Candy Club Holdings Limited
ACN 629 598 778
Annual Report - 31 December 2018
Candy Club Holdings Limited
Corporate directory
31 December 2018
Directors
Mr Keith Cohn (Executive Director)
Mr Robert Hines (Non-Executive Chairperson)
Mr Zachry Rosenberg (Non Executive Director)
Mr Chi Kan Tang (Non-Executive Director)
Company secretary
Mr Justyn Stedwell
Registered office
Principal place of business
Share register
Auditor
Solicitors
C/- Moray & Agnew Lawyers
Level 6, 505 Little Collins Street
Melbourne VIC 3000, Australia
12950 Culver Boulevard
Suite 150
Los Angeles, CA 90066, USA
Automic Group
Level 5, 126 Phillip Street
Sydney NSW 2000, Australia
HLB Mann Judd (Vic) Partnership
Level 9, 575 Bourke Street,
Melbourne VIC 3000, Australia
Moray & Agnew Lawyers
Level 6, 505 Little Collins Street,
Melbourne VIC 3000, Australia
Stock exchange listing
Candy Club Holdings Limited shares are listed on the Australian Securities Exchange
(ASX code: CLB)
Website
https://www.candyclub.com
Corporate Governance Statement
Refer to https://www.candyclub.com
1
Candy Club Holdings Limited
Directors' report
31 December 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity') consisting of Candy Club Holdings Limited (referred to hereafter as the 'company' or 'parent entity')
and the entities it controlled at the end of, or during, the period ended 31 December 2018.
Directors
The following persons were directors of Candy Club Holdings Limited during the whole of the financial period and up to the
date of this report, unless otherwise stated:
Keith Kohn (appointed 24 October 2018)
Robert Hines (appointed 24 October 2018)
Chi Kan Tang (appointed 24 October 2018)
Zachry David Rosenberg (appointed 24 October 2018)
James Baillieu (appointed 7 February 2019 and resigned 28 February 2019)
Principal activities
During the financial period the principal continuing activities of the consolidated entity consisted of:
●
applying for admission to the official list of the Australian Securities Exchange ("ASX") and to raise funds in order to
meet its business objectives; and
online and business to business candy distribution.
●
Dividends
There were no dividends paid, recommended or declared during the current financial period.
Review of operations
The loss for the consolidated entity after providing for income tax amounted to $1,298,090.
The company was incorporated as an Australian public company on 24 October 2018. The company then completed the
acquisition of the US-based confectionary company Candy Club Holdings, Inc on 12 November 2018 and proceeded with its
immediate plans to list on the Australian Securities Exchange (ASX). On 14 February 2019 Candy Club was admitted to the
Official List of the ASX and its shares commenced trading on ASX on 19 February 2019 following the completion of its
successful initial public offer (IPO) raising $5,024,004, before costs.
The company continues to focus its attention on its key priorities, expanding its B2B wholesale business, running its core
subscription business as efficiently as possible and managing expenses in order to drive towards profitability as quickly as
possible.
Candy Club’s B2B wholesale business, which launched in July ’18 , has more than doubled the locations which carry the
company’s product line to over 2,000 retail outlets in Q1 ’19 from just over 1,000 in Q4 ‘18.
While we are happy with the 100% quarter over quarter growth in retail outlets carrying our products, this is still just a fraction
of the thousands of other retail outlets the Company is targeting to carry its high- end specialty confectionery. Candy Club
continues to expand its retail partnerships with both national and independent retailers. The Company is having success
selling to a wide range of verticals, including department stores, women’s apparel shops, hotels and resorts, gift stores and
candy outlets. The Hallmark Stores, MGM Resorts, Candytopia, Lord & Taylor are just a few of the recognizable retailers
who currently carry the Company’s confectionery products.
Strong retail sell through in 2018 and an aggressive sales push in Q1 2019 are combining to expand the number of retail
partners carrying our confectionery products. Our rapid expansion into the retail marketplace is further validation of our strong
product market fit. Given the size of the addressable market, this is only a small fraction of where we believe our products
will ultimately be sold.
The direct to customer (D2C) subscription business continues its positive momentum as new marketing leadership combined
with a revamped and diversified customer acquisition strategy have contributed to a ~40% decrease in customer acquisition
costs since early December 2018.
2
Candy Club Holdings Limited
Directors' report
31 December 2018
Candy Club’s D2C subscription business has now partnered with Verizon, an American telecommunications provider, who
began offering Candy Club D2C subscriptions to its high- valued customers in February 2019. These partnerships are part
of the Company’s new customer acquisition strategy as it looks to diversify away from traditional paid media sources in favour
of more cost effective corporate partnerships. It is noted that a significant number of new subscribers for the D2C subscription
business in February 2019 came through this program, which is a key factor in the Company’s improved customer acquisition
cost of $26 per customer month to date in February 2019, which has been reduced from $50 per customer in late 2018.
Continued operating improvements in both business units along with strong expense management are combining to drive
improvements to the company’s bottom line.
The opportunity to build a large specialty market confectionary business exists because of the sheer size of the market
opportunity in the USA, with the USA confectionary market expected to grow to $40 USD Billion by 2023. The Company aims
to meet the needs of both retailers and consumers as it executes an omni-channel strategy by onboarding new retail accounts
and consumer subscriptions as it builds out its overall business strategy.
Candy Club continues to execute well in all segments of its business. We are off to a strong start in 2019 in both the wholesale
and direct-to-consumer segments. With the recent completion of the IPO, the addition of a few key hires and several cost
containment measures in place, we now turn our full attention to building the best specialty market confectionary business
in the industry.
Significant changes in the state of affairs
The company was incorporated on 24 October 2018.
On 12 November 2018, the company issued 75,303,017 fully paid ordinary shares as consideration for the acquisition of
100% of the issued capital of Candy Club Holdings Inc.
On 13 November 2018, the company issued 17,744,881 fully paid ordinary shares on the conversion of convertible notes
valued at $US 1,639,710
On 28 November 2018, the company issued 1,014,998 fully paid ordinary shares to settle operating liabilities totalling
$298,169.
There were no other significant changes in the state of affairs of the consolidated entity during the financial period.
