BUBS AUSTRALIA LIMITED
(formally Hillcrest Litigation Services Ltd) and Controlled Entities
ACN 060 094 742
Annual Report - 30 June 2017
HILLCREST LITIGATION SERVICES LIMITED PROSPECTUS
1
For personal use only Contents
General Information .............................................................................................................................................. 2
Directors Report .................................................................................................................................................... 3
Company Particulars ........................................................................................................................................ 3
The Board of Directors ..................................................................................................................................... 4
Remuneration report (Audited) .................................................................................................................... 11
Independent Auditor’s Report ........................................................................................................................... 24
Lead Auditor’s Independence Declaration ...................................................................................................... 31
Consolidated Statement of Profit or Loss and Other Comprehensive Income ........................................ 32
Consolidated Statement of Financial Position ............................................................................................... 33
Consolidated Statement of Changes in Equity ............................................................................................... 34
Consolidated Statement of Cash Flows .......................................................................................................... 35
Notes to the Financial Statement ..................................................................................................................... 36
Director’s Declaration ......................................................................................................................................... 72
Additional Information for Listed Public Companies………………………………………………………………………….73
General Information
The financial statements cover Bubs Australia Limited for the year ended 30 June 2017. The
financial statements are presented in Australian dollars, which is Bubs Australia Limited’s
functional and presentational currency.
Bubs Australia Limited’s registered office and principal place of business is:
2-4/6 Tilley Lane, Frenchs Forest
NSW 2086 Australia
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Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Company Particulars
Directors
Dennis Lin
Kristy-Lee Newland Carr
Matthew Reynolds
Alan Van Noort (13 January 2017), Jay Stephenson (22 December 2016) and Angus Middleton (22
December 2016) resigned during the year.
Company Secretary
Jay Stephenson
Registered office and domicile
Bubs Australia Limited is a company limited by shares, incorporated and domiciled in Australia.
Its registered office is:
2-4/6 Tilley Lane, Frenchs Forest
NSW 2086 Australia
Share registry
Computershare Investor Services Pty Limited
Level 2
Reserve Bank Building
45 St George’s Terrace
Perth WA 6000
Auditors
Ernst & Young
11 Mounts Bay Road
Perth WA 6000
Australian Stock Exchange
ASX Code: BUB
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Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
The directors present their report together with the consolidated financial statements of the Group
comprising of Bubs Australia Limited (the ‘Company’) and its subsidiaries for the financial year
ended 30 June 2017 and the auditor’s report thereon.
On 6 October 2016, the Company announced to the ASX that it had entered into the Share Sale
Agreement to acquire 100% of the issued shares of The Infant Food Holding Co. Pty Limited and its
controlled entities. The Company successfully completed the acquisition on 20 December 2016.
Under Australian Accounting Standards, this acquisition was treated as a ‘reverse acquisition’,
whereby the accounting acquirer was deemed to be IFHC and Bubs Australia Limited (formerly
Hillcrest Litigation Services Limited) was deemed to be the accounting acquiree.
The Board of Directors
The names of the directors in office at any time during or since the end of the financial year are:
Dennis Lin: GradDipAppFin, CA, Solicitor of the Supreme Court of Queensland – Chairman and
Non-Executive Director (appointed 22 December 2016)
Mr Lin is a Partner of BDO in Australia and the firm’s China Advisory Services national leader. He
advises on commercial aspects of transactions and acts as the lead advisor to foreign
entrepreneurial investors on merger and acquisition and capital markets activities, with particular
interests in food and agribusiness, and technology sectors. His focus is in facilitating the growth of
businesses as they become public, particularly in relation to corporate level reporting and
governance. Mr Lin was previously a specialist tax practitioner for over 10 years with Mallesons,
PricewaterhouseCoopers and Deloitte. He speaks fluent Chinese Mandarin, and is a Chartered
Accountant and Solicitor of the Supreme Court of Queensland and remains a current practitioner of
both professions. He is a director of BDO (Qld) Pty Ltd.
Mr Lin has not held any other Directorships in publically listed companies in the past three years.
Ms Kristy-Lee Newland Carr: BBus (Bachelor Degree of Business) – Managing Director (appointed
22 December 2016)
Ms Carr is currently the Managing Director of Bubs Australia Limited, has a Bachelor of Business
Degree (Queensland University of Technology) and was co-founder of the BUBS brand and product
range. She has an in-depth knowledge of all facets of the infant category, and she oversees the
company’s business development, marketing, and retail industry relations. Prior to co-founding the
BUBS brand of products, Ms Carr was International Communications Strategist for Cathay Pacific in
Hong Kong. Having lived in Asia and travelled extensively throughout China for over a decade, she
has a deep understanding of BUBS’ target market in Asia. As a mother of three, Ms Carr has first-
hand experience when it comes to new product development and mum-to-mum insight.
Ms Carr has not held any other Directorships in publically listed companies in the past three years.
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Directors Report
For the year ended 30 June 2017
The Board of Directors (continued)
Mr Matthew Reynolds: B.Sc (Hons), LLB (Hons), MQLS - Non-Executive Director (appointed 22
December 2016)
Mr Reynolds is a Partner at HWL Ebsworth lawyers who specialises in capital markets (retail and
wholesale), debt capital markets (wholesale) and mergers and acquisitions (public and private)
including private equity. He holds a Bachelor of Political Science & Economics (Hons) and a
Bachelor of Laws (Hons) and is a member of both the Queensland Law Society and Company Law
Committee, Queensland Law Society. Mr Reynolds is currently a director on the ASX listed Axsess
Today Limited (ASX: AXL), and holds directorships in unlisted companies including local
subsidiaries of Thai-listed Minor International PLC, Ignite Energy Limited.
Mr Reynolds was a director in publically listed G8 Education Limited (ASX: GEM) retiring from the
board on the 31st of August 2017.
Mr Alan van Noort: B.Juris LLB – Former Chairman and Executive Director (resigned 13 January
2017)
Mr Alan van Noort (appointed 1998) is a Barrister and Solicitor who was admitted to practice in the
Supreme Court of Western Australia in 1979. From 1979 to 1991, Mr van Noort practised law in
Perth, Western Australia, specialising in the areas of mining law, public company law, mergers and
acquisitions and shareholders’ rights. Since 1991, Mr van Noort has been involved in the
management and administration of publicly listed companies.
Mr van Noort has not held any other directorships in publicly listed companies in the last 3 years.
Mr Angus Middleton: SA Fin, MSAA – Former Non-executive Director (resigned 22 December
2016)
Mr Angus Middleton is a fund manager and former stockbroker who has extensive experience in
the capital markets sector in Australia. He is currently a director of SA Capital Pty Ltd, a corporate
advisory firm specialising in equity raisings and underwriting, and the managing director of SA
Capital Funds Management Limited, an Adelaide based investment fund. Mr Middleton is presently
a Director of Excalibur Mining Corporation Ltd and Non-executive Director of Aphrodite Gold Ltd.
Mr Middleton has not held any other directorships in publicly listed companies in the last 3 years
other than the above.
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Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
The Board of Directors (continued)
Mr Jay Stephenson: MBA, FCPA, FGIA, MAICD, CPA (Canada), CMA (Canada) – Former Non-
executive Director (resigned 22 December 2016), Company Secretary
Mr Stephenson has been involved in business development for over 25 years including
approximately 21 years as Director, Chief Financial Officer and Company Secretary for various
listed and unlisted entities in resources, IT, manufacturing, wine, hotels and property. He has been
involved in business acquisitions, mergers, initial public offerings, capital raisings, business
restructuring as well managing all areas of finance for companies. Mr Stephenson holds a Master
of Business Administration, is a Fellow of the Certified Practising Accountants (Australia), a
Chartered Professional Accountant (Canada), a Certified Management Accountant (Canada), a
Fellow of the Governance Institute of Australia and a Member of the Australian Institute of Company
Directors.
Mr Stephenson has not held any other directorships in publicly listed companies in the last 3 years.
Directors have been in office since the start of the financial year to the date of this report unless
otherwise stated.
Company Secretary
Jay Stephenson – appointed 1 September 2015
Directors’ meetings
During the year ended 30 June 2017 there were a total of 5 meetings of the Board of Directors held.
The number of directors’ meetings and the number of meetings attended by each of the directors of
the Company during the financial year are:
Director
D Lin
K Newland Carr
M Reynolds
A R Van Noort
J R Stephenson
A J L Middleton
Number of meetings held during
the time the Director held office
3
3
3
2
2
2
Number of meetings
attended
3
3
3
2
2
2
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Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Principal activities
The principal activity of the Company during the course of the year changed from the conduct of
litigation funding business, to a specialist in the development and marketing of premium range
Australian made organic baby food and infant milk formula products. This change occurred after
the Company completed the acquisition of 100% of The Infant Food Holding Co. Pty Limited (IFHC)
and its subsidiaries on 20 December 2016. Under AASB 3 Business Combinations this was treated
as a ‘reverse acquisition’, whereby the accounting acquirer was deemed to be IFHC and Bubs
Australia Limited (formerly Hillcrest Litigation Services Limited) was deemed to be the accounting
acquiree.
Given IFHC is considered to be the parent for accounting purposes, the consolidated financial
statements represent a continuation of the financial statements of IFHC, with the exception of the
capital structure. The results for the year ended 30 June 2017 comprise the results of the IFHC for
the full year and the results of Bubs Australia Limited subsequent to the acquisition. Similarly, the
statement of cash flows and statement of changes in equity reflect the movements in cash flow and
changes in equity of IFHC for the full year and the results of Bubs Australia Limited subsequent to
the acquisition. Unless otherwise stated, the comparative information provided is that of IFHC.
Further detail on the accounting for thereverse acquisition is detailed in Note 4 to the financial
statements
There were no other significant changes in the nature of the activities of the Group during the year.
Objectives
The Group’s objectives are set out below:
Increase market penetration
The Group’s products are widely available throughout Australia and select international markets.
Distribution opportunities to grow the products’ accessibility at key retail touch points, in
supermarkets, pharmacy, specialty organic and health food outlets as well as e-commerce
channels are being explored. Various of the Group’s products are currently available through the
majority of Coles Supermarkets and in Big W, Costco, Chemist Warehouse and leading pharmacy
wholesalers Sigma and Symbion.
Furthermore, the Group will seek to optimise the brand’s promotional effectiveness to build the
rate of sale, particularly in the infant milk formula market. It also intends to play an active role
championing the benefits of “organic” in the infant food category.
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Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Brand awareness and impact at point of purchase
The Group will be undertaking a brand refresh to re-establish its core brand credentials and drive
consumer awareness. This may assist in increased demand for the products and brand proposition.
To date, the Group’s marketing has been driven by word-of-mouth, with encouraging peer referrals.
The Group will seek to engage existing and new consumers via digital and direct marketing
strategies and invest in communications and content that will further resonate with consumers.
The increase in marketing investment will support growth ambitions and aim to secure both
consumer and retailer engagement with the brand, the existing product portfolio, and new product
development.
Innovation and product development
The Group will look to expand its share of the infant category through innovation and product
development. The brand will drive growth by looking to participate in higher value product
segments and seeking to disrupt the existing categories. The Group will continue to develop infant
and toddler products for every stage of a baby’s development, ensuring the business is
commercially agile to identify and exploit new opportunities in the industry. In the infant food
category, the Group has over a decade of organic supply chain experience and relationships. It will
seek to leverage the trust and experience it has built to increase relevance in both domestic and
international markets. Taking advantage of existing partnerships will assist the Group to increase
market penetration.
An enhanced international focus
There is a recognised demand internationally for organic and Australian infant food and formula.
Current sales platforms in China, South East Asia and the United Arab Emirates emerged due to the
Group’s Australian provenance and may be enhanced with resources dedicated towards growth.
