internet and telephones services divisions.

Accounting Policies and Inter-segment Transactions

The accounting policies used by the Group in reporting segments are the same as those contained in note 2 to the financial statements and in prior periods except as detailed below:

Inter-entity sales

Wholesale sales to the Group’s New Zealand operation and discount warehouse outlet are recorded at cost (including transport & other costs where applicable).

Corporate Charges

Non-segmental expenses, such as head office expenses and expenses that are not directly attributable to a segment and not considered part of the core operations of any segment, are not allocated to operating segments by way of corporate charges.

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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3. OPERATING SEGMENTS (continued)

These non-segment charges include:

• Head office expenses (group secretarial, insurances, audit fees, listing fees etc)

• Head office staff and directors salaries

• Group legal fees

Operating segments

The following tables present revenue and profit and loss information, and certain asset and liability information regarding operating segments for the years ended 30 June 2012 and 30 June 2011:

Year ended 30 June 2012 Revenue Sales to external customers Total segment revenue Unallocated fnance income Total consolidated revenue Result Segment results Unallocated expenses - Corporate expenses - Net fnance income Net proft for year Assets and liabilities Segment assets Unallocated assets - Investment in associate - Cash and cash equivalents - Other Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation	Total Operations	Total Operations
	Retail $’000 Wholesale $’000 Other $’000	Total $’000
	718 21,724 42	22,484
	718 21,724 42	22,484 260
	231 1,036 (19)
		22,744
		1,248 (838) 254
	75 14,345 -
		664
		14,420 2,000 656 149
	- 2,221 -	17,225
		2,221 86
	- 484 - - 273 -	2,307
		484 273

39

Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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3. OPERATING SEGMENTS (continued)

Year ended 30 June 2011 Revenue Sales to external customers Total segment revenue Unallocated fnance income Total consolidated revenue Result Segment results Unallocated expenses - Corporate expenses - Net fnance income Net loss for year Assets and liabilities Segment assets Unallocated assets - Cash and cash equivalents Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation	Total Operations	Total Operations
	Retail $’000 Wholesale $’000 Online & Phone Services $’000	Total $’000
	899 20,031 296	21,226
	899 20,031 296	21,226 111
	340 487 157
		21,337
		984 (1,852) 101
	204 14,131 25
		(767)
		14,360 1,701
	- 1,639 -	16,061
		1,639 222
	- 20 - 52 324 12	1,861
		20 388

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A nnu al R epo rt 2 0 12

Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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3. OPERATING SEGMENTS (continued)

Geographical areas

The Group’s geographical areas are determined based on the location of the Group’s assets.

The following tables present revenue, expenditure and certain asset information regarding geographical areas for the years ended 30 June 2012 and 30 June 2011.

Year ended 30 June 2012 Revenue Sales to external customers Finance income Total segment revenue Other segment information Segment non-current assets Year ended 30 June 2011 Revenue Sales to external customers Finance income Total segment revenue (including other income) Other segment information Segment non-current assets	Total Operations
	Australia $’000 New Zealand $’000 Total $’000
	20,601 1,883 22,484 260 - 260
	20,861 1,883 22,744
	3,325 16 3,341
	Total Operations
	Australia $’000 New Zealand $’000 Total $’000
	19,402 1,824 21,226 111 - 111
	19,513 1,824 21,337
	1,136 27 1,163

Sales are made to numerous customers. However, revenue from one customer amounted to 13% (2011:10%) of total revenue recorded in the current period.

41

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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4. REVENUE AND EXPENSES

Revenue and expenses from continuing operations

(a) Revenue Sale of goods Rendering of services Rental revenue Finance revenue – bank interest (b) Other Income Foreign exchange gain Sundry income (c) Finance costs Included in other expenses: Finance charges payable under fnance leases, hire purchase and loan contracts (d) Depreciation, impairment, and amortisation included in income statement: Depreciation (note 11) (e) Lease payments and other expenses included in income statement Included in occupancy expenses: Operating lease payments (f) Employee beneft expense Included in administration expenses: Wages and salaries Workers compensation costs Superannuation expense Provision for annual and long service leave (g) Foreign exchange loss Included in other expenses: Realised foreign exchange loss (h) Other Impairment charge / (reversal) of doubtful debts Provision for inventory obsolescence Merger costs expensed Loss on disposal / write off of fxed assets	2012 2011 $’000 $’000
	22,401 20,973 35 160 48 93 260 111
	22,744 21,337
	73 - 733 791
	806 791
	6 10
	6 10
	288 388
	809 963
	3,452 3,491 62 58 300 (57) 321 14
	3,757 3,884
	- 185
	76 (19) 710 646 161 311 16 4

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A nnu al R epo rt 2 0 12

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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5. INCOME TAX

5. INCOME TAX
(a) Income tax expense / (beneft) The major components of income tax expense are: Current income tax expense / (beneft) Deferred tax expense arising from origination and reversal of temporary differences Tax loss (utilised) / not brought to account	2012 2011 $’000 $’000
	198 50 (248) (322) 198 124
	- -

A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows:

Accounting proft / (loss) before tax from continuing operations Accounting (loss) / proft before tax from discontinued operations Total accounting loss before tax At the Group’s statutory income tax rate of 30% (2011: 30%) Other non-deductible items Utilisation of tax losses Net future deferred tax assets not booked Income tax expenses / (credit) reported in the statement of comprehensive income	664 (767) - 68
	664 (699)
	199 (210) 49 94 (248) (7) - 123
	- -

The Group has tax losses arising in Australia of $11,476,000 (2011: $12,023,000) that are available indefinitely for offset against future taxable profits.

Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 30 June 2012 because directors do not believe it is appropriate to regard realisation of the future tax benefit as probable. These benefits will only be obtained if:

• (i) the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deduction for the loss to be realised;

• (ii) the consolidated entity continues to comply with the conditions for the deductibility imposed by law; and

• (iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the deduction for the loss.