Matters subsequent to the end of the financial period
On 19 February 2019, the company successfully completed its IPO, and was officially admitted onto the Australian Securities
Exchange. Under its IPO, the company issued 25,120,020 fully paid ordinary raising $5,024,004 before costs. The below
table summaries the consolidated entities financial position after completion of IPO.
Summary of financial position
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Property, plant and equipment
Intangible assets
Trade and other payables
Net assets
Post IPO
Unaudited
1,772,500
324,741
2,753,571
205,456
54,186
7,209
(3,210,092)
1,907,571
On 19 February 2019, the company issued 7,244,312 fully paid ordinary shares to its lead broker and its associates as
consideration for services rendered during the IPO process.
On 19 February the company issued 2,000,000 options over ordinary shares to its lead broker and its associates as
consideration for services rendered during the IPO process. The options have a 4 year term and exercise price of 30 cents.
3
Candy Club Holdings Limited
Directors' report
31 December 2018
No other matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly
affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future
financial years.
Likely developments and expected results of operations
Information on likely developments in the operations of the consolidated entity and the expected results of operations have
not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the
consolidated entity.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
Information on directors
Name:
Title:
Experience and expertise:
Keith Cohn
(Executive Director)
Keith founded the Candy Club Business in 2014 and currently serves as the Chief
Executive Officer of the Company. Keith has over 20 years of consumer industry
experience and has held various executive marketing roles in the industry. Keith began
his career as a Product Manager for Parkers Brothers, a division of Hasbro, Inc in
managing the product lines of toys. He then proceeded to work as a Senior Product
manager for Mattel, Inc. Keith subsequently worked at Equity Marketing, Inc, where he
served as Vice President of the consumer division and was responsible for negotiating
master licensing agreements with Universal Studios, Warner Bros. Entertainment Inc.
and Lyrick Studios and launched product lines on a worldwide basis.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
Interests in options:
Interests in rights:
9,091,947 fully paid ordinary shares
631,333 options over ordinary shares
2,000,000 performance rights
Name:
Title:
Experience and expertise:
Robert Hines
(Non-Executive Chairperson)
Robert has been a member of the Australian Institute for Company Directors (AICD)
since 1997, including serving on the AICD Board in Queensland from 2000 to 2004.
Mr Hines has held a number of Board positions since 2001, including Chairman of
Genetraks Ltd, Group Chairman of the CEO Circle, executive director of VeCommerce
Ltd and non-executive director of Sportsbet Pty Ltd. He was also a member of the
Advisory Board of Griffith University from 2002 to 2004.
Nil
Other current directorships:
Former directorships (last 3 years): Donaco International Limited (ASX:DNA) resigned 31 December 2018.
Interests in shares:
Interests in options:
Interests in rights:
Nil
Nil
Nil
4
Candy Club Holdings Limited
Directors' report
31 December 2018
Experience and expertise:
Name:
Title:
Qualifications:
Chi Kan Tang
(Non Executive Director)
Kan is a qualified Chartered Professional Accountant (CPA) and qualified Chartered
Financial Analyst (CFA) and holds a Bachelor of Commerce from the University of
Alberta.
Kan is the founding partner of Asia Summit Capital, a private equity firm established in
2014, focused on consumer growth and the technology sector in Indonesia and
Southeast Asia. Prior to this, Kan developed considerable experience in the online and
landbase gaming industry with particular expertise in markets within the Asia-Pacific
region. In 2003, Kan co-founded AsianLogic Limited, a Hong Kong based gaming
company. During his time at Asianlogic, he took on numerous senior roles and
responsibilities from CFO in the early stages of the company growth, to Business
Development Director and was promoted to Chief Officer of Asianlogic from 2009 to
2014. Kan has also launched a series of SMEs including multiple F&B, leisure and 7-
Eleven franchises in Hong Kong and the Philippines.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
Interests in options:
Interests in rights:
20,438,189 fully paid ordinary shares
Nil
Nil
Name:
Title:
Qualifications:
Experience and expertise:
Zachry David Rosenberg
(Non Executive Director)
Zachry holds a Bachelor of Commerce from Monash University.
Zachry is the Founding Partner of Capital Zed, a private growth capital investor based
out of Melbourne, Australia, with significant minority investments in Australia, New
Zealand, the USA, Hong Kong and the United Kingdom. His current board roles include
Unleashed Software Limited (New Zealand), The Influential Network (USA), Predictive
Hire Pty Ltd (Australia) and Intelledox Pty Ltd (Australia), as well as a number of private
investment companies and vehicles.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
Interests in options:
Interests in rights:
2,374,895 fully paid ordinary shares
Nil
2,000,000 performance rights
Experience and expertise:
Name:
Title:
Qualifications:
Mr James Baillieu
(Non Executive Director - appointed 7 February 2019 and resigned 28 February 2019)
James holds an LLB (First Class Honours) and Bachelor of Arts from the University of
Melbourne
James previously served as Senior Vice President of Business Development at Aconex
Limited (ASX:ACX) and was an early investor in and consultant to Aconex Limited.
James spent more than seven years as a consultant with McKinsey & Co, assisting
businesses in Australia and internationally with strategy and operational improvement.
James was previously a lawyer who practised in commercial law with Mallesons
Stephen Jacques in the 1990s.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
N/A
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
5
Candy Club Holdings Limited
Directors' report
31 December 2018
Company secretary
Justyn Stedwell is a professional Company Secretary consultant with over eleven years’ experience as a Company Secretary
of ASX listed companies in a wide range of industries. His qualifications include a Bachelor of Commerce (Management and
Economics) from Monash University, a Graduate Diploma of Accounting from Deakin University and a Graduate Diploma in
Applied Corporate Governance at the Governance Institute of Australia. He is currently the Company Secretary of several
ASX listed companies including Broo Limited (ASX:BEE), Imugene Limited (ASX:IMU), Golden Mile Resources Limited
(ASX:G88), TBG Diagnostics Limited (ASX:TDL), Lifespot Health Limited (ASX:LSH) and Eagle Health Holdings Limited
(ASX: EHH).
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') held during the period ended 31 December 2018,
and the number of meetings attended by each director were:
Keith Cohn
Robert Hines
Chi Kan Tang
Zachry David Rosenberg
Full Board
Attended
Held
1
1
1
1
1
1
1
1
Held: represents the number of meetings held during the time the director held office.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The company observed the following factors in setting remuneration:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for
its directors and executives. The performance of the consolidated entity depends on the quality of its directors and executives.