Expanding the international business strategy capabilities will be a focus of the Group. The Group
already has relationships with retail and e-commerce operators such as Kaola NetEase, RED
(Xiaohongshu), Dairy Farm, NTUC FairPrice, Tmall Global and JD.com. By scaling up operations,
these channels may provide potentially significant growth opportunities and ready access to new
markets beyond China’s largest cities.
In addition to trading platforms, the Group has entered into an agreement with Brilite Nutritionals
(Shanghai) Co., Ltd (“Brilite”) as its exclusive partner and an authorised distributor in China, with a
primary focus on mother and baby stores. (cid:1)Brilite has undertaken to provide material assistance
with finalising regulatory approvals for all of Bubs infant formula and organic baby food products.(cid:1)
Review of operations and financial results
The operating loss of the Group after income tax for the financial year was $5,059,242 (2016:
$1,289,249).
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Directors Report
For the year ended 30 June 2017
A review of the operations of the Group during the financial year and the results of those operations
are as follows:
1. The Company’s business:
Following completion of the Company’s acquisition of The Infant Food Holding Co. Pty
Limited and its subsidiaries on 20 December 2016, the principal activity undertaken during
the year changed from the management of a litigation funding business, to the development
and marketing of a premium range of Australian made organic baby food and infant milk
formula products.
2. Understanding the results:
Since the change in principal activities, the income stream of the Group is represented by
sales of finished product.
Included in the net loss of $5,059,242, is Corporate transaction accounting expense relating
to the reverse takeover of $1,722,893 and employee expenses of $1,254,166. The
Remuneration Report, below, outlines the employee expenses paid to key management
personnel.
3. Financial position:
The Group currently hold $5,306,746 in cash.
The cash available has significantly increased during the year due to the successful capital
raising during the year.
The Directors are confident of the Group’s ability to continue as a going concern and meets
its debts and future commitments as and when they fall due and payable.
4. Business strategies:
The Group will continue of the path of focusing on its objectives.
To achieve its objectives, the Group is dependent on:
• Raw materials and ingredient supply: the Group will continue to work closely with its
suppliers at all stages of production to maintain its secure broad network of trusted
suppliers, from large multinationals to small family-owned farms, who reliably source,
grow, manufacture, test, pack and deliver our products.
• Production agreements: the Group’s operating model relies on outsourced production to
improve operational efficiencies and allow for an asset-light, streamlined business. The
Group develops the necessary intellectual property to produce its products (including
the trademarks, artwork, product formulations, recipes and specifications), then works
with the key partners to deliver the finished goods to market. Stable and ongoing
production agreements with long-term manufacturers have promoted efficiency and
reduced costs, however the Group regularly investigates the market to review pricing,
quality and overall service levels. The Group manages outsourcing risks by:
i. ensuring that counterparties are financially sound with a good reputation;
ii. reviewing counterparty proposals for the requisite authorisations and approvals
from certifying bodies; and
iii. maintaining close working relationships with senior staff and production teams at
all stages of the manufacturing process.
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4. Business strategies (continued):
• Management expertise: The senior management of the Group have 40 collective years of
experience in the fast moving consumer goods and infant food industry, including Bubs,
Mars Inc., HJ Heinz, PZ Cussons and five:am organics, which is crucial to its success.
Significant changes in the state of affairs
Since 2004, the company had predominantly operated as a litigation funding business focussed on
providing funds to enable a party to meet the cost of pursuing a legal claim; in return for receiving a
percentage of the amount recovered under the claim.
On 6 October 2016, the Company announced to the ASX that it had entered into the Share Sale
Agreement to acquire 100% of the issued shares of The Infant Food Holding Co. Pty Limited and its
controlled entities. Upon successful settlement of the acquisition, the company has focused on
developing and operating the Bubs business during the financial year ended 30 June 2017.
Environmental regulations
Cuprifex Mining NL (a former wholly owned subsidiary) previously held mining tenements in
Queensland. As a result of the surrendering of those tenements, the Company recognised a
rehabilitation provision equal to $50,000 in December 1999. The Company also lodged a security
deposit of $50,000 in December 1999 with the Department of Mines and Energy. As the possibility
of any claim being made was considered to be so remote, the value of this provision and the
corresponding security deposit were derecognised in 2012.
The Company is not aware of any matter which requires disclosure with respect to any significant
environmental regulation in respect of its operating activities.
Events Subsequent to the End of the Reporting Period
On 8 September 2017 the Company issued 35,467,243 ordinary shares through a private placement
at $0.45 to raise $15,950,259 before costs.
Other than this event, there has not arisen in the interval between the end of the financial year and
the date of this report any item, transaction or event of a material and unusual nature likely, in the
opinion of the directors of the Company, to affect significantly the operations of the Group, the
results of those operations, or the state of affairs of the Group, in future financial years.
Likely Developments
The Group will continue to pursue its policy of increasing the profitability and market share of its
major business sectors during the next financial year.
Further information about likely developments in the operations of the Group and the expected
results of those operations in future financial years has not been included in this report because
disclosure of the information would be likely to result in unreasonable prejudice and potential
commercial disadvantage to the Group.
Dividends
No dividends have been paid or declared since the start of the financial year.
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Directors Report
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Remuneration report (Audited)
This remuneration report outlines the director remuneration arrangements of the Company in
accordance with the requirements of the Corporations Act 2001 and its regulations.
Key management personnel remuneration are disclosed on two bases:
•
•
remuneration and comparatives related to the key management personnel of the legal
parent company Bubs Australia Limited (formerly Hillcrest Litigation Services Limited).
remuneration and comparatives related to the key management personnel of the Bubs
Australia Limited group which for accounting purposes is reflected as a continuation of The
Infant Food Holding Co Pty Ltd and its controlled entities.
The names of the key management personnel in office at any time during or since the end of the
financial year are as follows:
Bubs Australia Limited (parent company)
• Dennis Lin (Non-Executive Chairman) – appointed 22 December 2016
• Kristy-Lee Newland Carr (Managing Director) – appointed 22 December 2016
• Matthew Reynolds (Former Non-Executive Director) – appointed 22 December 2016
• Jay Stephenson (Non Executive Director – Resigned 22 December 2016) & Company Secretary
• Alan Van Noort (Former Executive Director & Chairman) – Resigned 13 January 2017
• Angus Middleton (Former Non-Executive Director) – Resigned 22 December 2016
• Nicholas Simms (Chief Executive Officer from 8 June 2017, formerly Commercial Director) –
from reverse acquisition on 20 December 2016
• Anthony Gualdi (Operations Director) – from reverse acquisition on 20 December 2016
Bubs Australia Limited group (continuation of Infant Food Holding Co Pty Ltd and its controlled
entities)
• Dennis Lin (Non-Executive Chairman) – appointed 22 December 2016
• Kristy-Lee Newland Carr (Managing Director)
• Matthew Reynolds (Former Non-Executive Director) – appointed 22 December 2016
• Jay Stephenson (Company Secretary) – from reverse acquisition on 20 December 2016
• Alan Van Noort (Former Executive Director & Chairman) – from reverse acquisition on 20
December 2016, resigned 13 January 2017
• Nicholas Simms (Chief Executive Officer from 8 June 2017, formerly Commercial Director)
• Anthony Gualdi (Operations Director)
Principles used to determine the nature and amount of remuneration:
Objective
The Board seeks to set aggregate compensation at a level that provides the Company with the
ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable
to shareholders.
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Bubs Australia Limited and Controlled Entities
Directors Report
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Structure
The amount of aggregate compensation sought to be approved by shareholders and the manner in
which it is apportioned amongst the directors is reviewed annually. The board considers advice
from external consultants as well as the fees paid to non-executive directors of comparable
companies when undertaking the annual review process. No external consultants were used for the
current year. The overall level of executive reward takes into account the performance of the
Company over a number of years.
The following is a summary of the Bubs Australia Limited revenue over the last four years:
Revenue/$
2017
3,945,255
2016
3,659,328
2015
1,818,770
2014
1,134,091
The remuneration of key management personnel does not include any performance bonuses and is
not based on any performance measures. The 2016 Remuneration Report was carried on a show of
hands as an ordinary resolution at the Annual General Meeting held on 8 December 2016. There
were no specific comments received on the remuneration report at the AGM.
The Company's constitution provides that directors shall be paid fees as remuneration for their
services as directors provided that the maximum aggregate amount so paid does not exceed the
amount set by shareholders in general meeting. Shareholders set the maximum aggregate amount
that may be paid to directors as remuneration for their services as directors at $300,000 per
annum at the Company's AGM held on 18 November 2009 (the maximum previously being $150,000
per annum as set by shareholders at a general meeting held on 6 February 2006). The Board's
present policy is that all directors be paid $30,000, per annum, inclusive of superannuation in
accordance with statutory rates as remuneration for their services as directors.
Employment Contracts
Remuneration and other terms of employment for the executive director, Alan van Noort, who
resigned on 13 January 2017, were formalised through an employment contracts. The major
provisions of his contract were as follows:
• Base salary was $200,000 per annum plus superannuation in accordance with the statutory
rates.
Insurance cover provided under Directors and Officers Liability.
•
• A period of one month's notice required upon termination.
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Employment Contracts (continued)
Remuneration and other terms of employment Nicholas Simms who commenced as a commercial
director on 1 October 2016 and was appointed as Chief Executive Officer on 8 June 2017 are as
follows:
• Base salary of $200,000 per annum plus superannuation in accordance with the statutory
rates.
Insurance cover provided under Directors and Officers Liability.
•
• No defined term.
• 3,578,108 options (issued January 2017)*
*These options were granted prior to Nicholas Simms being appointed as Chief Executive Officer, as
part of his compensation as a commercial director of the company. These options were issued as
an incentive for Mr Simms to join the company as and accordingly are not linked to any
performance-based milestones. There are no performance or service conditions required to
exercise the options, and the options are not dependent on the ongoing employment of Mr Simms
by the Company.
The current remuneration and other terms of employment of the executive director Kristy Carr and
the operations director Anthony Gualdi are as follows
• Base salary of $200,000 per annum plus superannuation in accordance with the statutory
rate.
Insurance cover provided under Directors and Officers Liability.
•
• No defined term.
• Termination benefits of 3 months of annual remuneration payable
Kristy Carr and Anthony Gualdi received their remuneration for the full financial year on the above
terms.
Mr JR Stephenson contracted on a monthly basis his Company Secretary role at a rate of $2,500
per month ($30,000 p.a.) Additional fees for secretarial services of $12,500 were charged in 2017
due to services performed in relation to the acquisition of Infant Food Holding Company Pty Ltd.
Other related party transactions
The lease of premises in Narrabeen was leased by Anthony Gualdi, the operations director. An
expense of $19,934 (2016: 52,322) was incurred during the 2017 year.
Dennis Lin, a Non-Executive Director is a partner in an accounting firm. The Company contracted
professional service from the accounting firm to the amount of $25,997 in 2017, with an
outstanding balance at 30 June 2017 of $22,050.
Apart from the details disclosed in this note, no director has entered into any other material
contracts with the Company since the end of the previous financial year. All of the above
transactions were considered to be on an arms’ length basis.
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Details of remuneration
Details of the remuneration of the key management personnel of Bubs Australia Limited and its
related entities are set out in the following tables.