43

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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5. INCOME TAX (continued)

(b) Deferred Income tax Deferred income tax at 30 June relates to: Deferred tax liabilities Trade and other receivables Deferred tax assets Employee entitlements Allowance for inventory obsolescence Trade and other receivables Provisions Prepayments Property, plant and equipment Carried forward tax losses Net (unrecognised) / utilised deferred tax assets Net deferred tax asset / ( liability) Deferred tax expense	Balance sheet 2012 2011 $’000 $’000	Income statement 2012 2011 $’000 $’000
		- 8 (22) (137) (58) 194 23 (6) 7 (40) - (6) - (211) (198) 322 248 (124)
	- -
	- - 122 144 930 988 104 81 57 50 - - - - 3,409 3,607
	4,662 4,870
	(4,622) (4,870)
	- -
		- -

Tax Consolidation Legislation

Delecta Limited and its 100% owned Australian resident subsidiaries have formed a tax consolidated group with effect 1 from July 2003. Delecta Limited is the head entity of the tax consolidated group. Members of the Group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries on a pro-rata basis based on the taxable income of each entity. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations.

Members of the tax consolidation group have entered into a tax funding arrangement. Tax balances are allocated to members of the tax consolidation group using the group allocation method. No amounts have been recognised during the period (2011: nil) as tax consolidation contributions by, or distributions to, equity participants.

6. DISCONTINUED OPERATIONS

(i) Details of operations discontinued

In the prior year, following a strategic review of the group’s operations and subsequent sales process, the group’s Adultshop.com Retail and Online businesses were disposed of with effect from 1 November 2010.

The Adultshop.com retail stores previously formed part of the retail operating segment.

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A nnu al R epo rt 2 0 12

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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6. DISCONTINUED OPERATIONS (continued)

(ii) Financial performance of discontinued operations

The results of the discontinued operation for the 2011 financial year up until disposal is presented below:

Year ended 30 June 2011 Revenue Expenses Trading proft Loss on sale of operations Proft from discontinued operation	Adultshop. com Online $’000 Adultshop. com Retail $’000 Total $’000
	876 2,789 3,665 (823) (2,639) (3,462)
	53 150 203 - (135) (135)
	53 15 68

(iii) Consideration received or receivable

Cash Less: Net assets disposed of Disposal costs Loss on disposal	2011 $’000
	1,000 (992) (143)
	(135)

(iv) Loss per share

Basic earnings / (loss) per share from discontinued operations Diluted earnings / (loss) per share from discontinued operations	2011
	0.01 cents 0.01 cents

7. EARNINGS / (LOSS) PER SHARE

Basic earnings / (loss) per share amounts are calculated by dividing net profit / (loss) for the year attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings / (loss) per share amounts are calculated by dividing the net profit / (loss) attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Potential ordinary shares are antidilutive when their conversion to ordinary shares would increase earnings per share or decrease loss per share from continuing operations. The calculation of diluted earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings per share.

45

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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7. EARNINGS / (LOSS) PER SHARE (continued)

Net proft / (loss) attributable to ordinary equity holders of the Parent from continuing operations Proft attributable to discontinued operations Net proft / (loss) attributable to ordinary equity holders of the Parent Weighted average number of ordinary shares for basic earnings / loss per share	2012 2011 $’000 $’000
	664 (767) - 68
	664 (699)
	2012 2011 Number of shares Number of shares
	630,545,830 616,007,932

There were no options to acquire ordinary shares in the company on issue at year end. In the prior year, none of the options to acquire ordinary shares in the company on issue at year end were taken into account in calculating diluted earnings per share as they were considered to be either not dilutive or antidilutive.

8. CASH AND CASH EQUIVALENTS

Cash at bank and in hand Short-term deposits	2012 2011 $’000 $’000
	922 2,074 3,822 4.023
	4,744 6,097

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short-term deposits are made for a period of 1 month, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

The fair value of cash and cash equivalents is $4,744,000 (2011: $6,097,000).

Reconciliation of net loss after tax to net cash flows used in operations

Net proft / (loss) Adjustments for: Depreciation Loss on disposal of fxed assets Loss on disposal of operations Changes in assets and liabilities (Increase) / decrease in inventories (Increase) / decrease in trade and other receivables Decrease / (increase) in prepayments Increase / (decrease) in trade and other payables Increase in reserves (Decrease) / increase in provisions Net cash from operating activities

664 (699) 288 469 16 4 - 135 (76) 1,024 (231) 222 243 (669) 485 (466) 7 54 (282) 631

1,114 705

Disclosure of non-cash financing and investing activities - refer to note 11.

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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9. TRADE AND OTHER RECEIVABLES

Current Trade receivables (i) (ii) Allowance for doubtful debts Other debtors (ii) (iii)	2012 2011 $’000 $’000
	3,571 3,387 (346) (270)
	3,225 3,117 84 37
	3,309 3,154

(i) Receivables are non-interest bearing and are generally on 30-60 day terms. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired. The amount of the allowance / impairment loss has been measured as the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be received from the relevant debtors.

(ii) Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the carrying value of receivables. Collateral is not held as security, nor is it the Group’s policy to transfer (on-sell) receivables to special purpose entities

(iii) For terms and conditions relating to related party receivables refer to note 22.

Details regarding the effective interest rate and credit risk of current receivables are disclosed in note 20. At 30 June, the ageing of trade receivables was as follows:

0-30 days	0-30 days	31-60 days	61-90 days	+91 days	+91 days	Total
	IT*	IT*	PDNI*	PDNI*	CI*
30 June 2012	1,719	1,363	108	36	346	3,571
30 June 2011	1,710	980	290	137	270	3,387
* PDNI = Past due not impaired	CI = Considered Impaired		IT = Inside	terms

Movement in allowance for doubtful debts provision

Opening balance 1 July Increase / (decrease) in provision Closing balance 30 June 10. INVENTORIES	2012 $’000 2011 $’000
	270 289 76 (19)
	346 270

Finished goods (at net realisable value)	2012 2011 $’000 $’000
	4,839 4,468

Inventory write-downs recognised as an expense totalled $999,000 (2011: $1,060,000) for the Group. This expense is included in the cost of sales.

