MOKO.MOBI Limited For the year ended 30 June 2010 For ... · MOKO.MOBI Limited For the year ended 30 June 2010 0 ... undertake marketing activities to develop sustainable ... stage

MOKO.MOBI LimitedFor the year ended 30 June 2010

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Contents

Corporate directory.................................................................................................................. 2

Chairman’s report .................................................................................................................... 3

Directors’ report ....................................................................................................................... 7

Remuneration report.............................................................................................................. 11

Corporate governance statement…………………………………………………………………..16

Auditor’s independence declaration..................................................................................... 21

Independent auditor’s report to members............................................................................ 22

Statements of comprehensive income ................................................................................. 24

Statements of financial positions.......................................................................................... 25

Statements of changes in equity........................................................................................... 26

Cash flow statements............................................................................................................. 27

Notes to financial statements................................................................................................ 28

Directors’ declaration............................................................................................................. 51

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Corporate directory

Directors Greg McCann - Non Executive ChairmanIan Rodwell - Managing DirectorPeter Yates - Non Executive DirectorJohannes de Back - Non Executive Director (appointed 1 April 2010)

Company secretary Andrew Bursill

Registered office Suite 206, 1 Katherine StreetCHATSWOOD, NSW, 2067Telephone (02) 9419 2966Fax (02) 9419 2944

Share registry Link Market Services LimitedLevel 9, 333 Collins StreetMelbourne VIC 3000

ASX code MKB

Listed on the ASX 27 June 2007

Auditor PKFLevel 10, 1 Margaret StreetSydney, NSW 2000

Solicitor Addisons LawyersLevel 1260 Carrington StreetSydney NSW 2000

Bankers National Australia Bank105 Miller StreetNorth Sydney NSW 2060

Internet address http://corporate.MOKO.mobi/

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http://corporate.moko.mobi/


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Chairman’s report

Introduction

Last year, in this Annual Review, we outlined the program of developing our “user-pays” focused mobilechat and share social platform and the strategy supporting this initiative. There were several parts to thatstrategy but we can distil it down to the three main points:

DEVELOP a robust mobile community and micro-billing platform that can be integrated with mobilecarriers globally;

PROVE the commercial model and user experience within the mobile carriers system – initially with aselect group of carriers and, once proven, sign up carriers globally;

EXPAND via the existing and new carrier deals, undertake marketing activities to develop sustainablerevenue streams, and to expand the product and platform to include complimentary digital contentsales using the platform’s micro-billing capabilities - including third party mobile content andadvertising.

MOKO.mobi is now well positioned on the first two points and is now focused on accelerating the thirdstage of the plan, with significant progress in signing new carrier deals. These distribution channels nowinclude:

• Verizon Wireless (USA)• AT&T Wireless (USA)• Orange (UK)• DiGi (Malaysia)• Maxis (Malaysia)• Telefonica/Movistar (Spain)• Yoigo (Spain• Smart (Philippines)• Globe (Philippines)• KPN (Netherlands)• Du (UAE)• PT Innotech Wireless (Indonesia)• Eclipse Productions (Japan)

We also have a plan to explore further expansion via key global partnerships and potentially via strategicM&A to build scale and revenue growth.

User growth

Although the focus is always on building sustainable user-pays revenue streams, we must firstestablish a viable recurring membership base across each carrier. Generally this is done via a “soft-launch” approach, establishing a critical mass of users before the billing engine is turned on. This isdone in consultation with the carriers and the timeframe surrounding this process is largely driven bythe carrier and varies greatly. We are pleased to report to shareholders that MOKO.mobi now hasover 4 million registered users and in August 2010 the service is generating over 2 million messagestransacted per day and 300,000 MMS (pics and video) uploaded. Our current focus is on building ourrevenue streams in the geographies that will generate high “Average Revenue Per User” (ARPU) andby way of example we will explain our progress in the United States and Malaysia below.

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Launch on AT&T in USA

MOKO.mobi is now fully operational and promotional campaigns have begun to expose MOKO.mobito the broader AT&T customer base in the United States. Initial results are very encouraging with over5,000 users subscribing within the first 2 weeks of promotions, each paying US$3.99 per month. Wepoint out that the promotional activity to date on the AT&T network has been minimal and we plan toincrease the promotions that will be ramped up significantly throughout the next 12 months. We expectthis subscriber base to grow steadily over the new financial year. The Company receives a revenueshare of 50% from AT&T. Further promotions are underway for the next half and will continue eachmonth with a build up towards Christmas 2010. Once these AT&T promotions have been fullyestablished and optimised, a similar promotion plan is scheduled for Verizon. We expect this willcommence over the coming 6 months. MOKO.mobi is currently live on Verizon in “soft-launch” mode.

Launch on Maxis and DiGi in Malaysia

After an initial soft launch, MOKO.mobi has built a significant Malaysian user base during the last 6months with over 320,000 registered users. Agreement on the structure and pricing of theMOKO.mobi billing system has now been reached with both carriers and users will now be payingRM$0.50 per day or RM$1.00 per week, plus RM$0.25c per MMS uploaded. During the last fewmonths of the soft launch, the Company has been earning revenues from MMS uploads and thosepayments were received in July. The billing is now live on both DiGi and Maxis and revenues will flowimmediately.

Multiple Language versions of the MOKO.mobi platform

MOKO.mobi has now been translated into multiple languages including Spanish, Portuguese, French,German, Italian, Malay, Tagalog, and of course English. Further development has commenced to alsoprovide MOKO.mobi in Dutch, Japanese, Greek, Russian and Chinese, including the relevantcharacter sets required for mobile handsets in those languages and regions. This will increase theglobal connectivity of the MOKO.mobi community and provide further opportunities to secure newcarrier contracts in these significant and emerging markets.

The Outlook

Based on feedback from carriers, users and key industry participants, we believe that MOKO.mobi is oneof the market’s leading mobile chat and share social platforms in terms of features and flexibility. If wecan succeed in building our user numbers and resultant revenues, we have a highly scalable businessmodel that has the potential to generate above average returns for our shareholders.

However, we see a greater potential beyond the mainstream business of mobile chat and share. Webelieve the market is open for a mobile based social platform that can sit on the networks of the dominantcarriers in the key markets around the globe. With voice and text there is generally open access acrossmost major carriers, however the same cannot be said about mobile communications involving thesharing of digital files (for example, music, photos and videos) for which a common platform is required.We believe MOKO.mobi has the potential to be such a platform. The short to mid-term benefits to carriersfrom MOKO.mobi includes incremental revenue and in the longer term it provides the potential to offercarrier’s customers more variety in the form of other content, services and other digital products and anincentive for pre-paid users to refrain from switching carriers.

Why is MOKO.mobi well placed for this opportunity? Essentially, because we are one of the few thirdparties that integrate into the carriers’ billing system. This provides customers with an effective means ofusing their mobile phone account for paying for content, services and other digital products, a feature notreadily offered to customers when accessing these via the internet. The attraction for carriers is that,together with MOKO.mobi, they can share in this potential revenue stream.

Long term success with this expanded opportunity requires us to continue signing up new carriers in keymarkets and ensuring we build the user base and revenues. We have done well so far, as summarisedbelow:

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DEVELOPMENT of a proven social chat and share technology incorporating the capability tointerface into the carrier’s billing system. We have also incorporated into our technology platform thecapability to build an intelligent customer data base, with unique demographic profiling via ourproprietary “Griffin” Customer and Content Management System (CCMS). Subject to privacylegislation, we can help carriers analyse and segment MOKO.mobi customers. This could lead tofurther revenue opportunities, such as sponsored advertising and promotions where a globalconsumer brand wants to interact with a specific user group that has been profiled by their relevantinterests.

DISTRIBUTION via a proven micro-billing platform and signing up 18 carriers. Unlike most mobileapplications where they simply sit on a carrier’s portal, all 18 carriers have consented to MOKO.mobiinterfacing into their billing systems.

PENETRATION as we start to see our user base grow and we work hard to develop a meaningfulincrease in revenue in the 2010/11 financial year.

BUILDING ONE GLOBAL BRAND - most of the broader competitors in the mobile content space areregional players and as such they don’t have a global footprint or a single global brand. Even thosecompanies that do operate in multiple regions do so under either white label brands or other localisedbrands. MOKO.mobi is a single global brand and we believe this will assist in virally growing the userbase and offers carriers a consistent brand and message that they can support. Building a singleglobal brand can create higher value as there is product recognition and marketing synergies. Thishas been proven in the online world where brands such as Amazon, eBay or Yahoo, have becomehousehold names.

INCORPORATION OF A MICRO BILLING SYSTEM – the Griffin CCMS together with ourMOKO.mobi mobile platform incorporates a modular micro-billing capability that allows for very smallpeer-to-peer or purchasing transactions via “premium activity points” (such as paying to download avideo or sending private media message to another user in another country). This means that theMOKO.mobi community can become like a virtual, digital shopping mall allowing for the sale anddistribution of a variety of digital content or services to be sold via our platform. This means that infuture we could become a conduit for third party products and services and facilitate that transactionvia our carrier billing integration and receive a commission for doing so.

If we can demonstrate our ability to execute on our underlying strategy, we intend to explore thepossibility of securing more content to offer carrier’s customers via the MOKO.mobi platform. We willlook at a number of possibilities, including joint ventures with and acquisitions of complementarycontent providers, in particular those who have proven success in sales via the internet andtelevision, and who are now seeking access to the mobile market.

Marketing to the mobile market is a relatively new and developing skill. Again, if we can demonstrateour ability to execute on our underlying strategy, we intend to explore the possibility of securingaccess to these skills via a number of possibilities including joint ventures with, and the acquisition of,specialist mobile marketing and promotions businesses.

With the combination of all these attributes and capabilities, we are aiming to provide shareholderswith the opportunity to share in an exciting company with a significant niche role in the mobile market.We do not under-estimate the time, effort and cost of developing and driving our strategies and weare enormously grateful to our shareholders for their ongoing support.

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Financial

The Company has recently established an American Depositary Receipt (ADR) program. The ADRprogram allows investors located in the US the ability to invest in shares of the Company in real time, andis aimed at increasing the attractiveness of the Company’s shares to US based investors.

The financial results for the period saw a 19% decrease in sales revenue to $447,504 over thecorresponding prior period due to the completion of all outstanding white label and design projects. Theoperating loss after tax (i.e. excluding share based payments) increased slightly from $2.2 million in 2009to $2.4 million in 2010.

During the year, your Company continued to invest in R&D and platform development. An AusIndustryR&D tax offset grant was successfully achieved and $366,995 was received during the year, with afurther $400,525 due in the next few months.

The cash assets of the Company at 30 June 2010 were $1.32m, up from $1.18 million at 30 June 2009.

Greg McCannChairman

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Directors’ report

Your directors present their report on MOKO.mobi Limited for the year ended 30 June 2010.