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Details of remuneration – Bubs Australia Limited (parent company)
2017
Short Term
Long Term
Post
Employment
Salary
Annual Leave
Directors' Fees
Company
Secretary
Services
Insurance
Premiums
Long Service
Leave
Superannuation
Share based
payments –
options
Total*
A R Van Noort (4)
J R Stephenson
A J L Middleton (7)
K N Carr (1)
D Lin (2)
M Reynolds (3)
N Simms (5)
A Gualdi (6)
Total
$
100,000
$
8,423
$
-
-
-
-
107,396
1,650
-
-
104,779
107,396
419,571
-
-
8,391
2,489
20,953
15,000
15,000
15,000
-
13,699
13,699
-
-
$
$
5,813
-
30,000
5,813
$
-
-
-
-
-
-
5,813
5,813
5,813
5,813
-
-
-
-
-
1,850
-
-
-
1,850
3,700
$
10,925
$
1,425
1,425
9,918
1,301
1,301
9,952
9,918
-
-
-
-
-
-
213,330
-
72,398
30,000
34, 878
46,165
213,330
$
140,161
52,238
22,238
126,627
20,813
20,813
336,452
121,653
840,995
*For the years presented there was no performance-related (e.g. bonus) remuneration
(1) Kristy-Lee Newland Carr was appointed 22 December 2016. (2) Dennis Lin was appointed 22 December 2016. (3) Matthew Reynolds was appointed 22 December 2016. (4) Alan Van Noort resigned 13
January 2017. (5) Nicholas Simms was appointed Chief Executive Office on 8 June 2017, and previously was a commercial director with the Company. (6) Anthony Gualdi is the operations director for the
Company. (7) Angus Middleton resigned 22 December 2016.
The Company issued 492,750 shares to Angus Middleton and 410,625 shares to Jay Stephenson in consideration of directors fees and superannuation
owing to them $49,275 and $41,063 respectively relating to current and prior years’ service. In addition 136,875 Shares we issued in consideration for
director’s fees and superannuation which owing to the former director of the Company, Ian Allen of $13,688. Mr Allen resigned as a director of the
Company on 1 September 2015.
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Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Details of remuneration – Bubs Australia Limited (parent company)
2016
Short Term
Long Term
Post Employment
Salary
Payment in
Lieu of
Annual Leave
Payment in Lieu of
Long Service Leave
Directors' Fees
Company Secretary
Services
Insurance Premiums
Long Service Leave
Superannuation
Total*
$
$
$
$
$
$
$
$
$
A R Van Noort
200,000
I D Allen
J R Stephenson
A J L Middleton
-
-
-
Total
200 000
-
-
-
-
-
-
-
-
-
-
30,000
5,000
25,000
30,000
90,000
-
5,000
25,000
-
30,000
8,463
1,410
7,053
8.463
25,389
3,650
21,850
263,963
-
-
-
475
2,375
2,850
11,885
59,428
41,313
3,650
27,550
376 589
Mr I Allen resigned as Director on 1 September 2015.
*For the years presented there was no performance related (e.g. bonus) remuneration
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Directors Report
For the year ended 30 June 2017
Details of remuneration – Bubs Australia Limited Group
(continuation of Infant Food Holding Co Pty Ltd and its controlled entities)*
2017
Short Term
Long Term
Post Employment
Salary
Annual Leave
Directors' Fees
Company
Secretary
Services
Insurance
Premiums
Long Service
Leave
Superannuation
Share Based
Payments –
Options
Total*
J R Stephenson
K N Carr
D Lin
M Reynolds
N Simms
A Gualdi
Total
$
-
206,000
-
-
150,000
206,000
562,000
$
$
$
$
$
$
$
-
15,000
-
1,650
-
-
-
13,699
13,699
8,391
2,489
12,530
-
-
27,398
-
5,813
5,813
5,813
-
-
-
-
-
-
-
-
3,700
-
-
-
3,700
7,400
-
19,000
1,301
1,301
14,250
19,000
54,852
-
-
-
-
213,330
-
$
15,000
236,163
20,813
20,813
385,971
231,189
15,000
17,439
213,330
909,949
* The following were directors of The Infant Food Holding Co Pty Ltd, however received no director remuneration and resigned following the reverse acquisition on 1 February 2017
•
•
•
•
•
Yuan Fang (appointed 8 September 2016)
Hugh Alexander Goldsbrough Robertson (Appointed 8 September 2016)
Albert Yeuk Kuk Tse (Appointed 17 July 2015)
Zetian Zhang (Appointed 17 March 2015)
Anthony Gualdi also resigned as a director of The Infant Food Holding Co Pty Ltd on 1 February 2017, but remains a key management personnel of Bubs Australia Limited because of his
ongoing role as operations director.
17
For personal use only
Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Details of remuneration – Bubs Australia Limited Group
(continuation of Infant Food Holding Co Pty Ltd and its controlled entities)*
2016*
Short Term
Long term
Post Employment
Salary
Directors' Fees
Company Secretary
Services
Long service leave
Superannuation
Total*
2016
K N Carr
A Gualdi
Total
$
$
$
$
$
$
-
206,000
206,000
412,000
-
-
-
-
-
-
-
-
-
3,700
3,700
7,400
-
19,000
19,000
38,000
-
228,700
228,700
457,400
*The following were directors of Infant Food Holding Co Pty Ltd during the year ended 30 June 2016, however received no remuneration
•
•
Albert Yeuk Kuk Tse (Appointed 17 July 2015, resigned 1 February 2017)
Zetian Zhang (Appointed 17 March 2015, resigned 1 February 2017)
18
For personal use only
Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
There were no amounts owing to the key management personnel of Bubs Australia Limited as at 30 June 2017. An outstanding amount of $21,602 for
annual leave and $36,500 for long service leave however was payable to A R Van Noort, who ceased to be a key management personnel from January
2017.
Amounts owed to key management personnel of Bubs Australia limited, including their related entities, at 30 June 2016 are set out in the following table:
2016
Salary
$
Directors’ fees
Company Secretary services
$
$
Total
$
A R Van Noort
JD Allen
J R Stephenson
A J L Middleton
Total
100,000
-
-
-
100,000
37,500
12,500
25,000
30,000
105,000
-
-
16,500
-
16,500
137,500
12,500
41,500
30,000
221,500
19
For personal use only
Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Directors’ Interests
The relevant interest of each director in the share capital of the Company, as notified to the ASX, at the date of this report is as follows:
K N Carr
There were no options outstanding held by directors of the company (excludes other key management personnel)
2017 Number held ordinary shares
2016 Number held ordinary
shares
20,761,600
-
20
For personal use only
Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Movement on key management personnel’s ordinary shareholdings
2017
1 July
2016
Purchase
of shares
(pre con-
solidation
)
Con-
solidation of
shares(4)
Shares
issued in
lieu of out-
standing
fees
Shares
disposed
Purchase of
Shares
(post con-
solidation)
Other
change(5)
30 June
2017
A R Van Noort
83,475,471
J R Stephenson
15,000
-
-
(78,466,940)
-
(3,240,002)
(14,100)
410,625
A J L Middleton
10,903,880
2,180,776
(12,299,577)
492,750
K N Carr
A Gualdi
D Lin
M Reynolds
N Simms
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-(1)
-(2)
-(3)
500,000
20,261,600
20,761,600
750,000
20,261,600
21,011,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Mr A R Van Noort held 1,768,529 shares up to his resignation date on the 12 January 2017
(2) Mr J R Stephenson resigned on 22 December 2016 but continued as a key management personnel throughout the period. At
the date of his resignation he held 411,525 shares.
(3) Mr A J L Middleton held 1,277,829 up to his resignation on 22 December 2016
(4) Consolidation on a ratio of 1:0.06 new share for every previous share took place on 13 December 2016
(5) Other change relates to shares in Bubs Australia Limited received by K N Carr and A Gualdi as part of the reverse acquisition of
The Infant Food Holding Co Pty Ltd (the share price in the prospectus implying a value of the shares acquired of $2,026,160 for K N
Carr and $2,026,160 for A Gualdi respectively)
2016
1 July 2015
Shares Purchased
30 June 2016
A R Van Noort
Ordinary Shares
J R Stephenson
Ordinary Shares
I D Allen
Ordinary Shares
A J L Middleton
Ordinary Shares
83,475,471
15,000*
34,646,720
10,903,880
-
-
-
-
83,475,471
15,000
-*
10,903,880
*Mr I Allen held 34,646,720 shares until his resignation on 31st August 2015. Mr J R Stephenson held 15,000
shares at the time of his appointment as Director on 1st September 2015.
Options over equity instruments granted as compensation
Details on rights and options over ordinary shares in the Company that were granted as
compensation to each key management person during the reporting period and details on options
that vested during the reporting period are as follows:
Number of
options
granted during
2017
Options
Grant date
Fair value per
option $
Exercise price
per option $
Expiry date
Number of
options
vested
during 2017
Nicholas Simms
3,578,108
20/12/2016
$0.06
$0.10
20/12/2019
3,578,108
21
For personal use only
Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Movement during the reporting period, by number of options over ordinary shares
Held at
1 July 2016
Granted as
compensation
Exercised
Other
changes
Held at
30 June
2017
Vested
during the
year
Vested and
exercised at
30 June
2017
Options
Nicholas Simms
-
3,578,108
-
-
3,578,108
3,578,108
-
End of Remuneration report (audited)
Corporate Governance
The Annual Corporate Governance Statement is located at the company website
www.bubsaustralia.com
Indemnification and insurance of officers
Since the end of the previous financial year the Company has paid insurance premiums of $34,880
(2016: $25,389) in respect of Directors’ and Officers’ liability insurance for current and past
directors and officers. Additionally, the Company has paid insurance premiums of $7,134 (2016:
nil) in respect of Management Liability insurance.
Insurance does not indemnify the Directors and Offices where there is conduct involving lack of
good faith.
Proceedings on behalf of the company
No person has applied for leave of court to bring proceedings on behalf of the company or intervene
in any proceedings to which the company is a party for the purpose of taking responsibility on
behalf of the company for all or part of those proceedings.
The company was not a party to any such proceedings during the year.
Indemnification of auditor
To the extent permitted by law, the company has agreed to indemnify its auditors, Ernst & Young as
part of the terms of its audit engagement letter against claims by third parties arising from the
audit (for an unspecified amount).
Gender diversity
Gender
Female
Male
% Female
Total
4
6
40%
Employees
Senior Management
Board
3
2
-
-
2
-
1
2
-
22
For personal use only
Bubs Australia Limited and Controlled Entities
Directors Report
For the year ended 30 June 2017
Unissued shares under options
At the date of this report, unissued shares of the Company under option are:
Expiry Date
20 December 2019
Exercise Price
0.10
Number of Shares
9,422,350
All unissued shares are ordinary shares of the Company.
No shares have been issued subsequent to year-end on exercise of options
Non-audit services
The company may decide to employ the auditor on assignments additional to their statutory audit
duties where the auditor’s expertise and experience with the company are important. During the
year ended 30 June 2017 and 30 June 2016 no non-audit services were provided by the company’s
auditor, Ernst & Young.
A copy of the auditor's independence declaration as required under Section 307C of the
Corporations Act 2001 is attached to this financial report.
This directors' report is signed in accordance with a resolution of the board of directors:
Dennis Lin
Chairman
Brisbane
Dated: 29 September 2017
23
For personal use only
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent Auditor's Report to the Members of Bubs Australia Limited
Report on the audit of the financial report
Qualified opinion
We have audited the financial report of Bubs Australia Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the directors' declaration.
In our opinion, except for the possible effects on the comparative information of the matter described in
the Basis for Qualified Opinion section of our report, the accompanying financial report of the Group is in
accordance with the Corporations Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017
and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for qualified opinion
The predecessor auditors of The Infant Food Holding Co. Pty Ltd (the accounting acquirer of Bubs
Australia Limited during the year ended 30 June 2017) were appointed after 30 June 2015 and were not
able to observe the counting of the physical inventories as at 30 June 2015 or satisfy themselves
concerning those inventories by alternative means. Since opening inventory balances enter into the
determination of the financial performance and cash flows, the predecessor auditors were unable to
determine whether adjustments might have been necessary in respect of the income reported in the
consolidated statement of comprehensive income and the net cash flows from operating activities
reported in the consolidated statement of cash flows for the year ended 30 June 2016. The predecessor
auditor’s opinion on the financial report for the year ended 30 June 2016 was modified accordingly.