47

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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11. PROPERTY, PLANT AND EQUIPMENT

Plant and Equipment At beginning of the year net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year – continuing operations Depreciation charge for the year – discontinued operations At end of the year net of accumulated depreciation At cost Accumulated depreciation Net carrying amount	2012 2011 $’000 $’000
	722 1,084 487 111 (21) (4) (288) (388) - (81)
	900 722 4,577 5,724 (3,677) (5,002)
	900 722

Assets acquired under hire purchase contracts are pledged as security for the related hire purchase liability.

No assets were acquired under hire purchase or finance lease agreements during the current or prior year.

Plant and equipment with a carrying amount of $25,000 (2011: $50,000) are pledged as securities for the current and non-current liabilities as disclosed in note 17.

12. GOODWILL

Goodwill At cost (gross carrying amount) Accumulated impairment at beginning of the year Impairment current year Accumulated impairment at end of year Total net carrying value of goodwill	2012 2011 $’000 $’000
	2,026 2,026
	(1,585) (1,585)
	- -
	(1,585) (1,585)
	441 441

Goodwill is not amortised but is subject to annual impairment testing (see note 14). No impairment losses on goodwill were recognised in the 2012 financial year (2011: nil).

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A nnu al R epo rt 2 0 12

Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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13. INVESTMENT IN ASSOCIATE

13. INVESTMENT IN ASSOCIATE
a) Investment details Listed Paynes Find Gold Limited The Group acquired a 24.91% interest in Paynes Find Gold on 27 June 2012. b) Movements in carrying value of the Groups investment in associate At cost Share of profts after income tax At 30 June 2012	2012 2011 $’000 $’000
	2,000 -
	2,000 - - -
	2,000 -

c) Fair value of investment in listed associate

The fair value of the Group’s Investment in Paynes Find Gold Limited is $2,000,000 (2011: nil).

d) Summarised financial information

The following table illustrates summarised financial information relating to the associate’s statement of financial position as at 30 June 2012:

Current assets Non- current assets Current liabilities Non-current liabilities	2012 $’000
	3,868 4,709
	8,577 (498) (26)
	8,053

14. IMPAIRMENT TESTING OF GOODWILL

Goodwill acquired through business combinations has been allocated to the individual cash generating units to which the goodwill relates for impairment testing.

The recoverable amount of the goodwill has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by senior management for the next financial year and applying a flat growth rate of 4% over 5 years.

The pre tax discount rate applied to cash flow projections is 10% (2011: 10%).

49

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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14. IMPAIRMENT TESTING OF GOODWILL (continued)

Carrying amount of goodwill allocated to cash generating units Wholesale division	2012 2011 $’000 $’000
	441 441
	441 441

The following describes each key assumption on which management has based its cash flow projections when determining the value in use:

• Budgeted gross margins – the basis used to determine the value assigned to the budgeted gross margins is the average gross margins achieved in the year immediately before the budgeted year and as such reflect past experience.

No changes in assumptions are likely to have a significant impact on the recoverable amount of goodwill.

15. SHARE BASED PAYMENT PLANS

Recognised share-based payment expenses

No expense was recognised for the employee services received during the current year (2011:$nil).

Employee share options incentive scheme

The Group operates an employee share options incentive scheme. Under the scheme, options to purchase shares in the Parent company are able to be offered to managers, executive officers or full or part time staff members of the Group. The offer of options is at the discretion of the directors.

It is a term of each option that any unexercised option shall lapse on the day that the option holder ceases to be employed by the Group.

Options issued are equity-settled.

Director options

From time to time options to purchase shares in the Company are offered to the company’s directors following approval of members in general meeting.

Summary of employee and Director share options granted

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in employee and director share options during the year:

Outstanding at the beginning of the year Cancelled during the year on cessation of employment Issued during the year Outstanding at the end of the year	2012 2011 No. WAEP No. WAEP
	4,575,000 $0.067 5,445,000 $0.067 (4,575,000) $0.067 (870,000) $0.067 - - - -
	- 4,575,000 $0.067

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Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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15. SHARE BASED PAYMENT PLANS (continued)

Range of exercise price

The range of exercise price for the options outstanding at the end of the 2011 year was $0.047.

Weighted average fair value

The weighted average fair value of options granted during the year was nil (2011: nil).

Fair value of options issued

The fair value of options issued during the year was nil (2011: nil).

16. TRADE AND OTHER PAYABLES

Current Trade payables (i) Goods and services tax Other creditors and accruals	2012 2011 $’000 $’000
	1,305 785 127 115 342 342
	1,774 1,242

(i) Trade payables are non-interest bearing and are normally settled on 30-day terms.

Information regarding the credit risk of current payables is set out in note 20.

17. INTEREST-BEARING LOANS AND BORROWINGS

Current Obligations under hire purchase contracts (note 21) Non-current Obligations under hire purchase contracts (note 21)	2012 2011 $’000 $’000
	28 25 14 41
	42 66

The carrying amount of plant and equipment pledged as security for current and non-current finance leases and hire purchase contracts is $25,000 (2011: $50,000).

The carrying amounts of the Group’s current and non-current borrowings approximate their fair value.

51

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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18. PROVISIONS

Current 2012 Non-current 2012 Current 2011 Non-current 2011	Employee entitlements $’000 Make good provisions $’000 Total $’000
	250 - 250 168 73 241
	418 73 491
	268 - 268 212 73 285
	480 73 553

Movements in each class of provision during the financial year, other than provisions relating to employee benefits, are set out below:

Make good provisions At 1 July Utilised At 30 June	2012 $’000 2011 $’000
	73 81 - (8)
	73 73

(b) Nature and timing of provisions

Make good provision

In accordance with the various lease agreements for retails stores and offices premises, the Group must restore the leased premises to their original condition on vacating such premises. Provision for make good is made at the commencement of the lease based on the estimated current cost of the make good, and is reviewed biannually and adjusted where necessary.