DirectorsThe following persons were directors of MOKO.mobi Limited during the whole of the financial year and up to the dateof this report, unless otherwise noted:

Greg McCann - Non Executive ChairmanIan Rodwell - Chief Executive Officer and Managing DirectorJohannes de Back - Non Executive Director (appointed 1 April 2010)Peter Yates - Non Executive DirectorChristine Kennedy - Non Executive Director (resigned 22 April 2010)Stuart Simson - Non Executive Director (resigned 22 April 2010)

Principal activities

During the year the principal continuing activity of MOKO.mobi Limited was delivering mobile social networkingservices to global consumers within the youth and young adult demographic. There have been no significantchanges in the nature of the activities of MOKO.mobi Limited during the year.

DividendsNo dividends were paid or declared during the year (2009: $nil).

Review of operationsDetails in relation to the review of operations is contained within the Chairman’s report on page 3.

FinancialMOKO.mobi earned total income of $0.55m (2009: $0.79m). The loss for the 2010 year was $2.77m compared with a2009 loss of $2.49m.

The financial results for the period saw a 19% decrease in sales revenue to $447,504 over the corresponding priorperiod due to the completion of all outstanding white label and design projects. The operating loss after tax (ie.excluding share based payments) increased slightly from $2.2 million in 2009 to $2.4 million in 2010.

During the year, your Company continued to invest in R&D and platform development. An AustIndustry R&D taxoffset grant was successfully achieved and $366,995 was received during the year, with a further $400,525 due in thenext few months.

The cash assets of the Company at 30 June 2010 were $1.32m, up from $1.18 million at 30 June 2009.

Significant changes in the state of affairsThere were no significant changes in the state of affairs of the Company during the year.

Matters subsequent to the end of the financial yearNo other matter or circumstance has arisen since 30 June 2010 that has significantly affected, or may significantlyaffect:

(a) MOKO.mobi 's operations in future financial years, or(b) The results of those operations in future financial years, or(c) MOKO.mobi 's state of affairs in future financial years.

Likely developments and expected results of operationsComments on expected results of certain operations of the Company are included in this annual report under theChairman’s Review.

Further information on likely developments in the operations of MOKO.mobi and the expected results of operationshave not been included in this annual financial report because the directors believe it would be likely to result inunreasonable prejudice to MOKO.mobi.

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Environmental regulationThere are no significant environmental regulations or Acts applying to the Company.

Greenhouse, gas and energy data

The Company is not subject to the reporting requirements of either the Energy Efficiency Opportunities Act 2006 andthe National Greenhouse and Energy Reporting Act 2007 due the to size and scale of it operations.

The Company will continue to monitor the relevant legislation to ensure that it meets any operational and reportingrequirements as and when they become applicable to the Company’s activities.

Information on directors

Gregory Ronald McCann (Non Executive Chairman)57 years. Director since 24 April 2007.

Experience and expertiseGreg McCann is currently the Managing Director and principal of the Excentor Group of companies, an independentsoftware and consulting services supplier to the Asia Pacific region with 25 years of experience. Greg was previouslya partner with Deloitte for 24 years and has held a number of senior leadership roles, including Managing Director forDeloitte Consulting/ICS in Australia, a systems integrator specialising in the implementation of enterpriseapplications. Greg is also Chairman of Tel.Pacific, a Non-executive Director of NBN Tasmania Limited, and on theBoard of the law firm, Landers and Rogers. He is a fellow of the Institute of Chartered Accountants in Australia and aFellow of the Australian Institute of Company Directors.

Other current directorshipTel.Pacific Limited, NBN Tasmania Limited

Former directorships in the last 3 yearsNil

Special responsibilitiesChairman

Interest in shares and optionsShares: 778,995 Ordinary – Indirectly heldOptions: 2,000,000 (1,000,000 Expiring 15 June 2012, exercisable at $0.20 each) – Indirectly held

(1,000,000 Expiring 25 July 2013, exercisable at $0.12 each) – Indirectly held

Ian Michael Rodwell (Managing Director and Chief Executive Officer)48 years. Director since 18th August 2008.

Experience and expertiseMr Rodwell is the founder of MOKO.mobi Limited. He has over 20 years experience in corporate and consumerdesign and multimedia and has owned and operated several businesses specialising in this field. He has worked inAustralia, Singapore, UK and the US, managing projects for many international companies including McKinsey,BMW, UniLever, and MTV. In the consumer area, Mr Rodwell led projects for several of the world’s biggest names insport including Manchester United FC; The All Blacks; Adidas; and several top tennis stars such as Anna Kournikovaand Lleyton Hewitt. His role includes the oversight of all MOKO.mobi Limited’s product development and strategicplanning.

Other current directorshipsNone

Former directorships in the last 3 yearsNone

Special responsibilitiesChief Executive Officer

Interest in shares and optionsShares: 3,160,000 ordinary – Directly heldOptions: 3,000,000 (Expiring 15 June 2012, exercisable at $0.20 each) – Directly held

3,005,000 (Expiring 25 July 2013, exercisable at $0.10 each) – Directly held3,000,000 (Expiring 25 July 2013, exercisable at $0.12 each) – Directly held

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Johannes Rudolf De Back (Non Executive Director)41 years. Appointed 1 April 2010

Experience and expertiseJohannes is CEO and co-founder of Triscreen Media Group, managing a number of companies providing interactivemedia solutions. Johannes previously worked as a lawyer for several international firms, specialising in mergers andacquisitions with a focus on telecom, media and entertainment. In 1999 he co-founded Telitas Benelux, one of thefirst and most successful mobile content providers in Europe. In 2002 Telitas was sold to Index for €50 million, andJohannes went on to form the Triscreen Media Group, which has built six offices worldwide with activity in over 35countries.

Other current directorshipNil


Special responsibilitiesNil

Interest in shares and optionsShares: 7,539,682 ordinary – Indirectly heldOptions: 1,388,889 (Expiring 25 July 2013, exercisable at $0.20 each) – Indirectly held

Peter Yates (Non-Executive Director)50 years. Director appointed 14 October 2008.

Experience and expertise

Peter Yates is also Chairman of the Peony Capital General Partnership and a director of Oceania Capital PartnersLimited.

From 2004-2007 Peter was Managing Director of Oceania Capital Partners (formerly Allco Equity Partners Limited) ,a listed private equity fund specialising in private equity and activist corporate situations. Peter was Chief ExecutiveOfficer of Publishing and Broadcasting Limited from 2001-2004. Until 2001 he worked in the Investment Bankingindustry including 15 years with Macquarie Bank. Peter has also worked for Morgan Stanley in Australia and BoozAllen Hamilton in Tokyo. He holds a Doctorate of the University (Murdoch) and a Masters degree from StanfordUniversity Graduate School of Business and a Commerce degree from Melbourne. He speaks Japanese, havingstudied at Keio University in Tokyo.

Other current directorshipsPeony Capital General Partnership and a director of and Oceania Capital Partners Limited. Peter is the Chairman ofthe Royal Institution of Australia, the Australian Science Media Centre and Graduate School of Management,University of Melbourne. Peter is Deputy Chairman of Asialink and Asia Society AustralAsia Centre; a BoardMember of the Royal Children’s Hospital Foundation (Victoria) and Melbourne International Art Festival. Peter is alsoa Director of The Centre for Independent Studies.



Interest in shares and optionsShares: 15,437,973 ordinary – Indirectly heldOptions: 2,053,542 (Expiring 25 July 2013, exercisable at $0.10 each) – Indirectly held

1,000,000 (Expiring 25 July 2013, exercisable at $0.12 each) – Directly held

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Christine Pamela Kennedy (Non Executive Director)Resigned 22 April 2010

Experience and expertiseChristine holds a Bachelor of Business (Accountancy) degree and a Bachelor of Laws degree from QueenslandUniversity of Technology and is admitted as a solicitor to the Supreme Court of Queensland. Christine spent fiveyears working in Brisbane CBD law firms Jones King Lawyers and later Bain Gasteen Lawyers, specialising incommercial and civil litigation. Since 2004 Christine has been based in London and Singapore as Director and LegalCounsel for a significant, privately-held Company of companies.

Other current directorshipNil

Former directorships in the last 3 yearsAdultshop.com Limited (1 August 2006 until 24 April 2007)


Interest in shares and optionsOptions: 1,250,000 (1,000,000 options Expiring 15 June 2012, exercisable at $0.20 each) – Indirectly held

(250,000 options Expiring 25 July 2013, exercisable at $0.12 each) – Indirectly held

Stuart Armstrong Simson (Non Executive Director)Resigned 22 April 2010

Experience and expertiseStuart has 38 years experience in the Australian media industry. From 2002 to 2006 he was Executive Chairman andChairman of Emitch Limited the largest on-line advertising agency in Australia and New Zealand. He has a portfolioof new media interests. Stuart is a former Managing Director of The Age and Sunday Age, and Editor and CEO ofBRW Publications. He is a former Managing Director and part owner of National Business Review NZ. He has ownedand operated regional radio stations. Stuart served as Associate Commissioner on the Productivity CommissionInquiry into the Broadcasting Services Act. He is a member of the CSIRO’s ICT business advisory council and aCouncil member of Leadership Victoria.

Other current directorshipFacilitate Digital Holdings Limited

Former directorships in the last 3 yearsemitch Limited (until 5 September 2006)


Interest in shares and optionsOptions: 1,250,000 (1,000,000 options Expiring 15 June 2012, exercisable at $0.20 each) – Indirectly held

(250,000 options Expiring 25 July 2013, exercisable at $0.12 each) – Indirectly held

Company Secretary

The company secretary is Mr A W Bursill. Mr Bursill was appointed to the position of company secretary on 24 April2007. Mr Bursill holds the position of company secretary for a number of other listed and non-listed entities. Mr Bursillis a member of the Institute of Chartered Accountants in Australia.F

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Meetings of directors

The number of meetings of the company’s board of directors held during the year ended 30 June 2010, and thenumber of meetings attended by each director were:

Number of meetings eligible toattend

Number of meetings attended

G McCann 13 13

I Rodwell 13 13

J De Back** 3 3

P Yates 13 13

C Kennedy* 10 10

S Simson* 10 10

* Resigned on 22 April 2010.

** Appointed on 1 April 2010.

Remuneration report

The remuneration report is set out under the following headings:

A Principles used to determine the nature and amount of remunerationB Details of remunerationC Service agreementsD Share based payments

The information provided under headings A-D includes remuneration disclosures that are required under AASB 124Related Party Disclosures. These disclosures have been transferred from the financial report and have been audited.