The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
●
●
having economic profit as a core component of plan design
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives
●
6
Candy Club Holdings Limited
Directors' report
31 December 2018
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors'
fees and payments are reviewed annually by the board. The board may, from time to time, receive advice from independent
remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market.
The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles
in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration.
Non-executive directors do not receive share options or other incentives.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general
meeting. This has yet to be determined and will be set up the company's first annual general meeting.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has two components:
●
●
base pay and non-monetary benefits
share-based payments
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of
the consolidated entity and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the
executive.
Use of remuneration consultants
The consolidated entity has not made use of remuneration consultants.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
7
Candy Club Holdings Limited
Directors' report
31 December 2018
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
Super-
monetary annuation
$
$
Long
service
leave
$
Equity-
settled
$
Total
$
12,240
8,160
8,160
47,630
76,190
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,240
8,160
8,160
12,993
12,993
60,623
89,183
24 Oct to 31 Dec 18
Non-Executive Directors:
Robert Hines
Zachry Rosenberg
Chi Kan Tang
Executive Directors:
Keith Cohn
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Robert Hines
Zachry Rosenberg
Chi Kan Tang
Executive Directors
Keith Cohn
Fixed
remuneration
24 Oct to 31
Dec 18
At risk - STI
24 Oct to 31
Dec 18
At risk - LTI
24 Oct to 31
Dec 18
100%
100%
100%
79%
-
-
-
-
-
-
-
21%
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements are as follows:
Name:
Title:
Term of agreement:
Name:
Title:
Term of agreement:
Name:
Title:
Term of agreement:
Name:
Title:
Term of agreement:
Keith Cohn
Executive Director
US$275,000 per annum (approximately $385,000), plus an allowance of US$1,750 per
month
Robert Hines
Non-Executive Chairperson
$60,000 per annum (plus superannuation)
Zachry Rosenberg
Non-Executive Director
$40,000 per annum (plus superannuation)
Chi Kan Tang
Non-Executive Director
$40,000 per annum (plus superannuation).
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Non-executive directors were not entitled to any remuneration during the current period.
8
Candy Club Holdings Limited
Directors' report
31 December 2018
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the period
ended 31 December 2018.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial period or future reporting years are as follows:
Grant date
Number of options
exercisable date
Expiry date
Exercise price
($US)
5 November 2015 and 1 July 2016 543,665
11 November 2018
87,668
48 months from grant date
11 March 2020
$1.1700
$1.1700
Options granted carry no dividend or voting rights.
There were no options over ordinary shares granted to or vested by directors and other key management personnel as part
of compensation during the period ended 31 December 2018.
Additional information
The earnings of the consolidated entity since listing are summarised below:
Sales revenue
Loss after income tax
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2018
$
1,037,442
(1,298,090)
2018
(1.73)
(1.73)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial period by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at Received
as part of
the start of
the period
remuneration Additions
Ordinary shares
Mr Keith Cohn
Mr Zachry Rosenberg
Mr Chi Kan Tang
-
-
-
-
-
-
-
-
9
Disposals/
other
Balance at
the end of
the period
9,091,947
2,374,895
9,091,947
-
-
2,374,895
- 20,438,189 20,438,189
- 31,905,031 31,905,031
Candy Club Holdings Limited
Directors' report
31 December 2018
Option holding
The number of options over ordinary shares in the company held during the financial period by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Options over ordinary shares
Keith Cohn
Balance at
the start of
the period
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the period
-
-
87,668
87,668
-
-
543,665
543,665
631,333
631,333
Performance shares
On 28 November 2018, both Keith Cohn and Zachry Rosenberg were issued 2,000,000 performance rights each, convertible
into 2,000,000 fully paid ordinary shares upon the achievement of the milestones referred to below on or before the date
being three (3) years from the date of the company’s Admission to the ASX. There are 4 classes with each recipient receiving
500,000 of each class:
●
●
●
●
Class A - the company achieving accumulated revenue of at least $15,000,000 within any 12 month period prior to the
expiry date of the performance shares;
Class B - the company achieving accumulated revenue of at least $20,000,000 within any 12 month period prior to the
expiry date of the performance shares;
Class C - the company achieving accumulated revenue of at least $25,000,000 within any 12 month period prior to the
expiry date of the performance shares;
Class D - the company achieving accumulated revenue of at least $30,000,000 within any 12 month period prior to the
expiry date of the performance shares;
The company was not admitted to the ASX until February 2019, meaning that the vesting period did not start in the current
financial period and therefore no expense has been recognised in relation to these performance rights.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Candy Club Holdings Limited under option at the date of this report are as follows:
Grant date
Expiry date
Between 30 March 2015 and 12 September
2016 *
Between 5 April 2017 and 15 August 2018 ** 48 months from the date of grant
48 months from the date of grant
19 February 2019
11 March 2020
11 November 2018 *
48 months from the date of grant
Exercise
price
Number
under option
$1.6577
$0.0041
$0.3000
$1.6570
687,488
1,582,128
2,000,000
87,668
4,357,284
*
**
Exercise price is US$1.17
Exercise price is US$0.0029
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the
company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Candy Club Holdings Limited issued on the exercise of options during the period ended
31 December 2018 and up to the date of this report.
10
Candy Club Holdings Limited
Directors' report
31 December 2018
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
Since the end of the financial period, the company paid a premium in respect of a contract to insure the directors and
executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial period, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial period, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to 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.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial period by the auditor
are outlined in note 19 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial period, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 19 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company,
acting as advocate for the company or jointly sharing economic risks and rewards.
●
Officers of the company who are former partners of HLB Mann Judd (Vic) Partnership
There are no officers of the company who are former partners of HLB Mann Judd (Vic) Partnership.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
HLB Mann Judd (Vic) Partnership was appointed in accordance with section 327 of the Corporations Act 2001.
11
Candy Club Holdings Limited
Directors' report
31 December 2018
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Keith Cohn
Executive Director
29 March 2019
12
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Candy Club Holdings Limited
for the period ended 31 December 2018, I declare that, to the best of my knowledge and belief,
there have been no contraventions of:
(a)
the auditor independence requirements as set out in the Corporations Act 2001 in relation
to the audit; and
(b)
any applicable code of professional conduct in relation to the audit.