Because of the long term nature of the liability, the greatest uncertainty in estimating the provision is in estimating the costs that will ultimately be incurred.

19. CONTRIBUTED EQUITY AND RESERVES

(a) Ordinary shares

Ordinary shares - issued and fully paid At 1 July 2010 Movements during the year - Exercise of 2011 Listed Options At 30 June 2011 Movements during the year - Exercise of 2011 Listed Options At 30 June 2012	2012 $’000 2011 $’000
	69,493 69,446
	Number $’000
	614,450,268 69,341 13,146,332 105
	627,596,600 69,446 5,899,605 47
	633,496,205 69,493

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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19. CONTRIBUTED EQUITY AND RESERVES (continued)

(b) Options

Movement in options on issue At 1 July 2010 Exercise of 2011 Listed Options Cancelled during the year on cessation of employment At 30 June 2011 Exercise of 2011 Listed Options Expiry of 2011 Listed Options Expiry / cancellation of employee options At 30 June 2012	Consolidated Number
	157,986,067 (13,146,332) (870,000)
	143,969,735 (5,899,605) (133,495,130) (4,575,000)
	-

(c) Accumulated losses

c) Accumulated losses
Movements in accumulated losses were as follows: Balance 1 July Net proft / (loss) for the year Balance 30 June	2012 2011 $’000 $’000
	(55,590) (54,891) 664 (699)
	(54,926) (55,590)

(d) Reserves

d) Reserves
Reserves At 30 June 2010 Currency translation differences for continuing operations At 30 June 2011 Currency translation differences for continuing operations At 30 June 2012	Share premium $’000 Foreign currency translation $’000 Share based payments $’000 Total $’000
	115 (35) 210 290 - 54 - 54
	115 19 210 344 - 7 - 7
	115 26 210 351

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Share based payments reserve

The share based payments reserve is used to record the value of share based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 15 for further details of these plans.

53

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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19. CONTRIBUTED EQUITY AND RESERVES (continued)

e) Capital management

Capital managed by the board includes shareholder equity, which is $14,918,000 at 30 June 2012 (2011: $14,200,000). The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future operations of the business. External borrowings totalled $42,000 (2011: $66,000) at balance date. There were no changes in the Group’s approach to capital management during the year. Neither the company nor any of its subsidiaries are subject to externally imposed capital requirements.

20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise receivables, payables, hire purchase / lease contracts, cash and short-term deposits.

The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security.

The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate and foreign exchange. Ageing analysis and monitoring of specific credit allowances are undertaken to manage credit risk, while liquidity risk is monitored through the development of future rolling cash flow forecasts.

Primary responsibility for identification and control of financial risks rests with the Managing Director and Chief Financial Officer under the authority of the Board.

Risk Exposures and Responses

Interest rate risk

The Group’s exposure to market interest rates relates primarily to the Group’s cash and cash deposits.

At balance date, the Group had the following financial assets exposed to Australian variable interest rate risks:

Financial assets Cash Security deposits	2012 $’000 2011 $’000
	4,744 6,097 141 86

At balance date, the Group did not have any financial liabilities exposed to Australian variable interest rate risks. The Group’s only borrowings at year end were in respect of a fixed rate hire purchase contracts.

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

Risk Exposures and Responses (continued)

At 30 June 2012, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Judgements of reasonable possible movements: +1% (100 basis points) -0.5% (50 basis points)	Post Tax Proft / Equity Higher / (Lower) 2012 $’000 2011 $’000
	49 62 (24) (31)

The movements in profit are due to higher / lower interest income from variable rate cash and deposit balances. The sensitivity is lower in 2012 than in 2011 because of a decrease in cash balances.

Foreign currency risk

As a result of purchases of inventory (some of which is paid for in advance) denominated in United States Dollars, the Group’s balance sheet can be affected by movements in the United States Dollar to Australian Dollar exchange rates.

It is the Group’s policy not to enter into forward currency contracts to eliminate the currency exposures on any individual transactions, as the majority of imported product is either pre paid or paid for on delivery, and no product is pre-sold prior to receipt, so the majority of the price fluctuations can be passed on to the Group’s customers.

At 30 June 2012, the Group had the following exposure to United States Dollars:

Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Net exposure	2012 $’000 2011 $’000
	62 53 3 769
	65 822
	(663) (256)
	(663) (256)
	(598) 566

The following sensitivity is based on the foreign currency risk exposures in existence at the balance sheet date:

At 30 June 2012, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

55

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

Risk Exposures and Responses (continued)

Risk Exposures and Responses (continued)
Judgements of reasonable possible movements: AUD/USD +10% AUD/USD -10%	Post Tax Proft Higher / (Lower) Equity Higher / (Lower) 2012 $’000 2011 $’000 2012 $’000 2011 $’000
	60 52 60 52 (60) (52) (60) (52)

The movements in profit in 2012 are more sensitive than in 2011 due to the higher level of foreign currency exposure at the current year balance date.

Management believes the balance date risk exposures are representative of the risk exposure inherent in the financial instruments.

Credit risk

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.

The Group does not hold any credit derivatives to offset its credit exposure.

The Group only extends credit to creditworthy third parties, and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer in accordance with set parameters. These risk limits are regularly monitored.

In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

There are no significant concentrations of credit risk within the Group except for cash which is only deposited with one of the major financial institutions in Australia and New Zealand.

Liquidity risk

The Group’s objective is to maintain sufficient cash resources to fund its ongoing operations and capital expenditure, although from time to time use is made of hire purchase loans / finance leases for the acquisition of motor vehicles.

The table below reflects the undiscounted cash flows for the respective upcoming fiscal years for all contractually fixed pay-offs and receivables for settlement, repayments and interest resulting from recognised financial assets and liabilities. Cash flows for financial assets and liabilities without fixed amount or timing are based on the conditions existing at 30 June 2012.