A Principles used to determine the nature and amount of remuneration

The objective of the Company’s executive reward framework is to ensure reward for performance is competitive andappropriate for the results delivered. The Board ensures that executive reward satisfies the following criteria for goodreward governance practices: competitiveness and reasonableness acceptability to shareholders transparency capital management

The remuneration structure for Directors, company secretary and senior managers is based on the following factors: experience of the individual concerned the overall performance of the market in which the company operates the overall performance of the Company

B Details of remuneration

Details of the nature and amount of each element of the remuneration of the key management personnel (as definedAASB 124 Related Party Disclosures) of MOKO.mobi Limited are set out in the following tables.

Key management personnel of MOKO.mobi Limited include the following directors and the chief executive officer.

Greg McCann - Non Executive Chairman Ian Rodwell - Chief Executive Officer and Managing Director (appointed 18 August 2008) Johannes De Back - Non Executive Director (appointed 1 April 2010) Christine Kennedy - Non Executive Director (resigned 22 April 2010) Stuart Simson - Non Executive Director (resigned 22 April 2010) Peter Yates - Non Executive Director Andrew Bursill - Chief Financial Officer

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Directors’ report (continued)

* J De Back was appointed as Non Executive Director on 1 April 2010.

** C Kennedy and S Simson resigned as Non Executive Directors on 22 April 2010.

*** A W Bursill, company secretary, is an associate of Franks & Associates Pty Ltd who provides accounting and companysecretarial services to MOKO.mobi Limited. The contract between MOKO.mobi Limited and Franks & Associates is basedon normal commercial terms. A total of $160,911 (2009: $ 140,772) was received by Franks & Associates in relation tothis contract for the year. Further information is contained in Note 18(e).

**** M Hoffman resigned as CEO on 31 July 2008 and resigned as a Director of the Company on 20 March 2009.

SHORT- TERM POST-EMPLOYMENT SHARE-BASED

2010Salary &

Fees

$

ConsultancyFees

$

Nonmonetarybenefits

$

Super-annuation

$

Retirementbenefits

$

Shares

$

Options

$

Total

$

Non-ExecutiveDirectors

G McCann 59,633 - - 5,367 - - 45,900 110,900

J De Back* - - - - - - - -

P Yates - - - - - - 45,900 45,900

C Kennedy ** 22,936 - - 2,064 - - 11,475 36,475

S Simson ** - - - 30,000 - - 11,475 41,475

Executive Directors

I Rodwell 183,938 - 16,195 18,012 - - 151,884 370,029

Other KeyManagementPersonnel

A W Bursill *** - - - - - -

TOTAL 266,507 - 16,195 55,443 - - 266,634 604,779

SHORT- TERM POST-EMPLOYMENT SHARE-BASED

2009Salary &

Fees

$

ConsultancyFees

$

Nonmonetarybenefits

$

Super-annuation

$

Retirementbenefits

$

Shares

$

Options

$

Total

$

Non-ExecutiveDirectors

G McCann 59,633 - - 5,367 - - 10,250 75,250

P Yates - - - - - - - -

C Kennedy 27,523 - - 2,477 - - 10,250 40,250

S Simson - - - 30,000 - - 10,250 40,250

M Hoffman **** 68,923 - - 5,250 - - 51,250 125,423

Executive Directors

I Rodwell 184,734 - 15,266 18,000 - - 95,276 313,276

Other KeyManagementPersonnel

A W Bursill *** - - - - - - - -

TOTAL 340,813 - 15,266 61,094 - - 177,276 594,449

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C Service agreements (audited)

I. Rodwell, Head of Technology and Product (commencing under a new contract from 15 January, 2007)

Term – open term, 6 months notice from either party

Base salary, exclusive of superannuation, $200,000 per annum

Received 1 million shares and 3 million options on successful completion of the IPO offer

D Share-based payments (audited)

Options

During the financial year, a total of 7,450,000 options were issued to Directors and Employees as follows:

Option series Numbers of optionsissued

Exercise Price Earliest exercise date Expiry date

Director III 5,500,000 $0.12 10 October 2009 25 July 2013Staff III 1,950,000 $0.12 16 December 2009 25 July 2013Total 7,450,000

Name of option holder Number of optionsissued

Director III Staff III

Ian Rodwell 6,005,000 3,000,000 -Greg McCann 1,000,000 1,000,000 -Peter Yates 1,000,000 1,000,000 -Gemline Pty Limited (relatedparty of Stuart Simson)

250,000 250,000 -

Christine Kennedy 250,000 250,000 -Staff 1,950,000 - 1,950,000Total 10,455,000 5,500,000 1,950,000

These options form part of the Directors remuneration for the year ending 30 June 2010 as set-out below:

Name of option holder Number of optionsissued

Amount $

Ian Rodwell 3,000,000 151,884Greg McCann 1,000,000 45,900Peter Yates 1,000,000 45,900Gemline Pty Limited(related party of StuartSimson)

250,000 11,475

Christine Kennedy 250,000 11,475Total 5,500,000 266,634

Shares provided in exercise of remuneration optionsNo ordinary shares were issued during the year ended 30 June 2010 as a result of exercise of remuneration optionsby the Directors of MOKO.mobi Limited.

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Share-based payments remuneration included as part of total remuneration for the year:

* J De Back was appointed as Non Executive Directors on 1 April 2010.

** M Hoffman resigned as CEO on 31 July 2008 and resigned as a Director of the Company on 20 March 2009.

*** C Kennedy and S Simson resigned as Non Executive Directors on 22 April 2010.

Shares granted to directors

No shares were issued to directors during the financial year (2009: nil).

Insurance of officers

During the financial year, MOKO.mobi Limited paid directors and officers liability insurance premium of $15,586 toinsure the directors and secretaries of the company and its Australian-based controlled entities, and the generalmanagers of each of the divisions of MOKO.mobi Limited.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may bebrought against the officers in their capacity as officers of the Company, and any other payments arising fromliabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arisefrom conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or ofinformation to gain advantage for themselves or someone else or to cause detriment to the company. It is notpossible to apportion the premium between amounts relating to the insurance against legal costs and those relatingto other liabilities.

Auditor

PKF was appointed by the directors’ in accordance with the requirements of the Corporations Act 2001.

Non-audit services

The company may decide to employ the auditor on assignments additional to their statutory audit duties where theauditor's expertise and experience with the company is important.

Details of amounts paid or payable to auditors, PKF, for audit and non-audit services provided during the year are setout below.

The board of directors has considered the position and is satisfied that the provision of the non-audit services iscompatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Thedirectors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromisethe auditor independence requirements of the Corporations Act 2001 for the following reasons:

All non-audit services have been reviewed by the board to ensure they do not impact the impartialityand objectivity of the auditor.

None of the services undermine the general principles relating to auditor independence as set out inAPES 110 Code of Ethics for Professional Accountants.

2010 2009

Non-Executive Directors

G McCann 41% 14%

J De Back* - -

M Hoffman** - 41%

S Simson*** 28% 25%

C Kennedy*** 31% 25%

P Yates 100% -

Executive Directors

I Rodwell 41% 30%

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During the year the following fees were paid or payable for services provided by the auditor:

2010 2009$ $

Audit services

Grant Thornton NSW - Audit and review of financial reports

PKF – Audit and review of financial reports

-

55,350

953

38,200

Non-audit services

Grant Thornton - -

PKF - -

Total55,350 39,153

Auditors’ independence declaration

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is setout on page 21.

This report is made in accordance with a resolution of directors.

Greg McCann Ian RodwellChairman Managing Director30 August 2010 30 August 2010

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Corporate governance statementThe Company’s corporate governance framework has been formulated in light of the best practice recommendationsreleased by the Australian Stock Exchange Corporate Governance Council in 2007 (ASX Recommendations). TheCompany’s framework largely complies with these recommendations. Consistent with the Company’s approach tosound corporate governance, opportunities for improvement are regularly considered.

Day-to-day management of the affairs of the Company and its controlled entities are delegated by the Board to theChief Executive Officer and senior executives. The Directors are responsible to shareholders for the performance ofthe Company and their focus is to enhance the interests of shareholders and other key stakeholders and to ensurethe Company is properly managed. The main processes that the directors of the Company use in doing so are setout in this statement.

Principle 1: Lay solid foundations for management and oversight

Recommendation 1.1 – Companies should establish the functions reserved to the board and those delegated tosenior executives and disclose those functions

The primary responsibilities of the board include:

The approval of the annual and half-yearly financial report, and quarterly cash statements (as long as required);

The establishment of the long term goals of the consolidated entity and strategic plans to achieve those goals;

The review and adoption of annual budgets for the financial performance of MOKO.mobi Limited and monitoringthe results on a quarterly basis;

Ensuring that the Company has implemented adequate internal controls together with appropriate monitoring ofcompliance activities; and

Ensuring that the Company is able to pay its debts as and when they fall due.

MOKO.mobi Limited discloses the curriculum vitae of each director in its Annual Report.

MOKO.mobi Limited’s executive management comprises the Chief Executive Officer (Mr Ian Rodwell), and Head ofBusiness Development (Mr Paul Grueber), to whom the Board delegates responsibilities to as outlined in theircontracts and as expected for these executive positions.

MOKO.mobi Limited’s Chief Financial Officer and Company Secretary is Mr Andrew Bursill. Mr Bursill performs theseduties pursuant to a contractual arrangement between MOKO.mobi Limited and Franks & Associates Pty Ltd, a firmof Chartered Accountants.

Recommendation 1.2 – Companies should disclose the process for evaluating the performance of senior executives

The objective of the Company’s executive reward framework is to ensure reward for performance is competitive andappropriate for the results delivered. The board ensures that executive reward satisfies the following criteria for goodreward governance practices:

competitiveness and reasonableness

acceptability to shareholders

transparency

capital management

The remuneration structure for directors, secretaries and senior managers is based on the following factors:

experience of the individual concerned

the overall performance of the market in which the Company operates

the overall performance of the Company

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Recommendation 1.3 – Companies should disclose the process for evaluating the performance of senior executives

Performance of senior executives is constantly reviewed by the Board as part of the ordinary course of meetings ofthe Directors.

There have been no departures from Principle 1 during the year ended 30 June 2010.

Principle 2: Structure the board to add value

Recommendation 2.1 – A majority of the board should be independent directors

Recommendation 2.2 – The chair should be an independent director

Recommendation 2.3 – The roles of chair and chief executive officer should not be exercised by the same individual

Recommendation 2.4 – The board should establish a nomination committee

Recommendation 2.5 – The Company should disclose the process for evaluating the performance of the board, itscommittees and individual directors

Recommendation 2.6 – The Company should provide the information indicated in the Guide to reporting on Principle2.

The skills, experience and expertise relevant to the position of director and period of office held by each directoris disclosed within the directors’ report of the Company’s Annual Report.

Presently the board consists of one executive director (Ian Rodwell) and three non-executive directors (GregMcCann, Johannes de Back and Peter Yates).

The Chairman of MOKO.mobi Limited is Greg McCann and the Chief Executive Officer is Ian Rodwell, thereforeas required under best practice, there is a separation of these two roles.