This declaration is in relation to Candy Club Holdings Limited and the entities it controlled during
the period.
HLB Mann Judd
Chartered Accountants
Melbourne
29 March 2019
Jude Lau
Partner
Candy Club Holdings Limited
Contents
31 December 2018
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of Candy Club Holdings Limited
Shareholder information
General information
15
16
17
18
19
40
41
45
The financial statements cover Candy Club Holdings Limited as a consolidated entity consisting of Candy Club Holdings
Limited and the entities it controlled at the end of, or during, the period. The financial statements are presented in Australian
dollars, which is Candy Club Holdings Limited's functional and presentation currency.
Candy Club Holdings Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business are:
Registered office
C/- Moray & Agnew Lawyers
Level 6, 505 Little Collins Street
Melbourne VIC 3000, Australia
Principal place of business
12950 Culver Boulevard
Suite 150
Los Angeles, CA 90066, USA
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 29 March 2019. The
directors have the power to amend and reissue the financial statements.
14
Candy Club Holdings Limited
Statement of profit or loss and other comprehensive income
For the period ended 31 December 2018
Revenue
Interest revenue calculated using the effective interest method
Expenses
Raw materials and consumables used
Corporate and administration expenses
Marketing and promotional expenses
Employee benefits expense
Development expenses
Depreciation and amortisation expense
Technology expenses
Property expenses
Other expenses
Finance costs
Loss before income tax expense
Income tax expense
Consolidated
24 Oct to 31
Dec 18
$
Note
5
1,037,442
15
(702,277)
(252,257)
(413,923)
(551,141)
(99,610)
(6,368)
(48,075)
(64,341)
(177,210)
(20,345)
(1,298,090)
6
-
Loss after income tax expense for the period attributable to the owners of Candy Club
Holdings Limited
(1,298,090)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the period, net of tax
Total comprehensive income for the period attributable to the owners of Candy Club
Holdings Limited
Basic earnings per share
Diluted earnings per share
(87,122)
(87,122)
(1,385,212)
Cents
26
26
(1.73)
(1.73)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
15
Candy Club Holdings Limited
Statement of financial position
As at 31 December 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Contract liabilities
Total current liabilities
Total liabilities
Net liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total deficiency in equity
Consolidated
Note 31 Dec 18
$
7
8
9
10
11
12
13
12,496
172,466
2,449,498
845,005
3,479,465
65,049
7,300
75,684
148,033
3,627,498
4,199,303
578,067
174,551
4,951,921
4,951,921
(1,324,423)
14
15
16,132,144
(16,158,477)
(1,298,090)
(1,324,423)
The above statement of financial position should be read in conjunction with the accompanying notes
16
Candy Club Holdings Limited
Statement of changes in equity
For the period ended 31 December 2018
Consolidated
Balance at 24 October 2018
Loss after income tax expense for the period
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
Commonly controlled reserve recognised on acquisition of
Candy Club LLC
Share based payment reserve transferred on acquisition of
Candy Club LLC
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 14)
Share based payments (note 27)
Issued
Reserves
Accumulated
capital
$
$
losses
$
Total
deficiency in
equity
$
-
-
-
-
-
-
-
-
-
-
(87,122)
(1,298,090)
-
(1,298,090)
(87,122)
(87,122)
(1,298,090)
(1,385,212)
(17,197,977)
1,083,131
-
-
(17,197,977)
1,083,131
16,132,144
-
-
43,491
- 16,132,144
43,491
-
Balance at 31 December 2018
16,132,144
(16,158,477)
(1,298,090)
(1,324,423)
The above statement of changes in equity should be read in conjunction with the accompanying notes
17
Candy Club Holdings Limited
Statement of cash flows
For the period ended 31 December 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Consolidated
24 Oct to 31
Dec 18
$
Note
1,044,014
(2,059,738)
(1,015,724)
15
Net cash used in operating activities
25
(1,015,709)
Cash flows from investing activities
Payments for property, plant and equipment
Cash acquired from commonly controlled acquisition
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Share issue transaction costs
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial period
14
(7,270)
485,727
478,457
200
567,192
(29,206)
538,186
934
-
11,562
12,496
The above statement of cash flows should be read in conjunction with the accompanying notes
18
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. As the company was
only incorporated on 24 October 2018, it has applied both AASB 9 and AASB 15 from its incorporation.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Going concern
The financial statements have been prepared on the going concern basis, which contemplates continuity of normal business
activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The consolidated entity
incurred a loss from ordinary activities of $1,298,090 for the period ended 31 December 2018, and had a net working capital
deficiency of $1,472,456. In addition, the consolidated entity had negative cash from operating activities of $1,004,147.
The directors have reviewed the cashflow forecasts and believe that there are reasonable grounds to believe that the
consolidated entity will be able to continue as a going concern due to the following factors:
●
●
●
On 19 February 2019, the company successfully completed its IPO, and was officially admitted onto the Australian
Securities Exchange. Under its IPO, the company issued 25,120,020 fully paid ordinary raising $5,024,004 before costs.
Refer to Note 24 for summary of the consolidated financial position after completion of the IPO;
The consolidated entity has recently entered the business to business market and is expecting this to generate
increased revenues going forward. As a result of this change in the business model the consolidated entity has incurred
higher than expected losses; and
Management has reviewed all expenditures and made savings that will reduce the level of operating expenses going
forward and recognises that diligence is required to manage the consolidated entity's cash flows as it embarks its
business strategies over the coming 12 months. In addition management is exploring the possibilities of securing
finance facilities as a means of providing the consolidated entity with flexibility in relation to its working capital.
Accordingly, the Directors believe that the consolidated entity will be able to continue as a going concern and that it is
appropriate to adopt the going concern basis in the preparation of the financial report.
The financial report does not include any adjustments relating to the recoverability and classification of recorded asset
amounts or to the amounts and classification of liabilities that might be necessarily incurred should the company not continue
as a going concern.
Reporting period
The company was incorporated on 24 October 2018. This financial report covers the period from that date until 31 December
2018. For this reason the report does not include any comparative information.
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').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the
revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other
comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial
instruments.
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 2.