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Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

Risk Exposures and Responses (continued)

The remaining contractual maturities of the Group’s financial liabilities are:

30 June 2012 6 months or less 6 -12 months 1-5 years 30 June 2011 6 months or less 6 -12 months 1-5 years	Trade & Other Payables Hire Purchase / Finance Lease Total $’000
	1,774 14 1,788 - 14 14 - 14 14
	1,774 42 1,816
	Trade & Other Payables Hire Purchase / Finance Lease Total $’000
	1,242 12 1,254 - 13 13 - 41 41
	1,242 66 1,308

Maturity analysis of financial assets and liability based on management’s expectation.

The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations such as property, plant, equipment and investments in working capital eg inventories and trade receivables. These assets are considered in the Group’s overall liquidity risk. The Group monitors existing financial assets and liabilities to enable an effective controlling of future risks.

Year ended 30 June 2012 FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables Security deposits FINANCIAL LIABILITIES Hire purchase / fnance lease contracts Trade and other payables Net maturity	< 6 months $’000 6-12months $’000 1-5 years $’000 Total $000
	4,744 - - 4,744 3,309 - - 3,309 - - 141 141 (14) (14) (14) (42) (1,774) - - (1,774)
	6,265 (14) 127 6,378

57

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

Risk Exposures and Responses (continued)

Risk Exposures and Responses (continued)
Year ended 30 June 2011 FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables Security deposits FINANCIAL LIABILITIES Hire purchase / fnance lease contracts Trade and other payables Net maturity	< 6 months $’000 6-12months $’000 1-5 years $’000 Total $000
	6,097 - - 6,097 3,154 - - 3,154 - - 86 86 (12) (13) (41) (66) (1,242) - - (1,242)
	7,997 (13) 45 8,029

The Group monitors rolling forecasts of liquidity reserves on the basis of expected cash flow.

Fair value

The methods for estimating fair value are outlined in the relevant notes to the financial statements.

21. COMMITMENTS AND CONTINGENCIES

Operating lease commitments – Group as lessee

The Group has entered into commercial property leases and leases of various items of plant and equipment. The property leases have a life of between 3 months and 6 years and the majority have renewal options. There are no restrictions placed upon the lessee by entering into these leases.

Future minimum lease payments under operating leases contracts are as follows:

Within 1 year After 1 year but not more than 5 Later than 5 years Total minimum lease payments	2012 2011 Minimum lease payments $’000 Minimum lease payments $’000
	780 759 1,722 2,368 - -
	2,502 3,127

Hire purchase and finance lease liabilities

Future payments under hire purchase and finance lease contracts together with the present value of the payments are as follows:

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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21. COMMITMENTS AND CONTINGENCIES (continued)

Within 1 year After 1 year but not more than 5 Total minimum lease payments Less amounts representing fnance charges Present value of minimum lease payments	2012 2011 Minimum payments $’000 Present value of payments $’000 Minimum payments $’000 Present value of payments $’000
	31 28 31 24 14 14 45 42
	45 42 76 66 (3) - (10) -
	42 42 66 66

The weighted average interest rate impact of the hire purchase and lease agreements for the Group is 10.7% (2011: 10.7%).

Capital commitments

At the reporting date the Group had no capital commitments contracted for but not recognised as liabilities.

Contingent liabilities and contingent assets

No known contingent liabilities or contingent assets which have not been provided for exist at year end nor have any arisen between the year end and the date of this report.

Guarantees

Cross guarantees given by Delecta Limited, Today’s Success Pty Ltd, Calvista Australia Pty Ltd and Stell Bay Pty Ltd are described in note 22.

22. RELATED PARTY DISCLOSURE

The consolidated financial statements include the financial statements of Delecta Limited and the subsidiaries listed in the following table:

subsidiaries listed in the following table:
Name	Country of	% Equity interest
	incorporation	2012	2011
Adultshop.com (NZ) Limited (1)	New Zealand	100	100
Beta Creek Diamonds Pty Ltd (1)	Australia	100	100
Calvista Australia Pty Ltd	Australia	100	100
Calvista New Zealand Limited	New Zealand	100	100
Stell Bay Pty Ltd (1)	Australia	100	100
Today’s Success Pty Ltd (1)	Australia	100	100

Delecta Limited is the ultimate Australian Parent entity and ultimate Parent of the Group.

(1) Dormant companies

59

Notes to the Financial Statements for the year ended 30 June 2012

Delecta Limited

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22. RELATED PARTY DISCLOSURE (continued)

Entities subject to class order

Pursuant to Class Order 98/1418, relief has been granted to Today’s Success Pty Ltd, Calvista Australia Pty Ltd and Stell Bay Pty Ltd from the Corporations Act 2001 requirements for preparation, audit and lodgement of their financial reports.

As a condition of the Class Order, Delecta Limited, Today’s Success Pty Ltd, Calvista Australia Pty Ltd and Stell Bay Pty Ltd (the “Closed Group”) entered into a Deed of Cross Guarantee on 27 March 2002. The effect of the deed is that Delecta Limited has guaranteed to pay any deficiency in the event of winding up of either controlled entity or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee in the event that Delecta Limited is wound up or if it does not meet its obligation under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee.