With the prior approval of the Chairman, each director has the right to seek independent legal and otherprofessional advice at the Company’s expense concerning any aspect of the Company’s operations orundertaking in order to fulfill their duties and responsibilities as directors.

The Company does not presently have a nomination committee. Due to the size and nature of the activities of theCompany, the nomination of new directors is conducted by the board by way of ongoing review and discussion inrelation to experience deficiencies that may exist within the existing board structure.

The performance of the board is reviewed as part of the ordinary course of meetings of the directors.

There have been the following departures from Principle 2 during the year ending 30 June 2010:

Recommendation 2.1 - As at the date of this report, three of the four of the Directors are not considered independent,namely Ian Rodwell, who is an executive Director of MOKO.mobi Limited and Peter Yates and Johannes de Backwho are associates of substantial shareholders. This departure arises from the size and nature of operations ofMOKO.mobi Limited.

Recommendation 2.4 – Due to the size of MOKO.mobi Limited, the Board has not yet established a nominationcommittee.

Principle 3: Promote ethical and responsible decision making

Recommendation 3.1 – The Company should establish a code of conduct and disclose the code

As part of the Board’s commitment to the highest standard of conduct, MOKO.mobi Limited adopts a code of conductto guide management and employees in carrying out their duties and responsibilities as follows.

All directors, executives, employees and consultants of MOKO.mobi Limited have the following duties:

To act honestly, fairly and without prejudice in all commercial dealings and to conduct business withprofessional courtesy and integrity

To work in a safe, healthy and efficient manner, using their skills, time and experience to the maximum oftheir ability

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To comply with applicable awards, company policies and job requirements

Not to knowingly make any misleading statements to any person or to be a party to any improper practice inrelation to dealings with or by MOKO.mobi Limited

To ensure that MOKO.mobi Limited’s resources and property are used properly and

Not to disclose information or documents relating to MOKO.mobi Limited or its business, other than asrequired by law, not to make any unauthorized public comment on MOKO.mobi Limited’s affairs and not tomisuse any information about MOKO.mobi Limited or its associates.

The board endeavours to ensure that the directors, officers and employees of the Company act with integrity andobserve the highest standards of behaviour and business ethics in relation to their corporate activities.

Specifically, that directors, officers and employees must:

Comply with the law

Act in the best interests of MOKO.mobi Limited

Be responsible and accountable for their actions, and

Observe the ethical principles of fairness, honesty and truthfulness, including disclosure of potential conflicts.

Recommendation 3.2 – The Company should establish a policy concerning trading in company securities anddisclose a summary of that policy

MOKO.mobi Limited’s policy regarding directors and employees trading in its securities is set by the board ofdirectors. The policy restricts directors and employees from acting on material information until it has been releasedto the market and adequate time has been given for this to be reflected in the security’s prices.

MOKO.mobi Limited has set the following windows for trading in the Company’s securities by the directors andemployees, being between two and thirty two days following:

The release to the Australia Stock Exchange of MOKO.mobi Limited’s preliminary full year financial statements

The release to the Australian Stock Exchange of MOKO.mobi Limited’s half year financial statements

The release to the Australian Stock Exchange of MOKO.mobi Limited’s quarterly 4C cash statement

The date on which the Company holds its annual general meeting and

The initial quotation of MOKO.mobi Limited’s shares on the Australian Stock Exchange.

Recommendation 3.3 – The Company should provide the information indicated in the Guide to reporting on Principle3


Principle 4: Safeguard integrity in financial reporting

Recommendation 4.1 – The board should establish an audit committee

Recommendation 4.2 – The audit committee should be structured so that it: (i) consists only of non-executivedirectors, (ii) consists of a majority of non-executive directors; (iii) is chaired by an independent chair, who is not thechair of the board; and (iv) has at least three members.

Recommendation 4.3 – The audit committee should have a formal charter


There have been the following departures from Principle 4 during the year ended 30 June 2010:

Recommendations 4.1, 4.2, 4.3 – Due to the size and nature of MOKO.mobi Limited, the Board does not have anaudit and finance committee.

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The Board is aware of the Principles of Good Corporate Governance and Best Practice Recommendations, and willcontinue to work towards full adoption of the recommendations in line with growth and development of MOKO.mobiLimited in the years ahead.

Principle 5: Make timely and balanced disclosure

Recommendation 5.1 – The Company should put in place mechanisms designed to ensure compliance with the ASXListing Rule requirements.

The CEO and Company Secretary have been appointed as the persons responsible for communications with theASX. The Board is responsible for ensuring the compliance with the continuous disclosure requirements in the ASXlisting rules and overseeing and co-ordinating information disclosure to the ASX.



Principle 6: Respect the rights of shareholders

Recommendation 6.1 – The Company should design a communications policy for promoting effective communicationwith shareholders.

The Board and the Company Secretary are responsible for the communications strategy to promote effectivecommunications with shareholders and encourage effective participation at general meeting. MOKO.mobi Limitedadheres to best practice in its preparation of Notices of Meetings to ensure all shareholders are fully informed. Dueto the size of MOKO.mobi Limited, all communications are prepared and administered in-house.



Principle 7: Recognise and manage risk

Recommendation 7.1 – The Company should establish policies for the oversight and management of materialbusiness risks and disclose a summary of those policies.

The Board is responsible for oversight of MOKO.mobi Limited management’s system of internal controls. The Boardconstantly monitors the operation and financial aspects of MOKO.mobi Limited activities and considers therecommendations and advice of external auditors and other external advisers on the operations and financial risksthat face MOKO.mobi Limited.

The Board ensures that recommendations made by the external auditors and other external advisers are investigatedand, where considered necessary, appropriate action is taken to ensure that MOKO.mobi Limited has an appropriateinternal control environment in place to manage the key risks identified.

In addition, the Board investigates ways of enhancing existing risk management strategies, including appropriatesegregation of duties and the employment and training of suitably qualified and experienced personnel.

Recommendation 7.2 – The Company should require management to design and implement a risk management andinternal control system to manage the Company’s material business risks.

Recommendation 7.3 – The Company should disclose whether it has received assurance from the chief executiveofficer and chief financial officer that the declaration provided in accordance with section 295A of the CorporationsAct is founded on a sound system of risk management and that the system is operating effectively in all materialrespects in relation to financial reporting risks.

The Company obtains statements from its chief executive officer and chief financial officer that:

MOKO.mobi Limited’s financial reports present a true and fair view in all material respects, of MOKO.mobiLimited’s financial condition and operational results are in accordance with the relevant accountingstandards. Furthermore, the board of directors does, in its role, state to shareholders in the Company’saccounts that they are true and fair, in all material respects

the integrity of the financial statements is founded on a sound system of risk management and internalcompliance and control which implements policies adopted by the board

the Company’s risk management and internal compliance and control system is operating efficiently andeffectively in all material respects.

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There have been no departures from Principle 7 during the year ending 30 June 2010. The Board believesMOKO.mobi Limited’s risk management and internal compliance and control procedures are operating efficiently andeffectively in all material aspects appropriate for a Company of MOKO.mobi Limited’s size and nature. The Board willcontinue to monitor this aspect of MOKO.mobi Limited closely, and will cause to be developed a comprehensive RiskManagement Process and Policy document, additional to the material outlined above.

Principle 8: Remunerate fairly and responsible

Recommendation 8.1 – The board should establish a remuneration committee

Recommendation 8.2 – The Company should clearly distinguish the structure of non-executive directors’remuneration from that of executive directors and senior executives.


The Company does not have any scheme for retirement benefits, other than superannuation, for any directors.

There have been the following departures from Principle 8 during the year ended 30 June 2010:

Recommendations 8.1– Due to the size and nature of MOKO.mobi Limited, the Board has not yet established aremuneration committee. As a result, the functions ordinarily undertaken by a remuneration committee areundertaken by the Board.

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Statements of comprehensive income

For the year ended 30 June 2010

Note 2010 2009

$ $

Revenue 5 447,504 555,058Other income 5 99,648 234,840

Computer expenses (474,797) (560,414)Marketing expenses (238,702) (253,579)Travel and entertainment expenses (280,125) (227,249)Rent expenses (33,740) (37,272)Other expenses (338,388) (239,475)Exchange Loss (39,381) -Loss from realisation of reserve - (11,349)Finance costs (28) (394)Legal and professional fees (557,084) (413,000)Employee benefits expenses 6 (1,343,263) (1,589,353)Share based payments 6 (371,116) (247,496)Depreciation and amortisation (10,505) (19,242)Total expenses (3,687,129) (3,598,823)

Loss before income tax expense 7 (3,139,977) (2,808,925)Income tax expense 7(b) 366,995 321,766

Loss for the year after tax (2,772,982) (2,487,159)

Other comprehensive income - -

Total comprehensive lossattributable to equity holders ofMOKO.mobi Limited

(2,772,982) (2,487,159)

Basic EPS (cents per share) 20 (2.59) (3.16)Diluted EPS (cents per share) 20 (2.59) (3.16)

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Statements of financial position

As at 30 June 2010

Note 2010 2009$ $

Current assetsCash and cash equivalents 8 1,322,506 1,176,916Trade and other receivables 9 119,750 122,954Other current assets 10 35,111 35,061

Total current assets 1,477,367 1,334,931

Non-current assetsProperty, plant and equipment 11 14,448 12,739Intangible assets 12 494 1,682

Total non-current assets 14,942 14,421

Total assets 1,492,309 1,349,352

Current liabilitiesTrade and other payables 13 318,003 319,142Provisions 14 128,001 113,147

Total current liabilities 446,004 432,289

Non Current liabilities - -

Total liabilities 446,004 432,289

Net assets 1,046,305 917,063

EquityIssued capital 15 13,017,916 10,486,808Reserves 1,436,512 1,065,396Accumulated losses (13,408,123) (10,635,141)

Total equity 1,046,305 917,063

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Statements of changes in equity


OrdinaryShares

TranslationReserve

OptionsReserve

Accumulatedlosses

Total

$ $ $ $ $

Balance at 30 June 2008 9,038,988 (11,349) 817,900 (8,147,982) 1,697,557

Loss for the year (2,487,159) (2,487,159)Total comprehensive lossfor the year

(2,487,159) (2,487,159)

Issue of shares 1,554,996 - - - 1,554,996Share buy-back (9,681) - - - (9,681)Capital raising costs (97,495) - - - (97,495)Share based payments - - 247,496 - 247,496Loss from realisation oftranslation reserve fromclosure of foreignoperations

- 11,349 - - 11,349

Balance at 30 June 2009 10,486,808 - 1,065,396 (10,635,141) 917,063

Comprehensive loss for theyear - - - (2,772,982) (2,772,982)Total comprehensive lossfor the year - - - (2,772,982) (2,772,982)

Issue of shares 2,602,580 - - - 2,602,580Capital raising costs (71,472) - - - (71,472)Share based payments - 371,116 - 371,116

Balance at 30 June 2010 13,017,916 - 1,436,512 (13,408,123) 1,046,305

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Cash flow statements


Note 2010 2009$ $

Cash flows from operating activitiesReceipts from customers 367,140 774,408R&D tax rebate received 366,995 321,766Payments to suppliers and employees (3,121,965) (3,263,223)Interest received 54,669 66,646GST paid (34,954) -Interest paid - (394)Net cash (used in) operating activities 17 (2,368,115) (2,100,797)

Cash flows from investing activitiesPayment for non-current assets (12,403) (8,981)Net cash (used in) investing activities (12,403) (8,981)

Cash flows from financing activitiesProceeds from the issue of shares 2,597,580 1,554,996Capital raising payments (71,472) (97,495)Payments for shares bought back (9,681)Net cash provided by financing activities 2,526,108 1,447,820

Net increase in cash and cash equivalents 145,590 (661,958)Cash and cash equivalents at the beginningof the year

1,176,916 1,838,874

Cash and cash equivalents at end of year 8 1,322,506 1,176,916

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Notes to financial statements


Note 1: Summary of significant accounting policies

The financial report covers MOKO.mobi Limited, a public listed company, incorporated and domiciled in Australia.