19
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 1. Significant accounting policies (continued)
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 parent entity is disclosed in note 22.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Candy Club Holdings Limited
('company' or 'parent entity') as at 31 December 2018 and the results of all subsidiaries for the period then ended. Candy
Club Holdings 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 de-consolidated from the date that control ceases.
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, unless it is an acquisition involving
entities or businesses under common control. For common control acquisitions the excess of the purchase price over the
identifiable fair value of net assets acquired, is recognised in equity as a reserve.
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.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same basis
as the internal reports provided to the Board of Directors being the Chief Operating Decision Makers ('CODM'). The CODM
is responsible for the allocation of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Candy Club Holdings Limited's functional and
presentation currency.
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 period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange
rates, which approximate the rates at the dates of the transactions, for the period. The exchange difference from the
translation of any net investment in foreign entities and of borrowings and other financial instruments so designated as
hedges of such investments, is recognised in other comprehensive income.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
20
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 1. Significant accounting policies (continued)
Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity:
●
●
●
●
●
identifies the contract with a customer;
identifies the performance obligations in the contract;
determines the transaction price which takes into account estimates of variable consideration and the time value of
money;
allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling
price of each distinct good or service to be delivered; and
recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the
customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration
is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues
until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject
to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is
generally at the time of delivery. No element of financing is deemed present as the sales are made with credit term of 30
days.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period'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 periods, 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.
21
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 1. Significant accounting policies (continued)
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.
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.
Current and non-current 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 period; 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 period. All other assets are classified as non-current.
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 period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are 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 amounts due from customers for goods sold in the ordinary course of business. Trade receivables are
initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any
allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated
entity holds accounts receivable with the objective of collecting the contracted cashflows.
The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days
overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Stock on hand 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.
Property, 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 property, plant and equipment
(excluding land) over their expected useful lives as follows:
Plant and equipment
Computer equipment
4-5 years
2 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
22
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 1. Significant accounting policies (continued)
An item of property, 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.
Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
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 derecognition 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
period.
Website
Significant costs associated with the development of the revenue generating aspects of the website, including the capacity
of placing orders, are deferred and amortised on a straight-line basis over the period of their expected benefit, being their
finite life.
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.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial
period 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. Borrowings are derecognised when the
obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount
extinguished and the consideration paid, including any non cash assets transferred or liabilities assumed is recognised in
profit and loss as other finance costs.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
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.
Employee benefits
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees and directors in
exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where
the amount of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option,
the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine
whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of
any other vesting conditions.
23
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 1. Significant accounting policies (continued)
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
●
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
●
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
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.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Candy Club Holdings Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the financial period.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
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 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.
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 period ended 31 December 2018. The
consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most
relevant to the consolidated entity, are set out below.
24
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 1. Significant accounting policies (continued)
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable
future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and
leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists
whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability
corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received,
initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating
lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and
an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the
expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117.
However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating
expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the
statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either
operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor
accounts for leases.
The company plans to adopt the standard when it becomes effective for the year ending 31 December 2019 and expects to
apply the standard using the modified retrospective approach. The Group also expects the ROU assets recognised at date
of initial application to be equal to their lease liabilities.
The company is likely to elect the practical expedient not to reassess whether a contract contains a lease at the date of initial
application. Accordingly, existing lease contracts that are still effective on 1 January 2019 continue to be accounted for as
lease contracts under AASB 16. The company has performed a preliminary assessment of the impact on its financial
statements based on its existing operating lease arrangements.
The company expects its existing operating lease arrangements to be recognised as ROU assets with corresponding lease
liabilities under AASB 16, as at 31 December 2018, these amounted to $1,287,448.
Note 2. 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.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees and directors by reference to the
fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the
Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted.
The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Provision for impairment of inventories
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.
Recovery of deferred tax assets
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. Deferred tax assets have not
been recognised in relation to tax losses as their realisation has not been deemed probable.
25
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 2. Critical accounting judgements, estimates and assumptions (continued)
Common controlled acquisition
On 12 November 2018, the company acquired 100% of the Candy Club Holdings Group. The consideration for this
acquisitions was 75,303,017 fully paid shares valued at $11,031,892.
In determining the accounting treatment to be applied to these acquisitions, the directors gave consideration to the fact that
the company and the CCH Group were controlled by the same group of shareholders before and after the
acquisition. Accordingly, it was determined that the acquisition met the definition of a transaction between entities under
common control as outlined in AASB 3, whereby the variance between the purchase consideration and the net assets
acquired is recognised in reserves on consolidation. A reserve of $17,197,977 has been recognised in relation to this
acquisition.
Note 3. Differences between preliminary and final report
There are material differences between the preliminary financial report dated 28 February 2018 and this financial report .
These relate to the following:-
●
●
●
The preliminary report incorrectly recognised the period in which debt was converted by the company's subsidiary as
being after the acquisition when it was converted before. This had the effect of reducing issued capital and reducing
the value of the negative common control reserve by $2,273,243. This has no impact on the reported net asset position;
There were adjustment made during the audit of the US subsidiary which led to revenue and expense being recognised
in different periods. This resulted in a change of $442,458 in the common control reserve. The overall net change to
the common control reserve was $1,830,785; and
There have been other immaterial changes to the reported statements financial position and performances.
Note 4. Operating segments
Identification of reportable operating segments
The consolidated entity is organised into one operating segment, being the candy distribution in the United States of
America. This operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who
are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation
of resources.
Note 5. Revenue
Sales of goods
Consolidated
24 Oct to 31
Dec 18
$
1,037,442
26
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 5. Revenue (continued)
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major revenue streams
Sale of goods - business to customer
Sale of goods - business to business
Geographical regions
United States of America
Timing of revenue recognition
Goods transferred at a point in time - being when shipped and ownership transfers
Note 6. Income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Tax effect of different tax rates in US
US tax losses not recognised
US state taxes
Tax losses not recognised
Non deductible items
Income tax expense
Australian tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 27.5%
Consolidated
24 Oct to 31
Dec 18
$
950,168
87,274
1,037,442
1,037,442
1,037,442
Consolidated
24 Oct to 31
Dec 18
$
(1,298,090)
(356,975)
58,186
390,178
(110,344)
15,899
3,056
-
Consolidated
24 Oct to 31
Dec 18
$
57,814
15,899
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses
can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed.
