DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT 60 61 DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT 61 60 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 GRANT DATE EXPIRY DATE SHARE PRICE AT REPORTING DATE EXERCISE PRICE EXPECTED VOLATILITY DIVIDEND YIELD RISK-FREE INTEREST RATE FAIR VALUE 07/07/2015 07/10/2018 $0.145 $0.76 83.17% – 2.00% – The remaining contractual life at 30 June 2018 is 0.27 years (2017: 1.27 years). Given the fair value of the warrants at 30 June 2018 is immaterial in nature, no derivative financial liability has been disclosed at the reporting date. NOTE 20. CURRENT LIABILITIES – INCOME TAX CONSOLIDATED 2018 2017 $ $ Provision for income tax 2,008,402 1,127,767 NOTE 21. CURRENT LIABILITIES – EMPLOYEE BENEFITS CONSOLIDATED 2018 2017 $ $ Annual leave 140,590 95,613 Accrued salaries, wages and other benefits 1,120,735 885,393 1,261,325 981,006 NOTE 22. NON-CURRENT LIABILITIES – BORROWINGS CONSOLIDATED 2018 2017 $ $ Joint Stock Commercial Ocean Bank 4,323,561 6,979,949 Mega International Commercial Bank Co Ltd 41,483,011 46,573,678 45,806,572 53,553,627 Refer to note 28 for further information on financial instruments. Total secured liabilities The total secured liabilities (current and non-current) are as follows: Joint Stock Commercial Ocean Bank 7,205,935 9,771,928 Mega International Commercial Bank Co Ltd 63,195,552 98,690,297 70,401,487 108,462,225 NOTE 23. NON-CURRENT LIABILITIES – EMPLOYEE BENEFITS CONSOLIDATED 2018 2017 $ $ Long service leave 42,408 32,669 42,408 32,669 The loan from Mega International Commercial Bank Co Ltd, which was initially drawn down on 1 July 2015, was refinanced under a new loan agreement dated 14 August 2017 for a total amount of US$57 million. The new loan was drawn down on 28 August 2017, the proceeds of which were used to settle the previous loan. Under the refinancing terms, the loan has been extended for a further three years with a final settlement date of 28 August 2020. The consolidated entity complied with loan covenants as amended by Mega Bank during the year and consequently continued to present the outstanding loan balance expected to be settled more than 12 months after the reporting period as a non-current liability as at 30 June 2018 (note 22). ASSETS PLEDGED AS SECURITY The loan from Mega International Commercial Bank Co. Ltd is secured by the following: i. A parent company guarantee from the parent entity for the debt owed by Donaco Hong Kong Limited ii. A pledge of the shares in Donaco Hong Kong Limited owned by the parent entity (carrying value $293,608,393, 2017: $293,608,393) iii. A pledge of the shares in DNA Star Vegas Co. Ltd owned by Donaco Hong Kong Limited (carrying value $443,615,198, 2017: $426,270,598) iv. A pledge of the debt service reserve account maintained by Donaco Hong Kong Limited v. A security assignment of contractual rights held by the parent entity under the purchase agreement for DNA Star Vegas vi. A security agreement over the assets of DNA Star Vegas vii. A hypothec agreement over the land and buildings of DNA Star Vegas. MORTGAGE TO JOINT STOCK COMMERCIAL OCEAN BANK A mortgage was registered by the Ocean Bank of Vietnam over the assets of the Aristo International Hotel on 11 July 2011. Total borrowings as per the statement of financial position as at 30 June 2018 under this arrangement were $7,205,935 (2017: $9,771,928). Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn down at any time. CONSOLIDATED 2018 2017 $ $ Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit (current and non current): Total facilities Bank loans 70,401,487 108,462,225 Used at the reporting date Bank loans 70,401,487 108,462,225 Unused at the reporting date Bank loans – – NOTE 19. CURRENT LIABILITIES – FINANCIAL LIABILITIES CONSOLIDATED 2018 2017 $ $ Derivative financial liability at fair value through profit and loss Warrants – 681,507 As a requirement of the terms of the group’s facility previously provided by OL Master Limited, the company as guarantor has issued 70 warrants to subscribe for its ordinary shares. Each warrant has a notional value of US$100,000. The warrants have a term of 39 months and expire on 6 October 2018. The exercise price is $0.7579 and the maximum number of ordinary shares which may be issued is 12,334,408, and the company may elect to settle the difference between the share price and exercise price in cash. The warrants associated with this transaction are classified as a derivative financial liability. On initial recognition the warrants issued are measured at fair value. At each reporting date the derivative financial liability is re-valued to fair value with the movement in the fair value recorded in profit or loss. For the warrants granted during the 2016 financial year, fair value at grant date was $4,403,859. The valuation model inputs used to determine the fair value at the balance date are shown below.