The principal accounting policies adopted in the preparation of the financial report are set out below. These policieshave been consistently applied to all the years presented, unless otherwise stated.

The financial report was authorised for issue by the Directors on 30 August 2010.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, otherauthoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretationsand the Corporations Act 2001.

The financial report of MOKO.mobi Limited complies with all International Financial Reporting Standards (IFRS) asissued by the International Accounting Standards Board (IASB) in their entirety.

Historical cost conventionThese financial statements have been prepared under the historical cost convention, as modified by the revaluationof available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair valuethrough profit or loss, certain classes of property, plant and equipment and investment property.

Critical accounting estimatesThe preparation of financial statements in conformity with Australian Accounting Standards requires the use of certaincritical accounting estimates. It also requires management to exercise its judgement in the process of applying thecompany’s accounting policies. Note 3 provide details of these estimates.

Going concern

The Company is an early stage technology company, and is currently operating on a negative operating cashflowbasis. Net cash used in operations for the year ended 30 June 2010 was $2,368,115 (2009: $2,100,797). TheCompany made an operating loss of $2,772,982 for the year ended 30 June 2010 (2009: $2,487,159).

For the company to achieve operating profitability, the Company requires an increase in revenue from both existingand new carrier agreements. Whilst the Company has recently signed a number of new carrier agreements, itremains difficult to accurately forecast revenues from these new carrier agreements. Until the Company achievesoperating profitability, it is reliant on raising additional equity funds to support its business operations.

The Directors have put plans in place that they believe will enable them to be successful in raising sufficient funds toensure that the Company can continue to meet its debts as and when they become due and payable. The financialreport has therefore been prepared on the going concern basis. However, if additional funds are not raised, there is asignificant uncertainty as to whether the going concern basis is appropriate and as a result the Company may have torealise its assets and extinguish its liabilities other than in the ordinary course of business and in amounts differentfrom those stated in the financial report. No allowance for such circumstances has been made in the financial report.

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Note 1: Summary of significant accounting policies (continued)

(b) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operatingdecision maker. The chief operating decision makers, who are responsible for allocating resources and assessingperformance of the operating segments, is the Board of directors.

The Company has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 SegmentReporting. The new standard requires a ‘management approach’, under which segment information is presented onthe same basis as that used for internal reporting purposes. In addition, the segments are reported in a manner thatis consistent with the internal reporting provided to the chief operating decision makers.

As a result of the adoption of the revised AASB 8, certain cash generating units have been redefined having regard tothe requirements in AASB 136: Impairment of Assets.

(c) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based onthe national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributableto temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financialstatements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply whenthe assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantivelyenacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxabletemporary differences to measure the deferred tax asset or liability. An exception is made for certain temporarydifferences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognisedin relation to these temporary differences if they arose in a transaction, other than a business combination, that at thetime of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probablethat future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assetsand liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and whenthe deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset wherethe entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the assetand settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly inequity.

(d) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held atcall with financial institutions, other short-term, highly liquid investments with original maturities of three months orless that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes invalue, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Statements ofFinancial Position.

(e) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provisionfor doubtful debts. Trade receivables are generally due for settlement within 30 days. Collectability of tradereceivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provisionfor doubtful receivables is established when there is objective evidence that the Company will not be able to collectall amounts due according to the original terms of receivables. The amount of the provision is the difference betweenthe asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effectiveinterest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting isimmaterial. The amount of the provision is recognised in the Statement of Comprehensive Income.

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(f) Trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of the financialyear which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(g) Revenue and other income

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financialassets. All revenue is stated net of the amount of goods and services tax (GST).

(h) Contributed equity

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

(i) Earnings per share

(i) Basic earnings per shareBasic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excludingany costs of servicing equity other than ordinary shares, by the weighted average number of ordinary sharesoutstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per shareDiluted earnings per share adjusts the figures used in the determination of basic earnings per share to take intoaccount the after income tax effect of interest and other financing costs associated with dilutive potential ordinaryshares and the weighted average number of shares assumed to have been issued for no consideration in relation todilutive potential ordinary shares.

(j) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is notrecoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset oras part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GSTrecoverable from, or payable to, the taxation authority is included with other receivables or payables in the statementof financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financingactivities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.

(k) Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of the Company is measured using the currency of the primary economic environment inwhich that Company operates. The financial statements are presented in Australian dollars which is the Company’sfunctional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dateof the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetaryitems measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values weredetermined.

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(k) Foreign Currency Transactions and Balances (continued)

Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensiveincome, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extentthat the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statementof comprehensive income.

Exchange differences arising on translation of foreign operations are transferred directly to the Company’s foreigncurrency translation reserve in the statement of financial position. These differences are recognised in the statementof comprehensive income in the period in which the operation is disposed.

(l) Financial Instruments

Recognition

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the relatedcontractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set outbelow.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted inan active market and are stated at amortised cost using the effective interest rate method.

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal paymentsand amortisation.

(m) Share based payments

When goods or services received are acquired in a share-based payment transaction, they are recognised asexpenses or assets, as determined by the nature of the goods or services received, over the vesting period attachedto the equity instrument acquired in the transaction. A corresponding increase is recognised in equity.

The goods or services are measured by reference to the fair value of goods or services received, or where this is notpossible, indirectly, by reference to the equity instrument acquired. The fair value of the equity instrument ismeasured at grant date.

The fair value of securities provided to directors and employees is determined by reference to the fair value of theequity instrument granted.

(n) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulateddepreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewedannually by directors to ensure it is not in excess of the recoverable amount from these assets.

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight-line basis over their useful lives to theconsolidated entity commencing from the time the asset is held ready for use.

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Depreciation (continued)

The depreciation rates used for each class of depreciable assets are:

Class of fixed asset Depreciation rateFurniture and fittings 11½% - 30%Computer equipment 37½% - 60%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financialposition date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount isgreater than its estimated recoverable amount. Gains and losses on disposals are determined by comparingproceeds with the carrying amount. These gains or losses are included in the Statement of Comprehensive Income.

(o) Intangible assets

Intangible assets are computer software purchased by the Company and are carried at cost. Computer software isamortised over its expected useful life of 2 years. The assets’ residual values and useful lives are reviewed, andadjusted if appropriate, at each statement of financial position date. Gains and losses on disposals are determined bycomparing proceeds with the carrying amount. These gains or losses are included in the Statement ofComprehensive Income.

(p) Impairment of assets

At each reporting date, the Company reviews the carrying values of its tangible and intangible assets to determinewhether there is any indication that those assets have been impaired. If such an indication exists, the recoverableamount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to theasset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to theStatement of Comprehensive Income.

(q) Employee benefits

Provision is made for the Company’s liability for employee benefits arising from services rendered by employees tobalance date. Employee benefits that are expected to be settled within one year have been measured at the amountsexpected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one yearhave been measured at the present value of the estimated future cash outflows to be made for those benefits usingthe government bond discount rates with terms to maturity and currency that match, as closely as possible, theestimated future cash outflows.

(r) Provisions

Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, forwhich it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

(s) Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grantwill be received and the Company will comply with all attached conditions. Government grants relating to costs aredeferred and recognised in the Statement of Comprehensive Income over the period necessary to match them withthe costs that they are intended to compensate.

(t) Research and development

Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating tothe design and testing of new or improved products) are recognised as intangible assets when it is probable that theproject will, after considering its commercial and technical feasibility, be completed and generate future economicbenefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs,including costs of materials, services, direct labour and an appropriate proportion of overheads. Other developmentexpenditures that do not meet these criteria are recognised as an expense as incurred. Development costspreviously recognised as an expense are not recognised as an asset in a subsequent period. Capitaliseddevelopment costs are recorded as intangible assets and amortised from the point at which the asset is ready for useon a straight-line basis over its useful life, which varies from 2 to 10 years.

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Note 1: Statement of significant accounting policies (continued)

(u) New accounting standards and interpretations

Standards and Interpretations affecting amounts reported in the current period

AASB 101 Presentation of Financial Statements

Adoption of AASB 101 required the presentation of a statement of comprehensive income and makes changes to thestatement of changes in equity, but has not affected any of the amounts recognised in the financial statements.

AASB 8 Operating Segments

Adoption of AASB 8 has resulted in a change in the approach to segment reporting, as it requires adoption of a'management approach' to reporting on financial performance. The information being reported is based on what thekey decision maker’s use internally for evaluating segment performance and deciding how to allocate resources tooperating segments.

Standards and Interpretations effective with no effect on financial statements

The following new and revised Standards and Interpretations have also been adopted in these financial statements.Their adoption has not had any significant impact on the amounts reported in these financial statements but mayaffect the accounting for future transactions or arrangements.

AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: VestingConditions and Cancellations.

Revised AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial Statements andAASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127.

AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the AnnualImprovements Project.

AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary,Jointly Controlled Entity or Associate.

AASB 2008-8 Amendment to IAS 39 Financial Instruments: Recognition and Measurement

Australian Interpretations

Interpretation 17 Distribution of Non-cash Asset to Owners

Interpretation 18 Transfer of Asset from Customers

Standards and Interpretations in issue not yet effective

A number of Australian Accounting Standards and Interpretations are in issue but are not effective for the currentyear end. The reported results and position of the company will not change on adoption of these pronouncements asthey do not result in any changes to the company’s existing accounting policies. Adoption will, however, result inchanges to information currently disclosed in the financial statements. The company does not intend to adopt any ofthese pronouncements before their effective dates.

AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the AnnualImprovements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139] (effective from 1 January 2010).Expected to be initially applied in the financial year ending 30 June 2011.

AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-Settled Share BasedPayment Transactions [AASB 2] (effective from 1 January 2010) Expected to be initially applied in thefinancial year ending 30 June 2011.

AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues [AASB132] (effective from 1 February 2010). Expected to be initially applied in the financial year ending 30 June2011.

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(u) New accounting standards and interpretations (continued)

Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian AccountingStandards (effective from 1 January 2011) Expected to be initially applied in the financial year ending 30June 2012.

AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arisingfrom AASB 9 (effective from 1 January 2013). Expected to be initially applied in the financial year ending 30June 2014.

AASB Interpretation 19 Extinguishing financial liabilities with equity instruments and AASB 2009-13Amendments to Australian Accounting Standards arising from Interpretation 19 (effective from 1 July 2010).Expected to be initially applied in the financial year ending 30 June 2011.

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Note 2: Financial risk management

a. Financial Risk Management Policies

The Company’s financial instruments consist mainly of deposits with banks and accounts

receivable and payable.

The Company does not presently have any bills, leases, preference shares, or derivatives.

i. Treasury Risk Management

Due the size and nature of the Company’s operations, and the Company’s limited exposure

to treasury products, the Company does not consider treasury risk to be a main risk of the

Company.

ii. Financial Risk Exposures and Management

The main risks the Company is exposed to through its financial instruments are, foreign

currency risk, liquidity risk, and credit risk.

Due to the size and nature of the Company’s operations, the Company does not consider

interest rate risk or price risk to be main risks of the Company.

Foreign currency risk

The Company is exposed to fluctuations in foreign currencies arising from the sale and

purchase of goods and services in currencies other than the Company’s measurement

currency.

The risk is not considered to be sufficient to warrant specific risk management policies to be

implemented.

iii. Liquidity Risk

The Company manages liquidity risk by monitoring forecast cash flows and ensuring that

adequate access to funds on deposits are maintained.

iv. Credit Risk

The maximum exposure to credit risk, excluding the value of any collateral or other security,at balance date to recognised financial assets, is the carrying amount, net of any provisionsfor impairment of those assets, as disclosed in the statement of financial position and notesto the financial statements.

There are no material amounts of collateral held as security at 30 June 2010.

Credit risk is managed on a Company basis and reviewed regularly. It arises from

exposures to customers as well as through deposits with financial institutions. The Company

monitors credit risk by actively assessing the rating quality and liquidity of counter parties,

noting that the majority of counter parties are large telecommunication organisations.

The Company has a significant concentration of credit risk with Hutchison 3G in Australia.The Company manages this risk by maintaining tight credit control policies. During the yearended 30 June 2010, the consolidated entity generated 40% (2009: 57%) of its grossturnover from Hutchison 3G in Australia.

The credit risk for counterparties included in trade and other receivables as at 30 June 2010is detailed below:F

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Note 2: Financial risk management (continued)

a. Financial Instruments (continued)

Trade and other receivables 2010$

2009$

Total Counterparties not rated 119,750 122,954

b. Financial Instruments

(i) Derivative Financial InstrumentsAs at the date of this report, the Company does not have any derivative financial instruments.

(ii) Trade and Sundry PayablesTrade and sundry payables are expected to be paid as follows:

2010$

2009$

Less than 6 months 318,003 319,142

(iii) Net Fair ValuesThe net fair values of all assets and liabilities approximate their carrying value. No financial assets andfinancial liabilities are readily traded on organised markets in standardised form.Financial assets where the carrying amount exceeds net fair values have not been written down as theCompany intends to hold these assets to maturity.

(iv) Sensitivity Analysis

Interest Rate Risk and Foreign Currency Risk

The Company has performed sensitivity analysis relating to its exposure to interest rate risk, foreigncurrency risk and price risk at balance date. This sensitivity analysis demonstrates the effect on thecurrent year results and equity which could result from a change in these risks.

Interest Rate Sensitivity AnalysisAt 30 June 2010, the only item effected by a change in interest rate would be the cash on deposit. Anchange in interest rates of 1% p.a. will not have a material effect on either the profit or equity of theCompany.

Foreign Currency Risk Sensitivity Analysis

As at the date of this report, the Company holds GBP71,585 (AU$125,982) and USD 2,214 (AU$2,585).

A change of 15% in the GBP/AUD and USD/AUD cross-rate will not have a material effect on either net

profit, or equity of the Company.

As at the date of this report, the Company does not have any material contracts that are denominated in

foreign currency. However, this situation could change depending on the location on new customers,

with the majority of new contracts being denominated in the local currency in the country of operation.

The above interest rate and foreign exchange rate sensitivity analysis has been performed on the

assumption that all other variables remain unchanged.

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Note 2: Financial risk management (continued)

Floating InterestRate

Non-InterestBearing Total

2010 2009 2010 2009 2010 2009Financial Assets: $ $ $ $ $ $

Petty cash - - 500 500 500 500Cash at bank (GBPdenominated accounts)

125,982 232,702 - 125,982 232,702

Cash at bank (AUDdenominated accounts)

1,193,439 943,714 - 1,193,439 943,714

Cash at bank (USDdenominated accounts)

2,585 2,585

Receivables - - 220,800 122,954 220,800 122,954

Total Financial Assets 1,322,006 1,176,416 221,300 123,454 1,543,306 1,299,870

Financial Liabilities:

Trade creditors - - 209,267 211,042 209,297 211,042Sundry creditors andaccruals

- - 108,736 108,100 108,736 108,100

Total FinancialLiabilities

- - 318,003 319,142 318,003 319,142

Note 3: Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that may have a financial impact on the entity and that are believed to bereasonable under the circumstances.

Critical accounting estimates and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, bydefinition, seldom equal the related actual results. The estimates and assumptions that have a significant risk ofcausing a material adjustment to the carrying amounts of assets and liabilities within the next financial year arediscussed below.

The Company makes estimates in arriving at provision for employee entitlements, revenue, provision for doubtfuldebts, and the life of plant and equipment. However, these estimates are not considered material to the Company.

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Note 4: Segment information

MOKO.mobi Limited is organised on a global basis into the following operating segments. The main operation is inAustralia.

Operating segmentThe primary segment of the Company is the business segment. The Company operates in one business segmentbeing the provision of mobile content services.

Geographical informationThe Company operates in four geographic areas being Australia, Europe, Asia and the United States.

30 June 2010 Australia Europe Asia US TOTAL

$ $ $ $ $

Sales Revenue 218,401 54,633 161,371 13,099 447,504

Assets 1,339,593 130,382 16,679 5,655 1,492,309

Liabilities 327,119 45,799 - 73,086 446,004

30 June 2009 Australia Europe Asia US TOTAL

$ $ $ $ $

Sales Revenue 493,371 52,504 - 9,183 555,058

Assets 1,346,262 - - 3,090 1,349,352

Liabilities 432,289 - - - 432,289

Note 5: Revenue

2010 2009$ $

Sales 447,504 555,058Other revenueGrants received 44,802 162,500Interest received 54,846 72,340

99,648 234,840

547,152 789,898

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Note 6: Employee benefits expense

2010 2009$ $

Salaries and wages 1,241,988 1,474,750Superannuation 101,275 114,603

1,343,263 1,589,353

Share based payments 371,116 247,496

Note 7a: Loss before income tax expense

The loss before income tax expense includes the following specific expenses:

2010 2009$ $

Research and development 1,068,067 978,652

Note 7b: Income tax expense

2010 2009$ $

The prima facie tax on loss beforeincome tax is reconciled to incometax expense as follows:

Loss from continuing operations beforeincome tax expense (3,139,977) (2,808,925)

Prima facie tax refund on loss beforeincome tax at 30% (2009: 30%) (941,993) (842,678)

Add tax effect of:Non-allowable items 178,563 75,450

Tax losses and timing differences notbrought to account 763,430 767,228

Research and Development tax offset 366,995 321,766

Income tax benefit 366,995 321,766

The $366,995 research and development tax offset was received on 9 September 2009 for a claim in accordancewith the Commonwealth Governments Research and Development Tax Concession initiatives where theconsolidated Companys’ expenditure on research and development is below $1 million and revenue is less than $5million.

An amount of $400,525 is expected to be received on lodgement of the 30 June 2010 income tax in research anddevelopment tax offset.

No amounts have been recognised for deferred tax on income losses as it is not yet probable that future taxableamounts will be available against which the company will utilise these assets in future years.

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Note 7(b): Income tax expense (continued)

2010 2009$ $

Deferred Tax Asset not brought toaccount arising from:

Temporary differences - 15,847Tax losses 1,546,530 1,156,203

1,546,530 1,172,050

The potential tax benefit of tax losses not brought to account for the year ended 30 June 2010 were $1,546,530(2009:$1,156,203).

The total tax losses carried forward to later income years is $4,370,812 (2009: $2,824,282).

Note 8: Cash and cash equivalents

2010 2009$ $

Cash on hand 500 500Cash at bank 1,322,006 1,176,416

1,322,506 1,176,916

Note 9: Trade and other receivables

2010 2009$ $

Receivables 233,893 122,954Less: Provision for Doubtful Debts (114,143) -

119,750 122,954

Current trade and term receivables are non-interest bearing loans and generally on 30 day terms. Included in thereceivable balance are debtors due in foreign currency. Non-current trade and term receivables are assessed forrecoverability based on the underlying terms of the contract. A provision for impairment is recognised when there isobjective evidence that an individual trade or term receivable is impaired. These amounts have been included in theother expenses item.

Ageing of receivables, net of provisions for doubtful debts, is as follows:

2010 2009$ $

1-30 days 60,897 104,43631-60 days 15,631 8,64461-90 days 13,800 9,87490+ days 29,422 -

119,750 122,954

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Note 9: Trade and other receivables (continued)

Movement in the provision for impairment of receivables is as follows:

2010 2009$ $

Opening Balance - 16,619Provision for impairmentrecognised 114,143 -Amount recovered during the year - (16,619)Closing Balance 114,143 -

There are no balances within trade and other receivables that contain assets that are not impaired and aresignificantly outside ordinary trading terms. Impaired assets are provided for in full.