The consolidated statement of comprehensive income and statement of financial position of the entities that are members of the “Closed Group” are as follows:

Consolidated Statement of Comprehensive Income Proft / (loss) from continuing operations before income tax Income tax expense Proft / (loss) after tax from continuing operations Proft from discontinued operations Accumulated loss at the beginning of the period Accumulated loss at the end of the period	CLOSED GROUP 2012 $’000 2011 $’000
	444 (787) - -
	444 - (787) 68 (54,444) (53,725)
	(54,000) (54,444)

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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22. RELATED PARTY DISCLOSURE (continued)

Consolidated Statement of Financial Position ASSETS Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments and deposits Total Current Assets Non-current Assets Other fnancial assets Property, plant and equipment Intangible assets Total Non-current assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Interest bearing loans and borrowings Provisions Total Current Liabilities Non-current Liabilities Interest-bearing loans and borrowings Provisions Total non-current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to equity holders of the Parent Issued capital Retained earnings Other reserves TOTAL EQUITY	CLOSED GROUP 2012 $’000 2011 $’000
	4,285 5,248 3,058 2,983 4,180 3,813 956 1,091
	12,479 13,135
	4,235 2,818 884 694 441 441
	5,560 3,953
	18,039 17,088
	1,714 1,164 28 25 235 256
	1,977 1,445
	14 41 230 275
	244 316
	2,221 1,761
	15,818 15,327
	69,493 69,446 (54,000) (54,444) 325 325
	15,818 15,327

The total amount of transactions that were entered into with related parties for the relevant financial year is as follows:

61

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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22. RELATED PARTY DISCLOSURE (continued)

Wholly-owned group transactions

Loans have been made to and from wholly owned entities during the year at no interest charge. In the 2011 year, Calvista New Zealand Limited was charged interest at a rate 7% per annum by the Parent entity generating interest income of $29,320. The loans have no fixed date for repayment and although repayment of the loans can be called upon, this is not expected to take place within the foreseeable future.

Calvista Australia Pty Ltd charged Calvista New Zealand Pty Ltd $36,000 (2011: $36,000) in management fees for work done on their behalf.

Sales and purchases between entities within the wholly owned group are at cost.

23. PARENT ENTITY INFORMATION

Information relating to Delecta Limited: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total Liabilities Issued capital Share premium reserve Share based payments reserve Accumulated losses TOTAL SHAREHOLDERS EQUITY Proft / (loss) after tax of the Parent Entity Other comprehensive income of the Parent Entity Total comprehensive income / (loss) of the Parent Entity	2012 $’000 2011 $’000
	805 7,957 1,818 8,723
	8,762 10,541
	(87) (200) - (22)
	(87) (222)
	69,493 69,446 115 115 210 210 (61,143) (59,452)
	8,675 10,319
	(793) (1,700) - -
	(793) (1,700)

24. EVENTS AFTER THE BALANCE SHEET DATE

No material fact or circumstance has occurred between the financial year end and the date of this report which has significantly effected or may affect the operations of the consolidated entity or Parent entity, the results of operations, or the state of affairs of the consolidated entity or Parent entity in future years.

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Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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25. AUDITORS’ REMUNERATION

The auditor of Delecta Limited is Ernst & Young.

Amounts received or due and receivable by Ernst & Young (Australia) for: • an audit or review of the fnancial report of the entity and any other entity in the consolidated group	2012 $ 2011 $
	95,000 115,000
	95,000 115,000

26. KEY MANAGEMENT PERSONNEL

(a) Compensation of Key Management Personnel

Short-term Post employment Other long term benefts	2012 $ 2011 $
	1,045,729 946,897 53,556 48,562 7,562 7,221
	1,106,847 1,002,680

(b) Option holdings of Key Management Personnel

30 June 2012	Balance 1 July 2011	Issued	Expired	Balance 30 June 2012
Directors M Day H Moser K Heitman B Moore Executives J Burness M Bassett	47,471,402 26,147,472 - 25,397,472 3,000,000 165,000	- - - - - -	47,471,402 26,147,472 - 25,397,472 3,000,000 165,000	- - - - - -
Total	102,181,346	**- **	102,181,346	-

30 June 2011	Balance 1 July 2010	Issued	Expired	Balance 30 June 2011	Vested at 30 June 2011	Vested at 30 June 2011	Vested at 30 June 2011
					Total	Not Exercisable	Exercisable
Directors M Day H Moser K Heitman B Moore Executives J Burness M Bassett	47,471,402 26,147,472 - 25,397,472 3,000,000 165,000	- - - - - -	- - - - - -	47,471,402 26,147,472 - 25,397,472 3,000,000 165,000	47,471,402 26,147,472 - 25,397,472 3,000,000 165,000	- - - - - -	47,471,402 26,147,472 - 25,397,472 3,000,000 165,000
Total	102,181,346	-	-	102,181,346	102,181,346	-	102,181,346

63

Delecta Limited

Notes to the Financial Statements for the year ended 30 June 2012

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26. KEY MANAGEMENT PERSONNEL (continued)

(c) Shareholdings of Key Management Personnel

Shares held in Delecta Limited (number)

	Balance 1 July 2011	Net change	Balance 30 June 2012
Directors M Day H Moser B Moore	152,690,662 53,794,943 50,794,943	- - -	152,690,662 53,794,943 50,794,943
Total	257,280,548	-	257,280,548
	Balance 1 July 2010	Net change	Balance 30 June 2011
Directors M Day H Moser B Moore	152,690,662 53,794,943 50,794,943	- -	152,690,662 53,794,943 50,794,943
Total	257,280,548	-	257,280,548

Messrs Heitman, Burness and Bassett did not hold any shares in Delecta Limited during the periods.

(d) Other transactions with Key Management Personnel

Services

In the prior year, Ontel Communications Pty Ltd, a company related to Mr Moore, earned total fees of $6,788 for the provision of phone dating services. At year end no amounts (2011: nil) was owed to Ontel Communications Pty Ltd.

Adultshop.com Pty Ltd, a company related to Mr Day, purchased goods and services to the value of $3,036,099 (November 2011 to June 2012: $2,224,511) from the Group. At year end $300,000 (2011:$347,000) was owing by Adultshop.com Pty Ltd to the group.

Sales and services provided to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal commercial terms.

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Delecta Limited Directors’ Declaration

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In accordance with a resolution of the directors of Delecta Limited, I state that:

In the opinion of the directors:

(a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001.

• (b) the financial statements and notes also comply with the International Financial Reporting Standards as disclosed in note 2(b).