Our opinion on the current year’s financial report is also modified because of the possible effects of this
matter on the comparability of the current year’s figures and the comparative information.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our qualified opinion.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. In addition to the matter described in the Basis for Qualified Opinion section, we
have determined the matters described below to be the key audit matters to be communicated in our
report. For each matter below, our description of how our audit addressed the matter is provided in that
context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
1. Going concern assessment
Why significant
How our audit addressed the key audit matter
The Group reported net operating cash outflows for
the year ended 30 June 2017. Accordingly the testing
of the availability of sufficient funding for the Group to
meet its obligations is considered to be a key part of
our going concern assessment and therefore a
significant aspect of our audit. Details of the Group’s
going concern considerations are set out in note 2.
We performed the following procedures:
► We analysed the cash flow forecast and enquired
with the Group to gain an understanding of the
inputs and process underpinning the cash flow
model prepared for the purpose of the going
concern assessment.
► We assessed whether the cash flow model
accurately reflected the budget that was approved
by the Directors.
► We evaluated the external inputs and assumptions
within the going concern model by comparing
them to assumptions and estimates used
elsewhere in the preparation of the financial
report. In addition we considered them for
consistency against our knowledge of the Group’s
operations.
► We assessed the sensitivities and stress testing
that the Group performed on the going concern
forecast.
► We assessed the possible mitigating actions
identified by the Group in the event that actual
cash flows are below forecast.
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2. Impairment assessment of intangible assets
Why significant
How our audit addressed the key audit matter
The Group performs an annual impairment
assessment of goodwill and indefinite life intangible
assets, while definite life intangibles are assessed for
indicators of impairment.
An indicator of impairment was identified by the
Group, in that the Group made a loss for the year. As
such, impairment testing was performed for finite life
intangible assets.
Due to the range of judgments and assumptions used
in the models and impairment assessments, as well as
the significant carrying amount of the intangible
assets, which represent 14% of the total assets on the
consolidated statement of financial position, this is an
area considered to be at risk of material
misstatement.
Key assumptions, judgments and estimates used in the
Group’s assessment of impairment are set out in the
financial report in note 2 and note 12.
Our procedures included assessing the assumptions and
methodologies used by the Group in their value-in-use
impairment model. We compared the Group’s assumptions
to externally derived data and our own assessments of key
inputs such as projected economic growth, cost inflation
and discount rates and assessed sensitivities, as well as
performed break-even analysis on key assumptions.
We tested the Group’s procedures around the preparation
of the budget which has been approved by the Board, upon
which the value-in-use impairment model is based, as well
as compared the sum of projected discounted cash flows to
the market capitalisation of the Group to assess whether
the projected cash flows appear reasonable. We enquired
with key management and the Directors to understand the
key assumptions and estimates that were used. We
assessed the Group’s historical accuracy in achieving
forecasts. We involved our own valuation specialists to
support our procedures. We assessed whether the
disclosures in respect of impairment considerations were
adequate.
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3. Reverse acquisition of The Infant Food Holding Co. Pty Ltd
Why significant
How our audit addressed the key audit matter
On 20 December 2016, Bubs Australia Limited
completed the reverse acquisition of The Infant Food
Holding Co. Pty Ltd (“IFCO”). IFCO shareholders
exchanged their shares in IFCO for shares in Bubs
Australia Limited, which resulted in IFCO becoming the
accounting acquirer in the reverse acquisition
although Bubs Australia Limited is the legal parent.
This means that Bubs Australia Limited is treated as
the acquired entity for financial reporting purposes
and that any other acquisition accounting relates to
the Bubs Australia Limited business, not IFCO.
We focused on this transaction because of the
materiality of the transaction and the significance of
the associated accounting and disclosures.
Details of the reverse acquisition are set out in the
financial report in note 4.
We evaluated the Group’s assessment that:
►
►
it is IFCO who is the legal subsidiary; and
the former shareholders of IFCO control the
combined group following the transaction, even
though Bubs Australia Limited is the legal parent,
concluding that IFCO should be identified as the
accounting acquirer in the business combination.
The transaction has been treated as a reverse
acquisition on this basis.
We obtained the trial balance of Bubs Australia Limited and
used this to perform the purchase price allocation and to
assist with the identification of identifiable assets and
liabilities in the reverse acquisition. We additionally
assessed the work performed on IFCO by the predecessor
auditors for the year ended 30 June 2016 which are
presented in the financial report as comparative figures.
We evaluated the methodology and tested the
mathematical accuracy of the calculations of the fair value
of shares issued of $6,804,862 to IFCO shareholders and
to the resulting corporate transaction accounting expense
of $1,722,893.
We obtained the signed contractual agreements relating to
the reverse acquisition and read significant contract terms
relevant to the accounting and disclosures in the financial
report.
We assessed the adequacy of the disclosures in note 4 of
the financial report to assess whether all the relevant
details of the reverse acquisition had been disclosed in
accordance with Australian Accounting Standards.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the information
included in the Group’s 2017 Annual Report other than the financial report and our auditor’s report
thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date
of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the
date of this auditor’s report.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance opinion thereon, with the exception of the Remuneration Report and our
related assurance opinion.
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In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
►
►
►
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
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►
►
►
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
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Report on the audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 11 to 22 of the directors' report for the year
ended 30 June 2017.
In our opinion, the Remuneration Report of Bubs Australia Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
T G Dachs
Partner
Perth
29 September 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Ernst & Young
Ernst & Young
11 Mounts Bay Road
11 Mounts Bay Road
Perth WA 6000 Australia
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
Fax: +61 8 9429 2436
ey.com/au
ey.com/au
Auditor’s Independence Declaration to the Directors of Bubs Australia
Limited
As lead auditor for the audit of Bubs Australia Limited for the financial year ended 30 June 2017, I
declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Bubs Australia Limited and the entities it controlled during the financial
year.
Ernst & Young
T G Dachs
Partner
29 September 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Bubs Australia Limited and Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2017
Revenue
Purchases and changes in trading stock
Distribution and selling costs
Employee costs
Marketing and promotion costs
Occupancy costs
Administrative and other costs
Share-based payment expenses
Corporate Transaction Accounting Expense
Depreciation and amortisation
Net interest income / (expense)
Loss before tax
Income tax benefit
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Loss per share
Basic (loss) per share (dollars)
Diluted (loss) per share (dollars)
Consolidated
2017
$
2016
$
3,945,255
(3,071,505)
(272,106)
(1,254,166)
(811,361)
(135,607)
(1,077,544)
(561,769)
(1,722,893)
(116,534)
180
(5,078,050)
18,808
(5,059,242)
-
(5,059,242)
3,659,328
(2,812,406)
(243,184)
(775,439)
(389,936)
(67,442)
(390,902)
-
-
(87,997)
(200,079)
(1,308,057)
18,808
(1,289,249)
-
(1,289,249)
(0.02)
(0.02)
(0.01)
(0.01)
Notes
5
28
4
7
27
27
The accompanying notes form part of these financial statements.
32
For personal use only
Bubs Australia Limited and Controlled Entities
Consolidated Statement of Financial Position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Options reserve
Accumulated losses
Total equity
Notes
Consolidated
2017
$
2016
$
8
9
10
11
12
13
14
15
16
18
19
28
5,306,746
1,368,623
984,968
7,660,337
66,026
1,275,447
1,341,473
9,001,810
1,100,168
-
177,830
1,277,998
-
199,338
199,338
1,477,336
7,524,474
2,081,606
753,342
2,467,174
5,302,122
89,475
1,349,067
1,438,542
6,740,664
1,120,238
3,557
23,746
1,147,541
35,958
218,146
254,104
1,401,645
5,339,019
15,082,928
561,769
(8,120,223)
7,524,474
8,400,000
-
(3,060,981)
5,339,019
The accompanying notes form part of these financial statements.
33
For personal use only
Bubs Australia Limited and Controlled Entities
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
Issued
Capital
$
Options
Reserve
$
Balance at 1 July 2015
Loss for the year
Total comprehensive loss for the year
Issue of shares
Balance at 30 June 2016
2,000,000
-
-
6,400,000
8,400,000
-
-
-
-
-
Balance at 1 July 2016
Loss for the year
Issue of options
Issue of shares
Capital raising costs
Balance at 30 June 2017
Issued
Capital
$
Options
Reserve
$
8,400,000
-
-
6,832,863
(149,935)
15,082,928
-
-
561,769
-
-
561,769
The accompanying notes form part of these financial statements.
Accumulate
d
Losses
$
(1,771,732)
(1,289,249)
(1,289,249)
-
(3,060,981)
Accumulate
d
Losses
$
(3,060,981)
(5,059,242)
-
-
-
(8,120,223)
Total equity
$
228,268
(1,289,249)
(1,289,249)
6,400,000
5,339,019
Total equity
$
5,339,019
(5,059,242)
561,769
6,832,863
(149,935)
7,524,474
34
For personal use only
Bubs Australia Limited and Controlled Entities
Consolidated Statement of Cash Flows
For the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Net cash used in operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds from disposal of property, plant and
equipment
Purchase of intangible assets
Cash acquired from reverse acquisition
Net cash provided by / (used in) investing
activities
Cash flows from financing activities
Proceeds from issue of shares
Capital raising costs
Repayment of borrowings
Proceeds from borrowings
Net cash (used in) / provided by financing
activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of
the financial year
Cash and cash equivalents at the end of the
financial year
Notes
20
11
12
4
Consolidated
2017
$
2016
$
3,924,057
(6,020,531)
12,957
(12,777)
(2,096,294)
3,914,253
(6,713,979)
-
(200,079)
(2,999,805)
(54,813)
27,988
(73,380)
-
(990)
5,510,699
5,482,884
(44,400)
-
(117,780)
28,000
(149,935)
(39,515)
-
(161,450)
6,400,000
-
(1,252,355)
39,515
5,187,160
3,225,140
2,081,606
2,069,575
12,031
8
5,306,746
2,081,606
The accompanying notes form part of these financial statements.
35
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 1. Reporting entity
The financial statements covers Bubs Australia Limited as a consolidated entity consisting of Bubs
Australia Limited and the entities it controlled (“the Group”) for the year ended 30 June 2017. The
financial report is presented in Australian dollars, which is Bubs Australia Limited’s functional and
presentational currency.
Bubs Australia Limited (‘Bubs’) is a for-profit entity that is a listed public company limited by
shares, incorporated and domiciled in Australia. A description of the nature of the Group’s
operations and its principal activities is included in the directors’ report, which is not part of the
financial report.
The annual report was authorised for issue, in accordance with a resolution of directors, on
28 August 2017. The directors have the power to amend and reissue the financial report.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
New, revised or amending Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory
for the current reporting year. The changes in standards had no material impact on the
consolidated entity’s financial position or comprehensive income for the year.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory
have not been early adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian
Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These
financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board ('IASB').
On 20 December 2016 Bubs (previously known as Hillcrest Litigation Services Limited (HLS)
acquired 100% of the ordinary share capital and voting rights of The Infant Food Holding Co. Pty
Limited (IFHC) as described in the prospectus issued on 11 November 2016. Under AASB 3
Business Combinations this is treated as a ‘reverse acquisition’, whereby the accounting acquirer is
deemed to be IFHC and HLS is deemed to be the accounting acquiree.
36
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Given IFHC is considered to be the parent for accounting purposes, the consolidated financial
statements represent a continuation of the financial statements of IFHC, with the exception of the
capital structure. The results for the year ended 30 June 2017 comprise the results of the
IFHC for the full year and the results of Bubs Australia Limited subsequent to the acquisition.