Note 10: Other current assets

2010 2009$ $

Other Debtors 16,164 11,534Prepayments 11,763 23,527Loan at call due from related party 7,184 -

35,111 35,061

Note 11: Property, plant and equipment

Computerequipment

Furnitureand fittings

Total

$ $ $

2009Opening net book amount (1 July 2008) 9,301 12,051 21,352Additions 7,817 - 7,817Disposals - (124) (124)Depreciation expense (10,723) (5,583) (16,306)Closing net book amount at 30 June 2009 6,395 6,344 12,739

Cost 132,749 27,917 160,666Accumulated depreciation (126,354) (21,573) (147,927)Net book amount at 30 June 2009 6,395 6,344 12,739

2010Opening net book amount (1 July 2009) 6,395 6,344 12,739Additions 12,403 - 12,403Disposals - (1,377) (1,377)Depreciation expense (6,349) (2,968) (9,317)Closing net book amount at 30 June 2010 12,449 1,999 14,448

Cost 144,180 25,566 169,746Accumulated depreciation (131,731) (23,567) (155,298)Net book amount at 30 June 2010 12,449 1,999 14,448

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Note 12: Intangible assets

Computersoftware

$

2009Opening net book amount (1 July 2008) 3,453Additions 1,164Disposals -Amortisation expense (2,935)Closing net book amount at 30 June 2009 1,682

Cost 26,228Accumulated amortisation (24,546)Net book amount at 30 June 2009 1,682

2010Opening net book amount (1 July 2009) 1,682Additions -Disposals -Amortisation expense (1,188)Closing net book amount at 30 June 2010 494

Cost 26,228Accumulated amortisation (25,734)Net book amount at 30 June 2010 494

Note 13: Trade and other payables

2010 2009$ $

Trade payables 209,267 211,042Other payables and accruals 108,736 108,100

318,003 319,142

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Note 14: Provisions

2010 2009$ $

Employee benefits

Balance at the beginning of the year 113,147 132,557Additional provisions 77,343 104,680Amount used (62,489) (124,090)Balance at the end of the year 128,001 113,147

Employee benefits

A provision has been recognised for employee benefits relating to annual leave. Management have determined thatgiven the stage of the company’s development the probability of an employee reaching 10 years service is low.Hence long service leave has not been provided for in the financial report. The measurement and recognition criteriarelating to employee benefits have been included in Note 1 of this report.

Note 15: Issued capital

(a) Share capital2010 2009

$ $

Fully paid ordinary shares 118,561,862(2009 : 86,812,921 shares) 13,017,916 10,486,808

(b) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company inproportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinaryshares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled toone vote.

(c) Movements in share capital during the year

Date Details Number ofshares

Issue Price$

Amount$

1 July 2009 Opening balance 86,812,921 10,486,80819 Oct 2009 Share issue 19,077,143 0.07 1,335,40016 Dec 2009 Share issue 12,600,000 0.10 1,260,00016 Dec 2009 Options exercise 50,006 0.10 5,00015 Jan 2010 Options exercise 21,792 0.10 2,179

Capital raising costs (71,471)

30 June 2010 Closing balance 118,561,862 13,017,916For

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Note 15: Issued capital (continued)

( d ) Movements in Options during the year

Date DetailsNumber of

options2010

Number ofoptions

2009

ExerciseDate

Exercise($)

1 July Opening balance 20,881,668 12,765,000 - -19 Nov 2008 Allotment – Director II – Class A 1,500,000 25/7/2013 0.1019 Nov 2008 Allotment – Director II – Class B 750,000 25/7/2013 0.1019 Nov 2008 Allotment – Director II – Class C 750,000 25/7/2013 0.1019 Nov 2008 Allotment – Employee II – Class A 875,000 25/7/2013 0.1019 Nov 2008 Allotment – Employee II – Class B 437,500 25/7/2013 0.1019 Nov 2008 Allotment – Employee II – Class C 437,500 25/7/2013 0.1019 Nov 2008 Allotment – Employees – Class A 200,000 15/12/2012 0.2019 Nov 2008 Allotment – Employees – Class B 100,000 15/12/2012 0.2019 Nov 2008 Allotment – Employees – Class C 100,000 15/12/2012 0.2016 Jan 2009 Allotment – Employee II – Class A 50,000 25/7/2013 0.1027 Mar 2009 Allotment – Investors 1,388,889 25/7/2013 0.20

1 Apr 2009 Allotment – Investors 277,778 25/7/2013 0.2027 Apr 2009 Allotment – Investors 833,333 25/7/2013 0.2027 Apr 2009 Allotment – Investors 277,778 25/7/2013 0.2027 Apr 2009 Allotment – Investors 138,890 25/7/2013 0.2019 Oct 2009 Allotment – Director III 5,500,000 - 25/07/2013 0.1216 Dec 2009 Allotment – Employees III 1,950,000 - 25/07/2013 0.1230 June 2010 Closing balance 28,331,668 20,881,668

(e) Options reserve

Date Details2010

Amount $2009

Amount $

1 July Opening balance 1,065,396 817,90031 Dec 2008 Options granted to directors - 107,34331 Dec 2008 Options granted to employees - 38,51231 Dec 2008 Options granted to consultant - 18,50030 Jun 2009 Options granted to employees - 13,20830 Jun 2009 Options granted to directors - 69,93331 Dec 2009 Options granted to directors 266,634 -31 Dec 2009 Options granted to employees 104,482 -

Closing Balance 1,436,512 1,065,396

For further information in relation to the Options reserve, please refer to Note 16.

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Note 15: Issued capital (continued)

(f) Capital Management

Management controls the capital of the Company in order to provide the shareholders with adequate returns andensure that the Company can fund its operations and continue as a going concern.

Due to the early stage nature of the Company’s business, the Company’s capital is limited to ordinary share capital.There are no externally imposed capital requirements.

Management effectively manages the Company’s capital by assessing the Company’s financial risks and adjusting itscapital structure in response to changes in these risks and in the market. These responses include the distributionsto shareholders and share issues.

There have been no changes in the strategy adopted by management to control the capital of the Company since theprior year. The Company does not presently have any borrowings.

Note 16: Share Based Payments

Fair value of options granted

The fair value at grant date is independently determined that takes into account the exercise price, the term of theoption, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, theexpected dividend yield and the risk free interest rate for the term of the option.

(a) Options

The model inputs used in the Black Scholes Valuation Methodology for Director Options granted during the yearended 30 June 2010 included:

options are granted for no consideration, have a maximum life of 3.8 years, with all Director Options vestingimmediately;

exercise price: $0.12

grant date: 12 October 2009

expiry date: 25 July 2013

share price at grant date: $0.065

expected price volatility of the company’s shares: 150%

expected dividend yield: 0%

risk-free interest rate: 5.305%

The expected price volatility is based on expected changes to future volatility based on the remaining life of theoptions due to publicly available information.F

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Note 16: Share Based Payments (continued)

The model inputs used in the Black Scholes Valuation Methodology for staff options granted during the year ended30 June 2010 included:

options are granted for no consideration, have a maximum life of 4.4 years, with all Staff Options vestingimmediately;

exercise price: $0.12

grant date: 16 December 2009

expiry date: 25 July 2013

share price at grant date: $0.065

expected price volatility of the company’s shares: 150%

expected dividend yield: 0%

risk-free interest rate: 5.305%

The expected price volatility is based on expected changes to future volatility based on the remaining life of theoptions due to publicly available information.

(b) Shares issued as compensation

No shares were issued to Directors or employees as compensation during the year or in the prior year.

Note 17: Cash flow information

2010 2009$ $

Reconciliation of cash flow fromoperations with loss afterincome tax

Loss after income tax (2,772,982) (2,487,159)

Non-cash operating flows inloss after income taxDepreciation and amortisation 10,505 19,242Loss on sale of fixed assets 1,371 124Reserve written off - 11,349Share based payments 371,116 247,496Non-cash employee benefits 5,000 37,765Doubtful debts expense 114,143 -

Changes in assets and liabilities(Increase)/decrease in receivables (125,166) 57,233Decrease/(increase) in otherassets 32,891 (20,014)(Decrease)/increase in payables (19,847) 45,719Increase/(decrease) in provisions 14,854 (12,552)Cash flows from operations (2,368,115) (2,100,797)

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Note 18: Key management personnel disclosures

(a) DirectorsThe following persons were directors of MOKO.mobi Limited during the financial year:

Greg McCann - Non Executive ChairmanIan Rodwell - Managing Director and Chief Executive OfficerJohannes de Back - Non Executive Director (appointed 1 April 2010)Peter Yates - Non Executive DirectorChristine Kennedy - Non Executive Director (resigned 22 April 2010)Stuart Simson - Non Executive Director (resigned 22 April 2010)

(b) Other key management personnelThe following persons also had authority and responsibility for planning, directing and controlling the activities of theCompany, directly or indirectly, during the financial year:

Andrew Bursill Company Secretary

(c) Key management personnel

2010 2009$ $

Short-term employee benefits 469,702 356,079Post-employment benefits 69,843 61,094Share based payments 267,803 177,276

807,348 594,449

Detailed remuneration disclosures can be found in Sections A-C of the remuneration report on pages 8 to 10.

(d) Equity instrument disclosures relating to key management personnel

The numbers of shares in the company held during the financial year by each director of MOKO.mobi Limited,including their personally related parties, are set out below.

2010 Ordinary Shares

Name Balance at startof the year

Received duringthe year

Other changesduring the year

Balance at end ofthe year

I Rodwell 3,160,000 - - 3,160,000J de Back 7,539,682 - - 7,539,682G McCann 528,995 - 250,000 778,995C Kennedy* - - - -S Simson** - - - -P Yates 12,382,258 - 3,055,715 15,437,973

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Note 18: Key management personnel disclosures (continued)

2009 Ordinary Shares

Name Balance at startof the year

Received duringthe year

Other changesduring the year

Balance at end ofthe year

M Hoffman *** 2,050,000 - 20,000 2,070,000I Rodwell 3,150,000 - 10,000 3,160,000G McCann 155,954 - 373,041 528,995C Kennedy* - - - -S Simson** - - - -P Yates 8,214,165 - 4,168,093 12,382,258

13,570,119 - 4,571,134 18,141,253

The numbers of options over ordinary shares in the Company held during the financial year by each director of theCompany and other key management personnel of the Company, including their personally related parties, are setout below.

2010 Balance at thestart of the

year

Granted duringthe year as

compensation

Exercisedduring the

year

Otherchanges

during theyear

Balance at theend of the

year

I Rodwell 6,005,000 3,000,000 - - 9,005,000J De Back 1,388,889 - - - 1,388,889G McCann 1,000,000 1,000,000 - - 2,000,000C Kennedy* 1,000,000 250,000 - - 1,250,000S Simson** 1,000,000 250,000 - - 1,250,000P Yates 2,053,542 1,000,000 - - 3,053,542

12,447,431 5,500,000 - - 17,947,431

2009 Balance at thestart of the

year

Granted duringthe year as

compensation

Exercisedduring the

year

Otherchanges

during theyear

Balance at theend of the

year

M Hoffman *** 5,000,000 - - 10,000 5,010,000I Rodwell 3,000,000 3,000,000 - 5,000 6,005,000G McCann 1,000,000 - - - 1,000,000C Kennedy* 1,000,000 - - - 1,000,000S Simson** 1,000,000 - - - 1,000,000P Yates - - - 2,053,542 2,053,542

11,000,000 3,000,000 - 2,068,542 16,068,542

* Christine Kennedy resigned as a Non Executive Director on 22 April 2010.** Stuart Simson resigned as a Non Executive Director on 22 April 2010.*** Martin Hoffman resigned as a Non Executive Director on 20 March 2009.