• (c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

• (d) This declaration has been made after receiving the declarations required to be made to the directors in accordance with sections 295A of the Corporations Act 2001 for the financial period ending 30 June 2012.

• (e) In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in note 22 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee.

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M R Day

Director

Perth, Western Australia 19 September 2012

65

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Independent auditor's report to the members of Delecta Limited

Report on the financial report

We have audited the accompanying financial report of Delecta Limited, which comprises the consolidated
statement of financial position as at 30 June 2012, the consolidated statement of comprehensive
income, the consolidated statement of changes in equity and the consolidated statement of cash flows for
the year then ended, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.

Auditor's 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. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about 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 the auditor's 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, the auditor considers internal controls relevant to the entity's 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 entity's
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 complied with the independence requirements of the Corporations Act
2001.  We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report. We confirm that the Auditor’s Independence Declaration
would be in the same terms if given to the directors as at the time of this auditor’s report

RC:DR:DELECTA:018

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Opinion

In our opinion:

• a. the financial report of Delecta Limited is in accordance with the Corporations Act 2001 , including:

• i giving a true and fair view of the consolidated entity's financial position as at 30 June 2012 and of its performance for the year ended on that date; and

• ii complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and

• b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the remuneration report

We have audited the Remuneration Report included in pages 6 to 15 of the directors' report for the year
ended 30 June 2012. The directors of the company are responsible for the preparation and presentation
of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Delecta Limited for the year ended 30 June 2012, complies
with section 300A of the Corporations Act 2001.

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Ernst & Young

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R J Curtin
Partner
Perth

19 September 2012

RC:DR:DELECTA:018

Delecta Limited

Corporate Governance Statement

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The Board of Directors of Delecta Limited is responsible for the corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of Delecta Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

In accordance with the Australian Stock Exchange Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations” the Corporate Governance Statement must contain certain specific information and must disclose the extent to which the Company has followed the guidelines during the period. Where a recommendation has not been followed, that fact must be disclosed together with the reasons for the departure.

Delecta Limited’s corporate governance practices were in place throughout the financial year ended 30 June 2012 and were compliant, unless otherwise stated, with the Corporate Governance Council’s principles and recommendations, which are as follows:

Principle 1.	Laya solid foundation for management and oversight
Principle 2.	Structure the board to add value
Principle 3.	Promote ethical and responsible decision making
Principle 4.	Safeguard integrityin fnancial reporting
Principle 5.	Make timelyand balanced disclosure
Principle 6.	Respect the rights of shareholders
Principle 7.	Recognise and manage risk
Principle 8.	Encourage enhancedperformance
Principle 9.	Remunerate fairlyand responsibly
Principle 10.	Recognise the legitimate interests of stakeholders

Structure and Composition of the Board

The composition of the Board is determined in accordance with the following principles and guidelines:

• The Board shall comprise at least 3 directors, increasing where additional expertise is considered desirable in certain areas.

• The Board should comprise a majority of independent non-executive directors.

• The Chairperson should be a non-executive director.

• Directors should bring characteristics, which allow a mix of qualifications, skills and experience both nationally and internationally.

The Board reviews its composition on an annual basis to ensure that the Board has the appropriate mix of expertise and experience. When a vacancy exists, for whatever reason, or where it is considered that the Board would benefit from the services of a new director with particular skills, the Board will select appropriate candidates with relevant qualifications, skills and experience. External advisers may be used to assist in such a process. The Board will then appoint the most suitable candidate who must stand for election at the next general meeting of shareholders.

The Australian Stock Exchange Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations” recommends the appointment of a Nomination Committee for prospective Board appointments. The Board considers that the Company and the Board are currently not of sufficient size to warrant the establishment of a Nomination Committee.

The terms and conditions of the appointment and retirement of directors is set out in a letter of appointment which covers remuneration, expectations, terms, the procedures for dealing with conflicts of interest and the availability of independent professional advice.

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Delecta Limited Corporate Governance Statement

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The performance of all directors is reviewed by the Chairman each year. Directors whose performance is unsatisfactory will be asked to retire.

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Director’s Report. Directors of Delecta Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with - the exercise of their unfettered judgement.

The following directors of Delecta Limited are considered to be independent:

Name	Position
H R Moser	Non-Executive Director
B Moore	Non-Executive Director(Chairman)

Each director has the right to seek independent professional advice at the Company’s expense. However, prior approval of the Chairman will be required, which will not be unreasonably withheld.

The term in office of each director in office at the date of this report is as follows:

Name	Term in Offce
M Day	14years
H R Moser	14years
B Moore	9years

Responsibilities of the Board

The Board is responsible for:

• Overseeing the Company, including its control and accountability systems.

• Appointing and removing the Managing Director and Company Secretary.

• Ratifying the appointment or removal of the Chief Financial Officer.

• Input into and approving the Group strategy, ensuring sufficient resources are available to implement the strategy and assessing managements performance against the strategy.

• Reviewing and ratifying systems of risk management and internal compliance and controls, codes of conduct and legal compliance.

• Approving and monitoring the progress of major capital expenditure, capital management, business acquisitions and disposals.

• Approving and monitoring financial and other reporting.

Code of Conduct and Trading Policy for Directors and Executives

The Company has introduced a Code of Conduct and a Trading Policy to guide the directors and key executives to the practices necessary to maintain confidence in the Company’s integrity.

The principles of the Code of Conduct are:

• To act honestly, in good faith and in the best interest of the Company.

• Not use property, information or position, or opportunities arising from these, for personal gain or to compete with the Company.

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Delecta Limited

Corporate Governance Statement

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• To keep confidential non-public information except where disclosure is authorised or legally mandated.

• To deal fairly with all Company’s customers, suppliers, competitors and employees.

• Protect and ensure the proper and efficient use of the Company’s assets for legitimate business purposes.

• To actively comply with and promote compliance with laws and regulations.

• Encourage the reporting of unlawful or unethical behaviour.

Directors, key management and employees are prohibited from trading in the Company’s securities at any time if the person possesses Inside Information.