Similarly, the statement of cashflows and statement of changes in equity reflect the movements in
cashflow and changes in equity of IFHC for the full year and the results of Bubs Australia Limited
subsequent to the acquisition.
The comparative information provided is that of IFHC. A reclassification has been made in the
statement of comprehensive income for the comparative information of $390,990 to decrease
revenue and decrease marketing and promotion costs. This reclassification was undertaken to
show rebates received on a consistent basis with the current year presentation.
The financial statements, apart from the cash flow information, have been prepared on an accruals
basis and are based on historical costs, except where applicable, by the measurement at fair value
of selected non-current assets and financial assets and liabilities.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the
consolidated entity's accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements,
are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the
consolidated entity only. Supplementary information about the legal parent entity is disclosed in
note 25.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of
Bubs Australia Limited ('company' or 'parent entity') as at 30 June 2017 and the results of all
subsidiaries for the year then ended. Bubs Australia Limited and its subsidiaries together are
referred to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated
entity controls an entity when the consolidated entity is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the consolidated entity. They are deconsolidated from the date that
control ceases.
37
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Intercompany transactions, balances and unrealised gains on transactions between entities in the
consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the
consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A
change in ownership interest, without the loss of control, is accounted for as an equity transaction,
where the difference between the consideration transferred and the book value of the share of the
non-controlling interest acquired is recognised directly in equity attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including
goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative
translation differences recognised in equity. The consolidated entity recognises the fair value of the
consideration received and the fair value of any investment retained together with any gain or loss
in profit or loss.
Income Tax
The income tax expense or benefit for the year is the tax payable on that year's taxable income
based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred
tax assets and liabilities attributable to temporary differences, unused tax losses and the
adjustment recognised for prior years, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates
expected to be applied when the assets are recovered or liabilities are settled, based on those tax
rates that are enacted or substantively enacted, except for:
• When the deferred income tax asset or liability arises from the initial recognition of
goodwill or an asset or liability in a transaction that is not a business combination and that,
at the time of the transaction, affects neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries,
associates or joint ventures, and the timing of the reversal can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses
only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each
reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer
probable that future taxable profits will be available for the carrying amount to be recovered.
Previously unrecognised deferred tax assets are recognised to the extent that it is probable that
there are future taxable profits available to recover the asset.
38
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset
current tax assets against current tax liabilities and deferred tax assets against deferred tax
liabilities; and they relate to the same taxable authority on either the same taxable entity or
different taxable entities which intend to settle simultaneously.
The company and its wholly-owned subsidiaries are part of a tax consolidated group. As a
consequence, all members of the tax-consolidated group are taxed as a single entity from 20
December 2016. The head entity within the tax consolidated group is Bubs Australia Limited.
Foreign currency translation
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at financial year end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated
entity and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received or receivable.
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken
delivery of the goods, the risks and rewards are transferred to the customer and there is a valid
sales contract. Amounts disclosed as revenue are net of sales returns and trade discounts.
Rebates
Amounts disclosed as revenue are net of sales returns, rebates and trade discounts.
Current and noncurrent classification
Assets and liabilities are presented in the statement of financial position based on current and non-
current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or
consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of
trading; it is expected to be realised within 12 months after the reporting year; or the asset is cash
or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12
months after the reporting year. All other assets are classified as noncurrent.
39
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
A liability is classified as current when: it is either expected to be settled in the consolidated entity's
normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within
12 months after the reporting year; or there is no unconditional right to defer the settlement of the
liability for at least 12 months after the reporting year. All other liabilities are classified as
noncurrent.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions,
other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any provision for impairment. Trade receivables are
generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectable are written off by reducing the carrying amount directly. A provision for impairment
of trade receivables is raised when there is objective evidence that the consolidated entity will not
be able to collect all amounts due according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered
indicators that the trade receivable may be impaired. The amount of the impairment allowance is
the difference between the asset's carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short-term
receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
Inventories are stated at an average cost basis. Cost comprises of direct materials and delivery
costs, direct labour, import duties and other taxes, an appropriate proportion of variable and fixed
overhead expenditure based on normal operating capacity. Costs of purchased inventory are
determined after deducting rebates and discounts received or receivable.
40
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase
and delivery costs, net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and
equipment over their expected useful lives as follows:
Plant and equipment
2-8 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if
appropriate, at each reporting date.
An item of plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal
proceeds are taken to profit or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of
the arrangement and requires an assessment of whether the fulfilment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use the
asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the
lessee substantially all the risks and benefits incidental to the ownership of leased assets, and
operating leases, under which the lessor effectively retains substantially all such risks and
benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the
leased assets, or if lower, the present value of minimum lease payments. Lease payments are
allocated between the principal component of the lease liability and the finance costs, so as to
achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over
the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the
consolidated entity will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or
loss on a straight-line basis over the term of the lease.
41
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially
measured at their fair value at the date of the acquisition. Intangible assets acquired separately are
initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently
measured at cost less any impairment. Finite life intangible assets are subsequently measured at
cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising
from the de-recognition of intangible assets are measured as the difference between net disposal
proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life
intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by
changing the amortisation method or year.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is
tested annually for impairment, or more frequently if events or changes in circumstances indicate
that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment
losses on goodwill are taken to profit or loss and are not subsequently reversed.
Research and development
Research costs are expensed in the year in which they are incurred. Development costs are
capitalised when it is probable that the project will be a success considering its commercial and
technical feasibility; the consolidated entity is able to use or sell the asset; the consolidated entity
has sufficient resources; and intent to complete the development and its costs can be measured
reliably. Capitalised development costs are amortised on a straight-line basis over the year of their
expected benefit, being their finite life of 10 years.
Patents and trademarks
Significant costs associated with patents and trademarks are deferred and amortised on a straight-
line basis over the period of their expected benefit, being their finite life of 10 years.
Customer list
Customer lists acquired in a business combination are amortised on a straight-line basis over the
period of their expected benefit, being their finite life of 5 years.
Software
Significant costs associated with software are deferred and amortised on a straight-line basis over
the period of their expected benefit, being their finite life of 5 years.
42
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired.
Other nonfinancial assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use.
The value-in-use is the present value of the estimated future cash flows relating to the asset using
a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs.
Assets that do not have independent cash flows are grouped together to form a cash-generating
unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior
to the end of the financial year and which are unpaid. Due to their short-term nature they are
measured at amortised cost and are not discounted. The amounts are unsecured and are usually
paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of
transaction costs. They are subsequently measured at amortised cost using the effective interest
method.
Financial Instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other
financial assets (including assets designated at fair value through the profit and loss) are
recognised initially on the trade date, which is the date that the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the
asset expire, or its transfers the rights to receive the contractual cash flows in a transaction in
which substantially all the risks and rewards of ownership of the financial assert are transferred.
Any interest in such transferred financial assets that is created or retained by the Group is
recognised as a separate asset or liability.
Financial asset and liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Group has a legal right to offset the amounts and intends either
to settle them on a net basis or to realise the asset and settle the liability simultaneously.
43
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted
in an active market. Such assets are recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, loans and receivables are measured at
amortised cost using the effective interest method, less any impairment losses
Loans and receivables comprise cash and cash equivalents and, trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of the three
months or less from the acquisition date that are subject to an insignificant risk of changes in their
fair value and are used by the Group in the management of its short term commitments.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that
they are originated. All other financial liabilities are recognised initially on the trade date, which is
the date that the Group becomes party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged,
cancelled or expire.
The Group classifies non-derivative financial liabilities into other financial liabilities category. Such
financial liabilities are recognised initially at fair value less any directly attributable transaction
costs. Subsequent to initial recognition, these financial liabilities are measure at amortised cost
using the effective interest rate method.
Other financial liabilities comprise loans and borrowings, debt securities issued, bank overdrafts
and trade and other payables.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash
management are included as a component of cash and cash equivalents for the statements of cash
flows.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance
costs are expensed in the period in which they are incurred.
44
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive)
obligation as a result of a past event, it is probable the consolidated entity will be required to settle
the obligation, and a reliable estimate can be made of the amount of the obligation. The amount
recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the
obligation.
If the time value of money is material, provisions are discounted using a current pre-tax rate
specific to the liability. The increase in the provision resulting from the passage of time is
recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including nonmonetary benefits, annual leave and long service
leave expected to be settled wholly within 12 months of the reporting date are measured at the
amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of
the reporting date are measured as the present value of expected future payments to be made in
respect of services provided by employees up to the reporting date. Consideration is given to
expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on corporate
bonds with terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which
they are incurred.
Equity-settled compensation
The fair value of options granted is recognised as an employee expense with a corresponding
increase in equity. The fair value is measured at grant date and spread over the period during
which the employees become unconditionally entitled to the options. The fair value of the options
granted is measured using the Black-Scholes or Monte Carlo pricing model, taking into account the
terms and conditions upon which the options were granted. The amount recognised is adjusted to
reflect the actual number of share options that vest except where forfeiture is only due to market
conditions not being met.
45
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or
disclosure purposes, the fair value is based on the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the
measurement date; and assumes that the transaction will take place either: in the principal market;
or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming they act in their economic best interests. For nonfinancial assets, the
fair value measurement is based on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient data are available to measure fair value,
are used, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value
hierarchy that reflects the significance of the inputs used in making the measurements.
Classifications are reviewed at each reporting date and transfers between levels are determined
based on a reassessment of the lowest level of input that is significant to the fair value
measurement.
For recurring and nonrecurring fair value measurements, external valuers may be used when
internal expertise is either not available or when the valuation is deemed to be significant. External
valuers are selected based on market knowledge and reputation. Where there is a significant
change in fair value of an asset or liability from one year to another, an analysis is undertaken,
which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction, net of tax, from the proceeds.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of
the company.
46
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of
whether equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition date fair values of the assets
transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of
the acquiree and the amount of any non-controlling interest in the acquiree. For each business
combination, the non-controlling interest in the acquiree is measured at either fair value or at the
proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as
incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and
liabilities assumed for appropriate classification and designation in accordance with the
contractual terms, economic conditions, the consolidated entity's operating or accounting policies
and other pertinent conditions in existence at the acquisition date.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition date fair
value. Subsequent changes in the fair value of the contingent consideration classified as an asset
or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is
accounted for within equity.
The difference between the acquisition date fair value of assets acquired, liabilities assumed and
any non-controlling interest in the acquiree and the fair value of the consideration transferred and
the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the
consideration transferred and the pre-existing fair value is less than the fair value of the
identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is
recognised as a gain directly in profit or loss by the acquirer on the acquisition date, but only after a
reassessment of the identification and measurement of the net assets acquired, the non-controlling
interest in the acquiree, if any, the consideration transferred and the acquirer's previously held
equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer
retrospectively adjusts the provisional amounts recognised and also recognises additional assets
or liabilities during the measurement period, based on new information obtained about the facts
and circumstances that existed at the acquisition date.
The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition
or (ii) when the acquirer receives all the information possible to determine fair value.
47
For personal use only
Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Goods and Services Tax ('GST')
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the
GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the
cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the tax authority is included in other receivables or
other payables in the consolidated statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from
investing or financing activities which are recoverable from, or payable to the tax authority, are
presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or
payable to, the tax authority.
Going Concern
The accounts have been prepared on the going concern basis. This assumes that the consolidated
entity will be able to pay its debts as they fall due in the normal course of business.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended
but are not yet mandatory, have not been early adopted by the consolidated entity for the annual
reporting year ended 30 June 2017.
The consolidated entity’s assessment of the impact of these new or amended Accounting
Standards, most relevant to the consolidated entity, are set out below.