(e) Other transactions with key management personnelAndrew Bursill, company secretary, is also an associate of Franks & Associates Pty Ltd who provides accounting andcompany secretarial services to MOKO.mobi Limited. The contract between MOKO.mobi Limited and Franks &Associates is based on normal commercial terms.

During the year the following fees were paid or payable for services provided by Franks & Associates Pty Limited :

2010 2009$ $

Amounts recognised as expenseCompany secretarial and accounting 160,911 140,772

Total 160,911 140,772

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Note 19: Related party transactions

During the year ended 30 June 2009, MOKO.mobi Limited advanced Mr Rodwell $21,077.87 with repayments of$15,000 and interest payment of $588.40 made during the year by way of salary sacrifice. The balance remaining asat year ended 30 June 2009 is $15,520.65.

During the year ended 30 June 2010, MOKO.mobi Limited advanced Mr Rodwell a further $6,128.85 withrepayments of $15,000 and interest payment of $533.08 made during the year by way of salary sacrifice. Thebalance remaining as at year ended 30 June 2010 is $7,182.58.

Note 20: Earnings per share

2010 2009cents cents

(a) Basic earnings per shareLoss from continuing operations attributable to the ordinary equityholders of the Company (2.59) (3.16)

Loss attributable to ordinary equity holders of the Company (2.59) (3.16)

(b) Diluted earnings per shareOptions issued to shareholders and related parties are considered to be potential ordinary shares and have beenconsidered in the determination of diluted earnings per share. The calculation of dilutive earnings per share does notassume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect onearnings per share. Diluted earnings per share are therefore not different from basic earnings per share.

2010 2009$ $

(c) Reconciliation of earnings used in calculating basic anddiluted earnings per shareLoss from continuing operations attributable to the ordinary equityholders of the Company (2,772,982) (2,487,159)Loss from discontinued operations

Loss attributable to ordinary equity holders of the Company (2,772,982) (2,487,159)

2010 2009$ $

(d) Weighted average number of shares used as thedenominatorWeighted average number of shares used as the denominator incalculating basic and diluted earnings per share 106,891,313 78,757,606

106,891,313 78,757,606

Note 21: Contingencies

There were no contingent liabilities at 30 June 2010 (2009: $nil).

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Note 22: Commitments

There were no commitments at 30 June 2010 (2009: $nil).

Note 23: Events occurring after the statement of financial position date

No matter or circumstance has arisen since 30 June 2010 that has significantly affected, or may significantly affect:

(a) MOKO.mobi Limited operations in future financial years, or(b) The results of those operations in future financial years, or(c) MOKO.mobi Limited’s state of affairs in future financial years.

Note 24: Auditor’s remuneration

During the year the following fees were paid or payable for services provided by Grant Thornton NSW and PKF.

2010 2009$ $

Audit servicesAudit and review of financial reports – GrantThornton NSW - 952

Audit servicesAudit and review of financial reports – PKF

55,350 38,200

Total 55,350 39,152

Note 25: Company details

The registered office of the Company is:

Suite 2061 Katherine StreetChatswood NSW 2067

The principal place of business is:

Suite 5, Level 1442-446 Beaufort StreetHIGHGATE WA 6003

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Directors’ declaration

The directors of the company declare that:

(a) The financial statements and notes, as set out on pages 24 to 50, are in accordance with theCorporations Act 2001 and:

i. comply with Accounting Standards and the Corporations Regulations 2001; andii. give a true and fair view of the financial position as at 30 June 2010 and the performance for the

year ended on that date of the company and consolidated Company;

(b) There are reasonable grounds to believe that the company will be able to pay its debts as and whenthey become due and payable.

The directors have been given the declaration by the Chief Executive Officer and the Chief Financial Officer requiredby Section 295A of the Corporations Act 2001 that:

This declaration is made in accordance with a resolution of the Board of Directors.

Greg McCann Ian RodwellChairman Managing Director30 August 2010 30 August 2010

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ASX Information

a) Substantial Shareholders

Substantial shareholder notice lodged with the company:

Shareholder Securities % of Total

Loop Creative Limited 6,423,199 5.41%

P & S Yates Holdings Ltd (and its controlled entities) 15,437,973 13.02%

b) Top security holders:

(i) Top 20 Shareholders as at 13 September 2010MKB – Fully paid Ordinary Shares

Rank Name Securities % of Total

1 ANZ Nominees Limited <Cash Income Account> 11,422,823 9.62%

2 Equitas Nominees Pty Limited <PB-600206 A/C> 10,821,248 9.12%

3 OSIRIS Capital Investments Pty Ltd 7,357,143 6.20%

4 Western Pacific Corporate Investments Pty Ltd 6,805,556 5.73%

5 Loop Creative Limited 5,850,000 4.93%

6 Robert Wittenoom 5,238,095 4.41%

7 Bowman Investment Holdings Pty Ltd <Bowman Investment Trust> 3,990,000 3.36%


9 Ian Michael Rodwell 3,160,000 2.66%

10 Mr Ian Niven Goldie 3,140,466 2.65%

11 TMG Holding BV 2,777,778 2.34%

12 Rudolf Christian De Back 2,380,952 2.01%

12 Anthonius Maria Kolenberg 2,380,952 2.01%

12 Johannes Rudolf De Back 2,380,952 2.01%

13 Wise Plan Pty Ltd <Burke Super Fund 2 A/C> 2,050,000 1.73%

14 Hawaiian Investments Pty Ltd <Trustee for Kidston Investment Ltd> 2,000,000 1.69%


16 Mr Robert Reginald Fisher & Mrs Lynette Gladys Fisher 1,050,000 0.88%

17 P & S Yates Holdings Pty Ltd <Yates Family> 1,000,000 0.84%

17 Mr Oliver Yates 1,000,000 0.84%

18 HSBC Custody Nominees (Australia) Limited 957,814 0.81%

19 Mr Paul Antony Young 926,767 0.78%

20 Mr Ralph Hyeem Levy 830,000 0.70%

Total 82,306,716 69.34%For

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(ii) Top 20 Option holders as at 13 September 2010LPMO – Expiry 25 July 2013, Exercise Price $0.10

Rank Name Securities % of Total

1 Western Pacific Corporate Investments Pty Ltd 2,500,000 24.32%

2 Bowman Investment Holdings Pty Ltd 1,900,000 18.49%

3 Equitas Nominees Pty Limited 1,803,542 17.55%

4 Loop Creative Limited 1,000,000 9.73%

5 Mr Oliver Yates 500,000 4.86%

5 Wise Plan Pty Ltd 500,000 4.86%

6 Hawaiian Investments Pty Ltd 296,059 2.88%

7 P & S Yates Holdings Pty Ltd 250,000 2.43%

7 Mr Mark Randell Stebbing 250,000 2.43%

7 Mr Brian Dowd & Mrs Ylonka Dowd 250,000 2.43%

8 Conrad Joseph Lawrence Goodger 175,179 1.70%

9 Mr Robert Reginald Fisher & Mrs Lynette Gladys Fisher 175,000 1.70%

10 UOB Kay Hian Private Limited 106,966 1.04%

11 Windsong Investments Pty Ltd 100,000 0.97%

12 Mr George William Pyett 62,500 0.61%

13 ANZ Nominees Limited 55,987 0.54%

14 Mr Edward Mitchell Hobson 51,825 0.50%

15 Nefco Nominees Pty Ltd 50,000 0.49%

16 Fevosa Pty Ltd 31,250 0.30%

17 Mr Warwick Taylor Vinton Smith 30,000 0.29%

18 Anphidama Pty Ltd 26,604 0.26%

19 Mr Brian Robert Rodwell 23,125 0.22%

20 Mr Thomas Arthur Skopek 22,614 0.22%

Total 10,160,651 98.86%

c) Distribution schedule of securities:

(i) Distribution schedule of shareholdings as at 13 September 2010:LPM – Fully paid Ordinary Shares

Range No of Holders Securities %

1 to 1,000 1,770 445,439 0.38

1,001 to 5,000 419 926,616 0.78

5,001 to 10,000 162 1,348,890 1.14

10,001 to 100,000 282 10,377,744 8.74

100,001 and Over 115 105,594,806 88.96Total 2,748 118,693,495 100.00

(ii) Distribution schedule of option holdings as at 13 September 2010:LPMO – Expiry 25 July 2013, Exercise Price $0.10

Range No of Holders Securities %

1 to 1,000 20 4,511 0.04

1,001 to 5,000 13 31,965 0.31

5,001 to 10,000 2 18,165 0.18

10,001 to 100,000 13 516,773 5.03

100,001 and Over 13 9,706,746 94.44Total 100.00

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(iii) Distribution schedule of unlisted option holdings as at 13 September 2010:Expiry 15 June 2012, Exercise Price $0.20

Range No of Holders Securities %100,001 and Over 5 11,000,000 100.00

(iii) Distribution schedule of unlisted option holdings as at 13 September 2010:Expiry 15 December 2012, Exercise Price $0.20

Range No of Holders Securities %10,001 to 100,000 15 865,000 60100,001 and Over 5 1,300,000 40Total 20 2,165,000 100.00

(iv) Distribution schedule of unlisted option holdings as at 13 September 2010:Expiry 25 July 2013, Exercise Price $0.10

Range No of Holders Securities %10,001 to 100,000 9 600,000 33100,001 and Over 4 1,200,000 67Total 13 1,800,000 100.00

(v) Distribution schedule of unlisted directors option holdings as at 13 September 2010:Expiry 25 July 2013, Exercise Price $0.10


(vi) Distribution schedule of unlisted option holdings as at 13 September 2010:Expiry 25 July 2013, Exercise Price $0.20


(vii) Distribution schedule of unlisted option holdings as at 13 September 2010:Expiry 25 July 2013, Exercise Price $0.12


(viii) Distribution schedule of unlisted option holdings as at 13 September 2010:Expiry 25 July 2013, Exercise Price $0.12

Range No of Holders Securities %10,001 to 100,000 5 250,000 12.82100,001 and Over 6 1,700,000 87.18Total 11 1,950,000 100.00

d) As at 13 September 2010, the number of security investors holdings less than a marketable parcel ofsecurities is 2,244 and collectively they hold 1,712,389 securities.

e) As at the date of this report, the company does not have any ordinary shares held as restricted securities.

f) The voting rights attaching to each class of equity securities are set out below:

(i) Ordinary shares: Subject to any rights or restrictions for the time being attached to anyclass of shares, at a meeting of shareholders each shareholders entitled to vote may votein person or by proxy or attorney or, being a corporation, by representative dulyauthorised under the Corporations Law, and has one vote on a show of hands and onevote per fully paid share on a poll.

(ii) Options: No voting rights

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