27
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 6. Income tax expense (continued)
US tax losses
The company's US subsidiaries have total tax losses valued at 7,512,522 that have not been recognised as the recovery of
this benefit is uncertain. The tax losses are yet to be tested to ensure that they will be able to be utilised by the US subsidiaries
after their acquisition by the company.
Note 7. Current assets - trade and other receivables
Trade receivables
Other receivables
BAS receivable
Note 8. Current assets - inventories
Stock on hand - at cost
Less: Provision for impairment
Note 9. Current assets - other
Prepayments
Prepaid IPO costs
Consolidated
31 Dec 18
$
56,629
107,628
8,209
172,466
Consolidated
31 Dec 18
$
2,484,762
(35,264)
2,449,498
Consolidated
31 Dec 18
$
83,205
761,800
845,005
On 19 February 2019, the company was admitted onto the ASX, at which point the prepaid IPO costs have been recognised
as a cost of capital raising.
Note 10. Non-current assets - other
Security deposits
Consolidated
31 Dec 18
$
75,684
28
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 11. Current liabilities - trade and other payables
Trade payables
Interest payable
Other payables
Refer to note 17 for further information on financial instruments.
All trade and other payables are unsecured liabilities
Note 12. Current liabilities - borrowings
Bridging finance - from director related entities
Refer to note 17 for further information on financial instruments.
Consolidated
31 Dec 18
$
2,826,440
9,470
1,363,393
4,199,303
Consolidated
31 Dec 18
$
578,067
The bridging finance was a short term facility from director related entities to provide working capital prior to the company's
listing on the ASX. This was repaid in full in February 2019, once the funds from the company's IPO were received. Interest
was payable at 20% per annum. This amount was repaid in full with funds raised from the company's IPO in February 2019.
Note 13. Current liabilities - contract liabilities
Deferred revenue
Note 14. Equity - issued capital
Ordinary shares - fully paid
Consolidated
31 Dec 18
$
174,551
Consolidated
31 Dec 18
31 Dec 18
Shares
$
106,726,399 16,132,144
29
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 14. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
Incorporation founder shares issued
Investment in Candy Club Holdings Inc
Conversion of debt
Settlement of liabilities
Cost of capital raising
24 October 2018
12 November 2018
13 November 2018
28 November 2018
20,001
75,303,017
29,488,494
1,914,887
-
$0.0100
200
$0.1465 11,031,892
4,817,863
$0.1634
298,169
$0.1557
(15,980)
$0.0000
Balance
31 December 2018
106,726,399
16,132,144
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company
does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to
reduce the cost of capital. Refer to going concern disclosures in Note 1.
Note 15. Equity - reserves
Foreign currency reserve
Share-based payments reserve (Refer to Note 27)
Commonly controlled reserve
Consolidated
31 Dec 18
$
(87,122)
1,126,622
(17,197,977)
(16,158,477)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
30
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 15. Equity - reserves (continued)
Commonly controlled reserve
This reserve is used to account for commonly controlled acquisitions, and the reserve represents the excess of the purchase
price over the identifiable fair value of net assets acquired from US subsidiaries.
On 12 November 2018, the company acquired 100% of the Candy Club Holdings Group. The consideration for this
acquisitions was 75,303,017 fully paid shares valued at $11,031,892.
In determining the accounting treatment to be applied to these acquisitions, the directors gave consideration to the fact that
the company and the CCH Group were controlled by the same group of shareholders before and after the
acquisition. Accordingly, it was determined that the acquisition met the definition of a transaction between entities under
common control as outlined in AASB 3, whereby the variance between the purchase consideration and the net assets
acquired is recognised in reserves on consolidation.
Movements in reserves
Movements in each class of reserve during the current financial period are set out below:
Consolidated
Balance at 24 October 2018
Foreign currency translation
Commonly controlled acquisition
Share based payments
Foreign
currency
$
Share based Commonly
payments
controlled
$
$
Total
$
-
(87,122)
-
-
-
-
1,083,131
43,491
-
-
(17,197,977)
-
-
(87,122)
(16,114,846)
43,491
Balance at 31 December 2018
(87,122)
1,126,622
(17,197,977)
(16,158,477)
Note 16. Equity - dividends
There were no dividends paid, recommended or declared during the current financial period.
Note 17. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, and
interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the
consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed.
These methods include sensitivity analysis in the case of interest rate, foreign exchange, ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors
('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate
procedures, controls and risk limits. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The consolidated entity is exposed to foreign exchange risk in relation to the operation of its subsidiaries in the United States
of America. It does not hedge any of these risks as the US denominated debts are expected to be paid with from US dollar
denominated income.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
31
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 17. Financial instruments (continued)
The carrying amount of the consolidated entity's foreign currency denominated assets and financial at the reporting date
were as follows:
Consolidated
US dollars
Assets
31 Dec 18
Liabilities
31 Dec 18
$
$
2,850,047
4,584,082
Consolidated - 31 Dec 18
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
AUD strengthened
Effect on
AUD weakened
Effect on
US dollars
10%
-
(173,403)
10%
-
173,403
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The consolidated entity is not exposed to significant interest rate risk. Its only borrowings were short term bridging finance
with a fixed interest rate.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity is not exposed to significant credit risk, as it has only just entered the business
to business market. The majority of its revenue for the period came from business to customer sales where payment is
received before delivery is made. The total trade receivable balance at 31 December 2018 was $56,629. There was no
impairment of trade receivables during the period. Average credit terms are 30 days.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Refer to going concern disclosures in Note 1.
32
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 17. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 31 Dec 18
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bridging finance
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
-
2,826,440
1,363,393
20.00%
578,067
4,767,900
-
-
-
-
-
-
-
-
-
-
-
-
2,826,440
1,363,393
578,067
4,767,900
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value, and none of the consolidated
entity's financial instruments are recorded at fair value after initial recognition.