Disclosure Initiative -Amendments to AASB 107 (applicable to the Company for the year
beginning 1 July 2017)
The amendments require disclosures that enable users of financial statements to evaluate changes
in liabilities arising from financial activities, including both changes arising from cash flow and non-
cash changes. To satisfy the new disclosure requirements, the Group intends to present a
reconciliation between the opening and closing balances for liabilities with changes arising from
financing activities.
48
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Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to AASB 112
(applicable Company for the year beginning 1 July 2017)
The amendments clarify the accounting for deferred tax assets for unrealised losses on debt
instruments measured at fair value. The Group is assessing the potential impact on its consolidated
financial statements resulting from the amendments. So far, the Group does not expect any
significant impact.
AASB 9: Financial Instruments and associated Amending Standards (applicable to the Company
for the year beginning 1 July 2018).
The Standard will be applicable retrospectively and includes revised requirements for the
classification and measurement of financial instruments, revised recognition and derecognition
requirements for financial instruments and simplified requirements for hedge accounting.
The key changes that may affect the consolidated entity on initial application include upfront
accounting for expected credit loss.
Although the directors anticipate that the adoption of AASB 9 may have an impact on the
consolidated entity’s financial instruments, the actual impact of adopting AASB on the Group’s
consolidated financial statements in 2019 is not known and cannot be reliably estimated because it
will be dependent on the financial instruments that the Group holds and economic conditions at that
time as well as accounting elections and judgements that it will make in the future. The new
standard will require the Group to revise its accounting processes and internal controls related to
reporting financial instruments and these changes are not yet complete. However, the Group has
performed a preliminary assessment of the potential impact of adoption of AASB 9 based on its
positions at 30 June 2017 and not identified any significant differences.
AASB 15: Revenue from Contracts with Customers (applicable to the Company for the year
beginning 1 July 2018, as deferred by AASB 2015-8: Amendments to Australian Accounting
Standards – Effective Date of AASB 15).
When effective, this Standard will replace the current accounting requirements applicable to
revenue with a single, principles-based model. Except for a limited number of exceptions, including
leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as
non-
Monetary exchanges between entities in the same line of business to facilitate sales to customers
and potential customers.
49
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
The core principle of the Standard is that an entity will recognise revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB
15 provides the following five-step process:
identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
•
•
• determine the transaction price;
• allocate the transaction price to the performance obligations in the contract(s); and
•
recognise revenue when (or as) the performance obligations are satisfied.
The transitional provisions of this Standard permit an entity to either: restate the contracts that
existed in each prior period presented per AASB 108: Accounting Policies, Changes in Accounting
Estimates and Errors (subject to certain practical expedients in AASB 15); or recognise the
cumulative effect of retrospective application to incomplete contracts on the date of initial
application. There are also enhanced disclosure requirements regarding revenue.
The Group has begun an analysis of the application of AASB15 to its operations and is planning to
perform a detailed assessment of the impact resulting from the application of AASB 15 and expects
to disclose additional quantitative information before it adopts AASB 15. At this stage, the Company
is yet to identify any significant issues. Pending the outcome of the assessment activities and the
resultant impact on revenue (if any) a decision on the transition will be made.
AASB 16: Leases (applicable to the Company for the year beginning 1 July 2019).
When effective, this Standard will replace the current accounting requirements applicable to leases
in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting
model that eliminates the requirement for leases to be classified as operating or finance leases.
The main changes introduced by the new Standard include:
•
recognition of a right-to-use asset and liability for all leases (excluding short-term leases
with less than 12 months of tenure and leases relating to low-value assets);
• depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in
•
profit or loss and unwinding of the liability in principal and interest components;
variable lease payments that depend on an index or a rate are included in the initial
measurement of the lease liability using the index or rate at the commencement date;
• by applying a practical expedient, a lessee is permitted to elect not to separate non-lease
components and instead account for all components as a lease; and
• additional disclosure requirements.
50
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 2. Significant accounting policies (continued)
The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard
to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective
application as an adjustment to opening equity on the date of initial application.
The Group has not yet quantified the impact on its reported assets and liabilities of adoption of
AASB 16. The quantitative effect will depend on, inter alia, the transition method chosen, the extent
to which the Group uses the practical expedients and recognition exemptions, and any additional
leases that the Group enters into. The Group expects to disclose its transition approach and
quantitative information before adoption.
Other amendments
The following new or amended standards are not expected to have a significant impact on the
Group’s consolidated financial statements.
- Classification and Measurement of Share-based Payment Transactions (Amendments to
AASB 2).
- Sale of Contribution of Assets between an Investor and its Associate or Joint Venture
(Amendments to AASB 10 AND IAS 28).
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates
and assumptions that affect the reported amounts in the financial statements. Management
continually evaluates its judgements and estimates in relation to assets, liabilities, contingent
liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions
on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting
judgements and estimates will seldom equal the related actual results. The judgements, estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Provision for impairment of receivables (refer Note 9)
The provision for impairment of receivables assessment requires a degree of estimation and
judgement. The level of provision is assessed by taking into account the recent sales experience,
the
ageing of receivables, use by dates, historical collection rates and specific knowledge of the
individual debtor's financial position.
Provision for impairment of inventories (refer Note 10)
The provision for impairment of inventories assessment requires a degree of estimation and
judgement. The level of the provision is assessed by taking into account the recent sales
experience, the ageing of inventories and other factors that affect inventory obsolescence.
51
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Estimation of useful lives of assets (refer Note 11)
The consolidated entity determines the estimated useful lives and related depreciation and
amortisation charges for its property, plant and equipment and finite life intangible assets. The
useful lives could change significantly as a result of technical innovations or some other event. The
depreciation and amortisation charge will increase where the useful lives are less than previously
estimated lives, or technically obsolete or nonstrategic assets that have been abandoned or sold
will be written off or written down.
Goodwill and other indefinite life intangible assets (refer Note 12)
The consolidated entity tests annually, or more frequently if events or changes in circumstances
indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any
impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of
cash-generating units have been determined based on value-in-use calculations. These
calculations require the use of assumptions, including estimated discount rates based on the
current cost of capital and growth rates of the estimated future cash flows. Refer to note 12 for
further information in relation to the goodwill calculation and subsequent measurement.
Income tax (Refer Note 7, 18)
The consolidated entity is subject to income taxes in the jurisdictions in which it operates.
Significant judgement is required in determining the provision for income tax.
Recovery of deferred tax assets (Note 18)
Deferred tax assets are recognised for deductible temporary differences only if the consolidated
entity considers it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
Share-based payments (Note 28)
Share-based payments are measured at the fair value of goods or services received or the fair
value of the equity instruments issued, if it is determined the fair value of the goods or services
cannot be reliably measured, and are recorded at the date the goods or services are received. The
fair value of options is determined using the Black-Scholes or Monte Carlo pricing model. The
number of shares and options expected to vest is reviewed and adjusted at the end of each
reporting period such that the amount recognised for services received as consideration for the
equity instruments granted is based on the number of equity instruments that eventually vest. The
corresponding amount for options or performance rights is recorded to the options reserve. Details
of share-based payments assumptions are detailed in Note 28.
52
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 4. Reverse acquisition
On 20 December 2016, the Company, formerly named Hillcrest Litigation Services Limited
(‘Hillcrest’) completed the legal acquisition of 100% of The Infant Food Holding Co. Pty Limited
(IFHC) and changed its name to Bubs Australia Limited. The acquisition of IFHC resulted in IFHC
obtaining control of the merged entity. In addition the board of directors of the merged entity was
restructured such that two of the three directors stepped down and were replaced by three of
IFHC’s nominees. A nominee of IFHC serves as the Managing Director and the IFHC management
team has assumed responsibility for the management of the merged entity. Consequently, the
acquisition has been accounted for with reference to the guidance for reverse acquisitions set out
in AASB 3: Business Combinations. The application of the reverse acquisition guidance contained in
AASB 3 has resulted in the Company (the legal parent) being accounted for as the subsidiary and
IFHC (the legal subsidiary) being accounted for as the parent entity. At the time the Company’s
acquisition of IFHC, Hillcrest’s operations did not fall within the scope of a “business” under AASB 3.
Consequently, the acquisition did not meet the definition of a “business combination” under AASB 3
and the principles of AASB 3 could not be applied in their entirety
Instead, the acquisition has been accounted for as a share-based payment transaction using the
principles set out in AASB 2: Share-based payment whereby IFHC is deemed to have issued shares
in exchange for the net assets and listing status of Bubs Australia Limited. In accordance with AASB
2, the difference between the fair value of the deemed consideration paid by IFHC and the fair value
of the identifiable net assets of Bubs Australia Limited, is required to be recognised as an expense.
Consequently, an expense of $1,722,893 has been recognised as set out below. Given IFHC is
considered to be the parent for accounting purposes, the consolidated financial statements
represent a continuation of the financial statements of IFHC, with the exception of the capital
structure. The results for the year ended 30 June 2017 include the results of IFHC for the full year
and the results of Bubs Australia Limited subsequent to the acquisition. The comparative
information provided is that of IFHC.
53
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Notes to the Financial Statement
30 June 2017
Note 4. Reverse acquisition (continued)
Details of the fair value of the identifiable net assets acquired and the calculation of the corporate
transaction accounting expense are set out below:
Deemed purchase consideration:
• Fair value of shares transferred
Fair value of consideration transferred
Fair value of assets and liabilities held at acquisition date:
• Cash
• Trade and other receivables
• Other current assets
• Trade and other payables
• Provisions
Fair value of identifiable net assets acquired
Corporate transaction accounting expense
The net cash inflow arising as part of the reverse acquisition is $5,510,699.
Note 5. Revenue and other income
Revenue
Interest income
$
6,804,862
6,804,862
5,510,699
3,198
7,626
(366,799)
(72,755)
5,081,969
1,722,893
Consolidated
2017
$
3,945,255
12,957
2016
$
3,659,328
-
54
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 6. Expenses
(Loss) before income tax includes the following specific expenses:
Accountancy fees
Depreciation
Amortisation
Bad debts written off
Defined contribution superannuation expense
Interest expense
Foreign exchange loss
Total
Note 7. Income taxes
Income tax (benefit)
Current tax
Deferred tax
Aggregate income tax (benefit)
Numerical reconciliation of income tax benefit and tax at the statutory
rate
Loss before income tax expense
Prima facie income tax at 27.5% (2016: 30%)
Income tax losses not recognised
Non-deductible expenses
Deferred tax assets not recognised
Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 27.5% (2016: 30%)
Consolidated
2017
$
2016
$
132,583
41,924
74,610
88,987
12,777
1,369
352,250
34,598
23,350
64,647
2,534
67,519
200,071
-
392,719
Consolidated
2017
$
2016
$
-
(18,808)
(18,808)
-
(18,808)
(18,808)
(5,078,050)
(1,308,057)
(1,396,464)
654,641
648,800
74,215
(18,808)
(392,417)
380,515
11,902
18,808
(18,808)
3,838,102
1,055,478
1,758,901
527,670
Potential tax benefit
The potential tax benefit relating to tax losses has not being recognised due to the history of recent
losses incurred by the Company.
55
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 8 Cash and cash equivalents
Cash on hand
Cash at bank
Cash held currently earns interest of 0.2% pa. (2016: 0.096% p.a.)
Note 9. Trade and other receivables
Trade debtors
Prepayments and other receivables
Other receivables
Credit risk
Consolidated
2017
$
2,207
5,304,539
5,306,746
2016
$
2,207
2,079,399
2,081,606
Consolidated
2017
$
903,743
444,517
20,363
1,368,623
2016
$
442,209
311,133
-
753,342
The consolidated entity has one significant customer who represents more than 10% of total
debtors.
At 30 June 2017, the ageing of the trade receivables that were not impaired was as follows:
Neither past due nor impaired
Past due 1 - 130 days
Past due – over 130 days
Consolidated
2017
$
802,405
97,641
3,697
903,743
2016
$
367,917
73,374
918
442,209
The management believes that the unimpaired amounts that are past due by more than 130 days
are still collectible in full, based on historic payment behaviour and analysis of customer credit
risks.