Directors and Key Management Personnel are, in addition to the general prohibition above, prohibited from trading in the Company’s securities during the following blackout periods:

• The period commencing on the last day of the financial half year and ending 24 hours after the release of the Company’s half year results; and

• The period commencing on the last day of the financial year and ending 24 hours after the release of the Company’s full year results.

At any other time, any Director or Key Management Personnel wishing to trade in the Company’s securities shall consult with, and obtain written clearance from, either the Chief Executive Officer or the Chief Financial Officer of the Company, and the Chairman of the Board (or one other non-executive member of the board in the case of the Chairman himself), prior to transacting.

This notification requirement is not mandatory for other employees; however they are encouraged to adopt it.

The Company expects all employees to act appropriately at work and has introduced “Standards of Conduct’ which provides guidelines aimed at attaining high ethical standards and appropriate corporate behaviour.

Audit Committee

In February 2012, the Board resolved to disband it’s Audit Committee. The operation of a separate Audit Committee was considered to be impractical and of little benefit given that the Board consisted of only three Director’s, two of which were independent, and that the matters previously dealt with by the Audit Committee would be better dealt with by the full Board.

Continuous Disclosure and Communication with Shareholders

The Chief Executive Officer is responsible, in consultation with the Board, for interpreting and monitoring the Company’s compliance with the continuous disclosure requirements of the Australian Stock Exchange whilst the Company Secretary is responsible for all communications with Australian Stock Exchange.

Communication with shareholders is conducted through the following mechanisms:

• Announcements lodged with Australian Stock Exchange

• Australian Stock Exchange Quarterly Cashflow Reports

• Half Yearly and Preliminary Final Reports

• Annual Reports and Annual general meetings

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Delecta Limited Corporate Governance Statement

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Remuneration

The Board is responsible for determining and reviewing compensation arrangements for the directors themselves, the Chief Executive Officer and the executive team. In February 2012 the Board resolved to disband it’s Remuneration Committee as it was no longer considered practical given the size and composition of the Board, and that the matters previously dealt with by the committee would be better dealt with by the Board.

It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Board links the nature and amount of executive directors’ and officers’ emoluments to the Company’s financial and operational performance. The expected outcomes of the remuneration structure are:

• Retention and motivation of key executives.

• Attraction of quality management to the Company.

• Performance incentives which allow executives to share the rewards of the success of the Company.

Details on the amount of remuneration and all monetary and non-monetary components for each of the directors and executives are provided in the Directors’ Report. In relation to the payments of bonuses, options and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of Delecta Limited and the performance of the individual during the period.

There were no loans made to directors or executives during the period and there are no amounts owing by directors and executives at the year end.

Risk Management

The Board monitors and receives advice on areas of operational and financial risk and the control framework, and considers strategies for appropriate risk management arrangements.

Specific areas of risk identified initially and which are regularly considered at Board Meetings include compliance with credit card regulations and regulations covering the Company’s operating activities, foreign currency fluctuations, performance of activities, human resources, the environment and continuous disclosure obligations.

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Delecta Limited ASX Additional Information

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The shareholder information set out below was applicable as at 18 September 2012.

FULLY PAID ORDINARY SHARES

1. Distribution of shareholders

(a) Analysis of number of shareholders by size of holding.

Category of Holding 1 - 1,000 shares 1,001 - 5,000 shares 5,001 - 10,000 shares 10,001 - 100,000 shares 100,001 shares and over	Number 623 700 332 628 205
	2,488

(b) There were 2,488 shareholders with less than a marketable parcel of ordinary shares.

2. Twenty Largest Shareholders

The names of the twenty largest shareholders are:

The names of the twenty largest shareholders are:
Name	Number of Shares Held % of Fully Paid Shares Held
1 JP Morgan Nominees Australia Limited 2 Zero Nominees Pty Ltd 3 Goldshore Investments Pty Ltd 4 Hollywood Marketing Pty Ltd 5 NEFCO Nominees Pty Ltd 6 Bradley Moore & Tanya Endicott 7 Mr Carl Philip Magnus Coward 8 Goldshore Investments Pty Ltd 9 Bradley Moore & Tanya Endicott 10 Adult Communication Services Pty Ltd 11 Goldshore Investments Pty Ltd 12 United & Pacifc Shirt Co Pty Ltd 13 Mr Jeffrey Robert Moulds 14 Dor Nominees Pty Ltd 15 AA Lam Pty Ltd 16 Buelow Nominees Pty Ltd 17 HSBC Custody Nominees (Australia) Limited 18 Mr Antonius Clemens Maria Bohnenn 19 Mr Gerard Thomas McMahon 20 Ms Svetlana Amelichkina Total Shares on Issue	89,707,867 14.16 57,991,425 9.15 50,794,944 8.02 46,447,968 7.33 43,012,374 6.79 28,544,943 4.51 28,524,000 4.50 27,675,750 4.37 15,000,000 2.37 14,172,000 2.24 13,600,000 2.15 13,510,360 2.13 10,584,500 1.67 6,718,049 1.06 6,281,414 0.99 6,000,000 0.95 5,978,513 0.95 5,637,120 0.89 5,474,585 0.86 5,474,585 0.86
	481,147,197 75.95
	633,496,205

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Delecta Limited ASX Additional Information

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3. Voting Rights

At a general meeting of shareholders:

• (a) On a show of hands, each person who is a member or sole proxy has one vote.

• (b) On a poll, each shareholder is entitled to one vote for each fully paid share.

4. Substantial Shareholders

There were three substantial shareholders in the Company as disclosed in the substantial shareholder notices given to the Company as follows:

Name	Shares Entitlement
Malcolm Raymond Day, Hollywood Marketing (WA) Pty Ltd
(ACN 072 551 896), Goldshore Investments Pty Ltd & Adult
Communication Services Pty Ltd (ACN 072 711 963).	152,690,662
Hans Rudolf Moser	53,794,943
B Moore & T Endicott	50,794,943

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