Note 18. Key management personnel disclosures
Compensation
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
Share-based payments
Consolidated
24 Oct to 31
Dec 18
$
76,190
12,993
89,183
33
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 19. Remuneration of auditors
During the financial period the following fees were paid or payable for services provided by HLB Mann Judd (Vic) Partnership,
the auditor of the company, and its network firms:
Audit services - HLB Mann Judd (Vic) Partnership
Audit or review of the financial statements
Other services - related parties of HLB Mann Judd (Vic) Partnership
Tax due diligence
Independent accountant's report
Audit services - network firms
Audit or review of the financial statements
Note 20. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
24 Oct to 31
Dec 18
$
26,000
3,500
27,500
31,000
57,000
66,500
Consolidated
31 Dec 18
$
264,836
1,003,416
1,268,252
Operating lease commitments relate to the consolidated entity's premises in the United States of America. The lease
commenced on 1 August 2018, and has a 5 year term with annual uplifts of 3.5%
Note 21. Related party transactions
Parent entity
Candy Club Holdings Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 23.
Key management personnel
Disclosures relating to key management personnel are set out in note 18 and the remuneration report included in the
directors' report.
34
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 21. Related party transactions (continued)
Transactions with related parties
The following transactions occurred with related parties:
Payment for other expenses:
Interest accrued to key management personnel and their related entities. Interest has been charged at 20%
per annum.
20,345
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Consolidated
24 Oct to 31
Dec 18
$
Consolidated
31 Dec 18
$
574,703
9,470
Consolidated
31 Dec 18
$
578,067
Parent
24 Oct to 31
Dec 18
$
(57,812)
(57,812)
Current payables:
Other payables to key management personnel
Interest payable to key management personnel and their related entities
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Current borrowings:
Loan from key management personnel and their related entities
Note 22. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
35
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 22. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Total equity
Parent
31 Dec 18
$
777,453
16,305,725
231,392
231,392
16,132,145
(57,812)
16,074,333
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 31 December 2018.
Contingent liabilities
The parent entity had no contingent liabilities as at 31 December 2018
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 31 December 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except
for the following:
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Note 23. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 1:
Name
Candy Club Holdings Inc.
Candy Club LLC
Principal place of business /
Country of incorporation
USA
USA
Ownership
interest
31 Dec 18
%
100.00%
100.00%
On 12 November 2018, the Company entered into a Share Purchase Agreement to effect the acquisition of 100% of Candy
Club Holdings Inc. for a consideration of $11.032 million. By this transaction, the Company obtained control of Candy Club
Holdings Inc. In determining the accounting treatment to be applied, the Directors gave consideration to the fact that the
Company and Candy Club Holdings Inc. were controlled by the same group of shareholders before and after the acquisition.
Accordingly, it was determined that the acquisition met the definition of a transaction between entities under common control
as outlined in AASB 3, whereby the variance between the purchase consideration paid and the net assets acquired is
recognised in equity on consolidation. The impact of this transaction is set out in the tables below:
36
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 23. Interests in subsidiaries (continued)
Summary of asset and liabilities acquired:
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Plant and equipment
Intangible assets
Other non-current assets
Trade and other payables
Accrued interest
Borrowings
Contract liabilities
Share based payment reserve
Net assets/(liabilities) acquired net of options reserve
The other reserves recognised in relation to the common control acquisition has the following components
Net liabilities acquired net of options reserve
Value of consideration shares (Note 14)
Total reserve recognised (Note 15)
Note 24. Events after the reporting period
Acquisition
date value
485,726
186,300
2,420,816
443,803
61,191
7,843
73,832
(3,793,479)
(164,304)
(4,623,917)
(181,813)
(1,082,083)
(6,166,085)
Other reserve
6,166,085
11,031,892
17,197,977
On 19 February 2019, the company successfully completed its IPO, and was officially admitted onto the Australian Securities
Exchange. Under its IPO, the company issued 25,120,020 fully paid ordinary raising $5,024,004 before costs. The below
table summaries the consolidated entities financial position after completion of IPO.
Summary of financial position
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Property, plant and equipment
Intangible assets
Trade and other payables
Net assets
Post IPO
1,772,500
324,741
2,753,571
205,456
54,186
7,209
(3,210,092)
1,907,571
On 19 February 2019, the company issued 7,244,312 fully paid ordinary shares to its lead broker and its associates as
consideration for services rendered during the IPO process.
37
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 24. Events after the reporting period (continued)
On 19 February the company issued 2,000,000 options over ordinary shares to its lead broker and its associates as
consideration for services rendered during the IPO process. The options have a 4 year term and exercise price of 30 cents.
No other matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly
affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future
financial years.
Note 25. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the period
Adjustments for:
Depreciation and amortisation
Share-based payments
Accrued interest
Change in operating assets and liabilities:
Decrease in trade and other receivables
Increase in inventories
Increase in other operating assets
Increase in trade and other payables
Decrease in other operating liabilities
Net cash used in operating activities
Note 26. Earnings per share
Loss after income tax attributable to the owners of Candy Club Holdings Limited
Consolidated
24 Oct to 31
Dec 18
$
(1,298,090)
6,368
43,491
20,345
13,835
(28,682)
(1,276)
235,563
(7,263)
(1,015,709)
Consolidated
24 Oct to 31
Dec 18
$
(1,298,090)
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
74,925,607
Weighted average number of ordinary shares used in calculating diluted earnings per share
74,925,607
Basic earnings per share
Diluted earnings per share
Cents
(1.73)
(1.73)
38
Candy Club Holdings Limited
Notes to the financial statements
31 December 2018
Note 27. Share-based payments
As part of the corporate restructure whereby the company acquired all the issued share capital in CCH, the company agreed
to assume the obligations of CCH pursuant to an employee share option plan adopted by CCH (CCH ESOP). Under such
arrangement, the company, CCH and the holders of options under the CCH ESOP have agreed to convert the entitlements
of the optionees under the CCH ESOP into 2,269,616 Options (CCH ESOP Options) which will entitle the holders of the CCH
ESOP Options to receive up to 2,269,616 Shares upon payment of the relevant exercise price referred to below on or before
the relevant expiry date.
This amendments to the scheme has been deemed to be a continuation of the existing scheme. For this reason an amount
of $1,083,131 was transferred to the share based payment reserve upon acquisition of CCH. A share based payment
expense of $43,491 has been recognised since the acquisition.
The CCH ESOP Options are subject to a vesting condition that the holder of the options continue to be employed by the
consolidated entity, whereby the options shall vest and be exercisable by such holders in accordance with the following:
●
●
25% of the CCH ESOP Options shall vest and be exercisable on the date being 12 months from the date of grant of the
relevant CCH ESOP Options; and
75% of the CCH ESOP Options shall vest and be exercisable rateably on a monthly basis for the remaining 36 months
prior to the expiry date of the relevant CCH ESOP Options.