A provision of doubtful debts of $5,000 (2016: $2,427) has been raised against specific debtors and
is excluded from the above receivables ageing.
56
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 10. Inventories
Finished goods at cost
Consolidated
2017
$
984,968
984,968
2016
$
2,467,174
2,467,174
The amount of inventory that was written of during the period was $97,466 (2016:$27,007)
Note 11. Plant and equipment
Plant and equipment – at cost
Less: Accumulated depreciation
Movements in carrying amount
Balance at 1 July 2015
Additions
Depreciation expense
Balance at 30 June 2016
Additions
Disposals
Depreciation expense
Balance at 30 June 2017
Consolidated
2017
$
140,496
(74,470)
66,026
2016
$
139,097
(49,622)
89,475
Plant and
Equipment
$
39,445
73,380
(23,350)
89,475
54,813
(36,338)
(41,924)
66,026
Total
$
39,445
73,380
(23,350)
89,475
18,475
-
(41,924)
66,026
57
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 12. Intangible assets
Patents, trademarks and software
Less accumulated amortisation
Brand name
Customer list
Less accumulated amortisation
Recipes
Less accumulated amortisation
Goodwill
Less impairment
Movements in carrying amount
Balance at 1 July 2015
Additions
Amortisation expense
Balance at 30 June 2016
Additions
Amortisation expense
Balance at 30 June 2017
Goodwill
$
Brand name
$
574,071
-
-
574,071
-
-
574,071
591,634
-
-
591,634
-
-
591,634
Consolidated
2017
$
52,188
(15,220)
36,968
2016
$
51,198
(3,358)
47,840
591,634
591,634
265,731
(204,048)
61,683
265,731
(150,847)
114,884
47,740
(36,649)
11,091
47,740
(27,102)
20,638
1,478,251
(904,180)
574,071
1,275,447
1,478,251
(904,180)
574,071
1,349,067
Other
$
203,609
44,400
(64,647)
183,362
990
(74,610)
109,742
Total
$
1,369,314
44,400
(64,647)
1,349,067
990
(74,610)
1,275,447
Indefinite life intangible assets – goodwill and brand name
On 28 August 2013, The Infant Food Co. Pty Limited acquired the net assets of Organic Bubs Unit
Trust for consideration of $1,999,666. The fair value of the brand name “Organic Bubs” was
independently determined, and when combined with the values of all other identifiable net assets,
and then compared to the purchase consideration, resulted in acquired goodwill amounting to
$1,478,251.
58
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 12. Intangible assets (continued)
Goodwill and the brand name are tested for impairment at the end of each year by comparing the
carrying value of the cash generating unit (CGU) to the calculated value-in-use of the CGUs to which
these intangible assets have been allocated at the acquisition date.
For impairment testing purposes, the entire consolidated entity is determined to be the only CGU.
The value-in-use of the CGUs has been determined by preparing a 5 year forecast, with the earlier
years being estimated through specific volume assumptions based on known opportunities, while
years thereafter are estimated using assumed diminishing positive growth assumptions for the
CGU overall. As part of the impairment test, management assesses the reasonableness of the
growth assumptions by reviewing the achieved growth of comparable entities in the same, or
related, industry segments.
The discount rates used in the value-in-use calculations are pre-tax and reflect management’s
estimate of the time value of money, as well as the specific risks to the CGUs. The discount rates
have been determined using the average weighted cost of capital and current market risk-free rate,
adjusted for relevant business risks. Pre-tax discount rates applied to the current year value-in-
use model are 16.4% to 18.3% (2016: 18.4% - 20.8%).
A terminal growth rate of 2.1% (2016: 1.0%) has been assumed in the value-in-use calculation,
which is in line with inflation, and reflects the long term growth potential beyond the five year
forecast horizon.
As the calculated recoverable amount is above the net assets adjusted for borrowings at the
balance sheet date, no impairment loss has been recognised on either goodwill or the brand name
(2016: $nil).
Management has identified that a reasonably possible change in two key assumptions could cause
the carrying amount to exceed the recoverable amount. The following table shows the amount by
which these two assumptions would need to change individually for the estimated recoverable
amount to be equal to the carrying amount.
In percent
Discount rate
Budgeted gross revenue growth rate
Change required for carrying amount to
equal the recoverable amount
2016
2017
6.4%
2.1%
(1.0%)
(2.5%)
59
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 13. Trade and other payables
Trade payables
Other payables and accruals
Consolidated
2017
$
558,175
541,993
1,100,168
2016
$
616,360
503,878
1,120,238
The trade and other payables are unsecured and have terms of between 0 and 90 days
Note 14. Borrowings – Current
Commercial lenders
Consolidated
2017
$
-
-
2016
$
3,557
3,557
The Borrowings at 30 June 2016 consisted of a financing of a motor vehicle through a chattel
mortgage. The finance was entered into 5 January 2016 for five year period with a discount rate of
1.75% p.a., and was paid out during the year ended 30 June 2017.
Note 15. Provisions – Current
Employee entitlements
Note 16. Borrowings – Non-current
Commercial lenders
Consolidated
2017
$
177,830
177,830
2016
$
23,746
23,746
Consolidated
2017
$
-
-
2016
$
35,958
35,958
The Borrowings at 30 June 2016 consisted of a financing of a motor vehicle through a chattel
mortgage. The finance was entered into 5 January 2016 for five year period with a discount rate of
1.75% p.a., and was paid out during the year ended 30 June 2017.
60
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 17. Segment information
The Group has identified its operating segments based on the internal reports that are provided to
the Chief Executive Officer and Managing Director, the chief operating decision maker, on a regular
basis and in determining the allocation of resources. Management continually assesses the
Company's segments and has identified a single operating segments being the manufacture and
sale of infant food.
Accordingly, the financial information presented in the consolidated statement of profit or loss and
other comprehensive income and consolidated statement of financial position is the same as that
presented to the Chief Executive Officer and Managing Director.
The geographic information below further analyses the group’s revenue by the Company’s country
domicile and other countries. In presenting the following information, the revenue has been based
on the geographic location of the customers.
Revenue (by region)
Australia
China
Other International
Consolidated
2017
$
3,047,924
582,722
314,609
3,945,255
2016
$
1,965,971
1,327,161
366,196
3,659,328
The Group has one external customer who generated greater than 10 percent of its revenues. For
the year ended 30 June 2017, the revenue for the customer amounted to $2,090,515 (for 2016,
$882,488).
Note 18. Deferred taxes
Deferred tax liability comprises temporary differences attributable to:
Intangible assets
Opening balance
Credited to profit or loss
Closing balance
Consolidated
2017
$
2016
$
199,338
218,146
218,146
(18,808)
199,338
236,954
(18,808)
218,146
61
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 19. Issued capital
238,820,888 (30 June 2016: 25,000) fully paid ordinary shares
Movement in share capital
Balance at 1 July 2015
Issue of shares by IFHC – 23 July 2015
Issue if shares by IFHC – 11 April 2016
Balance at 30 June 2016
Deemed reverse acquisition on Bubs Australia Limited by IFHC
Issue of shares to IFHC Vendors as part of reverse acquisition
Elimination of the acquisition of IFHC by Bubs Australia Limited
Placement of shares
Share issue transactions costs
Balance at 30 June 2017
June 2017
$
15,082,928
June 2016
$
8,400,000
Shares
$
8,000
2,000
15,000
25,000
75,140,888
163,400,000
(25,000)
280,000
-
238,820,888
2,000,000
400,000
6,000,000
8,400,000
6,804,862
16,340,000
(16,340,000)
28,000
(149,934)
15,082,928
Fully paid ordinary shares carry one vote per share and carry right to dividends.
Capital management
The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as
a going concern so that in due course it can provide returns for stakeholders and maintain an
optimum capital structure.
In order to maintain or adjust the capital structure, the consolidated entity manages the level of
debt such that it remains prudent and facilitates the execution of the operational plan and provides
flexibility for growth.
62
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 20. Reconciliation of Loss After Income Tax to Net Cash Used in Operating Activities
(Loss) after income tax expense for the year
Share-based payments
Depreciation and amortisation
Corporate transaction accounting expense
Loss on disposal of property, plant and equipment
Decrease / (increase) in trade and other receivables
Decrease / (increase) in inventories
Increase / (decrease) in trade and other payables
Increase/ (decrease) in provisions
(Decrease) in Deferred tax liability
Net cash outflow from operating activities
Note 21. Key management personnel disclosures
Consolidated
2017
$
(5,059,242)
561,769
116,534
1,722,893
8,350
(604,455)
1,482,205
(386,868)
81,328
(18,808)
(2,096,294)
2016
$
(1,289,249)
-
87,997
-
-
(361,795)
(1,855,436)
437,486
-
(18,808)
(2,999,805)
Any person having authority and responsibility for planning, directing and controlling the activities
of the entity directly or indirectly, whether executive or otherwise of the entity, are considered key
management personnel. The aggregate compensation made to directors and other members of
key management personnel of the consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
2017
$
634,367
54,852
7,400
213,330
909,949
2016
$
412,000
38,000
7,400
-
457,400
Options granted to key management personnel are detailed in Note 28 as employee options
63
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 22. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by the
auditor of the company:
Audit services
Audit or review of the financial statements
– Logicca Chartered Accountants
Audit or review of the financial statements
– Ernst & Young
Note 23. Related party transactions
Key management personnel
Consolidated
2017
$
2016
$
-
16,000
95,000
-
95,000
16,000
Disclosures relating to key management personnel compensation are set out in note 21.
Transactions with related parties
The following transactions occurred with related parties:
Payments for other expenses
Payment for other expenses
Lease of premises in Narrabeen that is leased by Anthony Gualdi
Payments to related parties
Consolidated
2017
$
2016
$
19,934
19,934
52,322
52,322
One of the Directors who was appointed to the Company during the financial year is a partner in an
accounting firm. The Company contracted professional service from the accounting firm to the
amount of $25,997 in 2017, with an outstanding balance at 30 June 2017 at $22,050.
All of the above transactions were considered to be on an arms’ length basis.
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Exchange of shares as part of the reverse takeover
Two of the key management personnel received shares in Bubs Australia Limited in exchange for
their existing equity holdings in Infant Holding Company Pty Ltd as part of the reverse takeover that
occurred during the year. The total number of shares received by the key management were
20,261,600 shares and 20,261,600 respectively. This represented an implied value of those shares
of $2,026,160 and $2,026,160 respectively.
Terms and conditions
All transactions were made on normal commercial terms and conditions at market rates.
Note 24. Financial risk management
The consolidated entity’s financial instruments consist of deposits with banks, accounts receivable
and accounts payable. As at 30 June 2017 there were no derivative financial instruments in place.
Financial risk exposures
The consolidated entity is exposed to liquidity, credit risks, interest rate risks and foreign exchange
risk as a result of volatility in the exchange rates where input commodities are priced in foreign
currency.
Liquidity and credit risks are managed through ensuring the business is adequately capitalised.
This has meant that the entity placed less reliance on debt financing. The company holds is cash in
AA- rated Australian Banks.
Credit risk arising from exposure to customers with accounts is managed by offering only limited
terms (around 30 – 45 days) to minor customers, with longer terms only offered to significant
customers who will settle their accounts in due course. Accounts receivable are regularly
reviewed and followed up.
The entity is exposed to changes in input costs where the input commodity is priced in foreign
currency. This risk is managed through monitoring product profitability where input costs have
become excessive.
The entity holds its cash in business accounts that earn a variable interest rate on outstanding
balances (refer note 8). A reasonable possible increase of 50 bp would have increased equity and
profit or loss by an amount of $26,522 (2016: $10,396) while a reasonably possible decrease of
10bp would have reduced equity and profit or loss by an amount of $5,307 (2016: $2,082).