On 11 November 2018, 87,688 options were granted to Keith Cohn as consideration for termination of an option that he held
to acquire his shares in the company. The terms of options are as follows:
Balance at
the start of Granted
the period
Granted on Balance at
the end of
acquisition of
the period
CCH
-
-
87,668
87,668
2,269,616
2,269,616
2,357,284
2,357,284
Weighted average exercise price
$1.6577
$0.5050
$0.5479
The weighted average remaining contractual life of options outstanding at the end of the financial period was 2.36 years.
The fair value of the options granted to employees is considered to represent the value of the employee services received
over the vesting period.
For the options granted during the current financial period, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date
Share price Exercise
at grant date
price
Expected
volatility
Dividend
Risk-free
Fair value
yield
interest rate at grant date
11/11/2018
11/03/2020
$0.2000
$1.6250
100.00%
-
1.75%
$0.008
39
Candy Club Holdings Limited
Directors' declaration
31 December 2018
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at
31 December 2018 and of its performance for the financial period ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable, taking into accounts the matters outlined in the going concern disclosures in Note 1 of the financial
statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Keith Cohn
Executive Director
29 March 2019
40
Independent Auditor’s Report to the Members of Candy Club Holdings Limited
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Candy Club Holdings Limited (“the Company”) and its
controlled entities (“the Group”), which comprises the consolidated statement of financial
position as at 31 December 2018, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the period then ended, and notes to the financial statements,
including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, 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 Group’s financial position as at 31 December 2018 and of
its financial performance for the period then ended; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
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 confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of the Company, would be in the same terms if given to the
directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Material Uncertainty Regarding Going Concern
We draw attention to the Going Concern note as contained in Note 1 of the financial report,
which indicates that the Group incurred a net loss of $1,298,090 during the period ended 31
December 2018 and, as of that date, the current liabilities exceeded its current assets by
$1,472,456. As stated in the Going Concern note as contained in Note 1 of the financial
report, these events or conditions, along with other matters as set forth in the Going
Concern note as contained in Note 1 of the financial report, indicate that a material
uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report of the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. In addition to the
matter described in the Material Uncertainty Related to Going Concern section, we have
determined the matters described below to be the key audit matters to be communicated in our
report.
Key Audit Matter
How our audit addressed the key audit
matter
Acquisition of controlled entities
Refer to note 23 - Interests in subsidiaries
During the period ended 31 December 2018, the
Company acquired Candy Club Holdings Inc. and its
controlled entity (referred to as “acquired entities”) as
part of its planned listing on the Australian Securities
Exchange (“ASX”).
The directors considered the requirements of AASB 3
Business combinations to assess if the transaction
met the definition of a “business combination” as per
the requirements of the standard. The directors
concluded that the transaction did not meet the
definition of a “business combination” but represented
a transaction between entities under common control
as outlined in AASB 3.
Due to the significant judgement required to determine
if the transaction met the definition of a common
control transaction, the acquisition of the acquired
entities was assessed to be a key audit matter.
We assessed management’s evaluation of
the adopted accounting treatment and
performed the following procedures
amongst others:
Reviewed the terms and conditions of
the share purchase agreement (“SPA”)
and details of the controlling entities
before and after the transaction to
ensure that the treatment applicable to
a transaction between entities under
common control was met.
Tested the value of the identifiable
assets acquired and liabilities assumed
at acquisition date, ensuring that no fair
value uplift was recognised in
determining the value of the common
control reserve.
Reviewed the adopted disclosures
made in the financial statements.
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 annual report for the period ended 31 December 2018, but
does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do
not express any form of assurance conclusion thereon.
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, 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 ability of the
Group to continue as a going concern, disclosing, as applicable, matters related 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 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 judgement 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.
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 with the directors, we determine those matters that were of
most significance in the audit of the financial report of the current period 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.
REPORT ON THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 6 to 10 of the directors’ report for
the period ended 31 December 2018.
In our opinion, the Remuneration Report of Candy Club Holdings Limited for the period ended
31 December 2018 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.
HLB Mann Judd
Chartered Accountants
Melbourne
29 March 2019
Jude Lau
Partner
Candy Club Holdings Limited
Shareholder information
31 December 2018
The shareholder information set out below was applicable as at 19 February 2019.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Chi Kan Tang
Instanz Nominees Pty Ltd (Hearts A/C)
Sabone Internet Investments LLC
James Clive Know Baiillieu
KEC Ventures II LP
Safari Capital Pty Ltd
CVC Limited
Hamilton Hawkes Pty Ltd (Whitcombe Family Acc)
Bedwell Pty Ltd (Bedwell Discretionary Acc)
10 Bolivianos Pty Ltd
Crosscut Ventures 3 LP
Chris Bollenbach
Rouse Equities Pty Ltd
Citicorp Nominees Pty Ltd
TGF Holdings (QLD) Pty Ltd (T Ford Super Acc)
Instanz Employee Investment Pty Ltd (Instanz Investment Acc)
RJIR Pty Ltd (ZDR Family Acc)
Cerdik
Neysa Demann
Kentsurf Pty Ltd (Chambers Super Fund Acc)
Unquoted equity securities
There are no unquoted equity securities.
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Number
of holders
of ordinary
shares
5
102
216
130
453
-
Ordinary shares
% of total
shares
issued
Number held
21,188,189
12,562,500
7,591,549
6,534,682
5,322,351
4,333,474
4,333,474
4,275,460
4,256,509
3,354,011
2,804,870
2,634,241
2,181,305
2,125,000
1,835,514
1,775,620
1,775,620
1,688,452
1,500,398
1,400,000
15.23
9.03
5.46
4.70
3.83
3.12
3.12
3.07
3.06
2.41
2.02
1.89
1.57
1.53
1.32
1.28
1.28
1.21
1.08
1.01
93,473,219
67.22
Candy Club Holdings Limited
Shareholder information
31 December 2018
Substantial holders
Substantial holders in the company are set out below:
Chi Kan Tang
Keith Cohn
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
shares
issued
Number held
21,188,189
9,091,947
15.23
6.54
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
46