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Notes to the Financial Statement
30 June 2017
The summary of the quantitative data about the Group’s exposure to currency risk as reported to
management of the Group based on its risk management policy was as follows:
Financial liabilities in foreign currency
New Zealand dollar
United States Dollar
Net exposure
$
9,191
31,600
Consolidated
2017
Balance in
foreign currency
Balance in
Australian
dollars
$
8,769
41,159
49,928
There were no equivalent foreign currency amounts payable in 2016. All sales were in Australian
dollars. A reasonably possible increase/decrease in either New Zealand or United States Dollar vs
Australian dollar Exchange rate of 10% would not have resulted in result in material change in
profit or loss or net assets of the Group.
Financial assets other than cash comprise trade debtors that mature between 30 and 90 days.
Financial liabilities comprise creditors which mature on terms of between 0 and 90 days, and
borrowings which have no term. Because of their short-term nature, the financial assets and
liabilities approximate fair value.
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Notes to the Financial Statement
30 June 2017
Note 25. Parent entity information
Set out below is the supplementary information of the legal parent entity (refer Note 26) which is a
non-trading holding company.
Result of parent entity
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Issued share capital
Reserves
Accumulated losses
Total Equity
2017
$
2016
$
(1,562,023)
-
(1,562,023)
(514,491)
-
(514,491)
5,234,093
21,576,824
525,603
525,603
389,036
392,167
333,967
337,617
43,063,145
561,769
(22,573,693)
21,051,221
21,066,220
-
(21,011,670)
54,550
The Directors are of the opinion that there are no contingent liabilities, capital commitments or
guarantees relating to the parent entity requiring disclosure. Operating lease commitments are
disclosed in Note 29.
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Bubs Australia Limited and Controlled Entities
Notes to the Financial Statement
30 June 2017
Note 26. Group entities
A. Legal parent entity
Bubs Australia Limited (formerly Hillcrest Litigation Services Limited) is the ultimate parent of
the
Group.
Legal subsidiaries
The Infant Food
Holding Co. Pty
Limited
Australia
Principal
Activity
Holding
Company
Class or
Shares
% Owned
2017
% Owned
2016
Ordinary
100%
-
The Infant Food Co.
Pty Limited
Australia
Bubs IP Pty Ltd
(formerly Bubs
Australia Pty Limited)
Australia
Trading
Company
Holder of IP
and
trademarks
Ordinary
100%
100%
Ordinary
100%
100%
B. Accounting parent entity
The Infant Food Holding Co. Pty Limited is the accounting parent of the Group. The consolidated
financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policies described in note 2:
Accounting subsidiaries
Principal
Activity
Class or
Shares
% Owned
2017
% Owned
2016
Australia
Non-trading
Ordinary
100%
-
Bubs Australia
Limited (formerly
Hillcrest Litigation
Services Limited)
The Infant Food Co.
Pty Limited
Australia
Bubs IP Pty Ltd
(formerly Bubs
Australia Pty Limited)
Australia
Holding
Company
Trading
Company
Holder of IP
and
trademarks
Ordinary
100%
100%
Ordinary
100%
100%
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Notes to the Financial Statement
30 June 2017
Note 27. Loss per share
a. Reconciliation of earnings to profit or loss
Loss for the year
Loss used in the calculation of basic and diluted EPS
b. Weighted average number of ordinary shares outstanding
June 2017
$
June 2016
$
(5,059,242)
(5,059,242)
(1,289,249)
(1,289,249)
June 2017
No.
June 2016
No.
203,025,125 86,203,573
during the year used in calculation of basic EPS
June 2017
$
June 2016
$
c. Loss per share
Basic loss per share (dollars per share)
Diluted loss per share (dollars per share)
(0.02)
(0.02)
(0.01)
(0.01)
d. As at 30 June 2017, the Group has 9,422,350 unissued shares under options (30 June 2016 nil).
The Group does not report diluted earnings per share on annual losses generated by the Group.
During the year ended 30 June 2017 the Group's unissued shares under option were anti-
dilutive.
e. The equity structure in these consolidated financial statements following the reverse
acquisition reflects the equity structure of Bubs, being the legal acquirer (the accounting
acquiree), including the equity interests issued by Bubs to effect the asset acquisition.
i.
In calculating the weighted average number of ordinary shares outstanding (the
denominator of the EPS calculation) for the year ended 30 June 2017:
(1)
(2)
the number of ordinary shares outstanding from 1 July 2016 to 20 December 2016
(deemed acquisition date) are computed on the basis of the weighted average
number of ordinary shares of IFHC, (legal acquiree/accounting acquirer)
outstanding during the period multiplied by the exchange ratio established in the
acquisition agreement; and
the number of ordinary shares outstanding from 21 December 2016 to the end of
year shall be the actual number of ordinary shares of Bubs outstanding during that
period.
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Notes to the Financial Statement
30 June 2017
Note 27. Loss per share (continued)
ii.
The basic EPS for the year ended 30 June 2016 shall be calculated by dividing:
(1)
the profit or loss of the IFHCo attributable to ordinary shareholders in each of those
periods by
the IFHCo's historical weighted average number of ordinary shares outstanding
multiplied by the exchange ratio established in the acquisition agreement.
(2)
Note 28. Share based payments and other reserves
Reverse takeover
A total of 163,400,000 shares were issued to the IFHC venders by Bubs Australia Limited as part of
the reverse acquisition, which has been accounted for as a share based payment transaction in the
financial statements. Note 4 contains details of the notional share based payment consideration of
$6,804,862 granted and associated corporate transaction accounting expense of $1,722,893.
Options issued
The options reserve is used to recognise the grant date fair value of options issued to employees
but not exercised. The movement in the option reserve is as follows:
Balance at 1 July 2015
Balance at 1 July 2016
Option issued during the period:
- Exercisable at $0.10 employee options expiring 20.12.2019
- Exercisable at $0.10 employee options expiring 20.12.2019
Balance at 30 June 2017
Options #
-
-
-
3,578,108
5,844,242
9,422,350
$
-
-
-
213,330
348,439
561,769
The details of the fair value of the options issued during the period is as follows:
Exercise price ($)
Share price at date of issue ($)
Grant date
Expected volatility (%)
Expiry date
Expected dividends
Risk free interest rate (%)
Value per option ($)
Number of options
Total value of options ($)
Employee options
0.10
0.10
20/12/2016
93.88
20/12/2019
N/A
2.00
0.06
3,578,108
213,330
Consultant options
0.10
0.10
20/12/2016
93.88
20/12/2019
N/A
2.00
0.06
5,844,242
348,439
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Notes to the Financial Statement
30 June 2017
Options issued (continued)
The employee options are currently exercisable while the consultant options have a vesting
condition that the share price of Bubs Australia Limited must be at least 12.5 cents before they are
exercisable. There is no required service period for the employee or consultant options. The
employee options do not expire on termination of employment
The fair value of options is determined using the Black-Scholes pricing model, on the basis that
there was no fair value determined for the services provided.
Note 29. Operating leases
Leases as lessee
At the end of the reporting period, the future minimum lease payments under non- cancellable
operating leases are payable as follows:
Less than one year
Between one and five years
More than five years
2017
48,754
8,152
-
56,906
2016
-
-
-
-
The operating lease commitments relate to the company’s head office. There are two options for
renewal for 3 years each respectively.
Note 30. Events after the reporting period
On 8 September 2017 the Company issued 35,467,243 ordinary shares through a private placement
at $0.45 to raise $15,950,259 before costs.
Other than this event,no matter or circumstance has arisen since 30 June 2017 that has
significantly affected, or could significantly affect the reported results from operations or financial
position for the year then ended.
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Bubs Australia Limited and Controlled Entities
Director’s Declaration
For the year ended 30 June 2017
1.
In the opinion of the directors of Bubs Australia Limited (the ‘Company’):
a) The consolidated financial statements and notes that are set out on pages 30 to 69 and the
Remuneration report on pages 11 to 22 in the Directors’ report, are in accordance with the
Corporations Act 2001, including:
i.
ii.
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
performance for the financial year ended on that date; and
Complying with Australian Accounting Standards and the Corporations Regulations
2001; and
b) There are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
2. The directors have been given the declarations required by Section 295A the Corporations Act
2001 from the chief executive officer for the financial year ended 30 June 2017.
3. The directors draw attention to Note 2 to the consolidated financial statements, which includes
a statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Dated at Sydney this 29th day of September 2017
Dennis Lin
Director
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Bubs Australia Limited and Controlled Entities
Additional Information For Listed Public Companies
As at 30 June 2017
The following additional information is required by the Australian Securities Exchange in respect of
listed public companies.
1 SHAREHOLDING AS AT – 21 September 2017
a. Distribution of Shareholders
Category (size of holding)
Total Holders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
817
1,733
1,002
2,083
273
5,908
Number
Ordinary
433,810
5,041,036
8,281,640
65,652,541
194,656,883
274,065,910
b. Unmarketable Parcels – 31 August 2017
Minimum $500.00 parcel at $0.615 per unit
814
608
Minimum Parcel Size
Holders
% Held of Issued
Ordinary Capital
0.15
1.84
3.02
23.96
71.03
100
Units
230,811
c. Voting Rights
The voting rights attached to each class of equity security are as follows:
Ordinary shares: Each ordinary share is entitled to one vote when a poll is called, otherwise each
member present at a meeting or by proxy has one vote on a show of hands.
d. 20 Largest Shareholders — Ordinary Shares as at – 21 September 2017
Rank
Name
1.
2.
3.
4.
5.
6.
7.
8.
NEXT STEP GLOBAL LIMITED
INFANT FOOD BUSINESS PTY LTD
CARR FAMILY PTY LTD
WF INVESTMENT HOLDINGS PTY LTD
CAI HUA
JP MORGAN NOMINEES AUSTRALIA LIMITED
MAGIC HOME LIMITED
MS LIU ZHAO
Number of Ordinary
% Held of Issued
Fully Paid Shares Held
32,626,800
Ordinary Capital
11.90
21,011,600
20,761,600
13,789,440
4,444,445
4,197,489
3,043,200
3,020,894
7.67
7.58
5.03
1.62
1.53
1.11
1.10
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Additional Information For Listed Public Companies
As at 30 June 2017
20 Largest Shareholders — Ordinary Shares as at – 21 September 2017 (continued)
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
2
3
CITICORP NOMINEES PTY LIMITED
MR YU GUI FENG
INSPIRING FURNITURE LIMITED
LIU LEQI
NEWECONOMY COM AU NOMINEES PTY LTD <900 A/C>
MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED
MRS MELINDA JANE COATES
COMSEC NOMINEES PTY LIMITED
WROXBY PTY LTD
BERNE NO 132 NOMINEES PTY LTD
MR BINYAN PENG
BNP PARIBAS NOMS PTY LTD
TOTAL
2,991,549
2,880,000
2,318,000
2,222,223
2,085,563
2,001,506
1,800,000
1,760,035
1,666,667
1,632,960
1,600,329
1,456,315
1.09
1.05
0.85
0.81
0.76
0.73
0.66
0.64
0.61
0.60
0.58
0.53
127,310,615
46.45
The name of the Company Secretary is Jay Richard Stephenson.
Principal Registered Office
2-4/6 Tilley Lane, Frenchs Forest, NSW, Australia, 2086
4 Registers Of Securities
Computershare Investor Services Pty Ltd
5
Stock Exchange Listing
Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges
of the Australian Securities Exchange Limited.
6 Unquoted Securities
a. Options over Unissued Shares
The Company has 9,422,350 options on issue.
7 Use Of Funds
The Company has used its funds in accordance with its initial business objectives.
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