Candy Club Holdings Limited
ACN 629 598 778
Annual Report - 31 December 2019
Candy Club Holdings Limited
Corporate directory
31 December 2019
Directors
Mr Keith Cohn (Executive Director)
Mr Andrew Clark (Non Executive Director)
Mr James Baillieu (Non Executive Chairman)
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
5855 Green Valley Circle
Suite 101
Culver City, CA 90230
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)
Candy Club Holdings Limited options are listed on the Australian Securities Exchange
(ASX code: CLBO)
Website
https://www.candyclub.com
Corporate Governance Statement
Refer to https://www.candyclub.com
1
Candy Club Holdings Limited
Directors' report
31 December 2019
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 2019.
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 Cohn
Robert Hines (resigned 3 October 2019)
Chi Kan Tang
Zachry David Rosenberg (resigned on 16 September 2019)
James Baillieu (appointed 7 February 2019 and resigned 28 February 2019 and reappointed on 16 September 2019)
Andrew Clark (appointed 3 October 2019)
Principal activities
During the financial period the principal continuing activities of the consolidated entity consisted of:
●
online and business to business candy distribution in the United States.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial period.
Review of operations
The loss for the consolidated entity after providing for income tax amounted to $7,844,962 (31 December 2018: $1,298,090).
The 2019 year was a transformational year for Candy Club as it refocused the majority of its resources towards building its
B2B wholesale business, repositioned its B2C subscription business to be run for maximum efficiency vs. scale and
completed its public listing on the ASX.
Candy Club’s B2B segment saw an increase in the total number of retail doors shipped in FY2019 by 275% from 1,200 to
4,500. Candy Club continues to experience rapid accelerating growth in the number of retail doors carrying its product
resulting from signing partnerships with large US national retailers. It has continued to add large, prominent retailers in Q1
2020 and is on pace to penetrate 8,000 retail doors by April 2020 with a target to achieve more than 15,000 retail doors by
December 2020.
Candy Club recorded outstanding retail sales in 2019 and repeat orders accounted for 55% of total revenue in FY2019, even
with a significant increase in new customers during the period. The Company’s top 10 B2B customers re-ordered at an
average of 11 times throughout the year.
Candy Club’s B2C subscription business is being managed for an optimum ROI. This segment’s largest variable expense is
its cost per acquisition (“CPA”), which dropped to $US23 in 2019 vs. $US 43 the prior year, a direct result of focusing on
efficiency vs. scale. This trend has continued in Q1 2020 with CPA currently running below $10.
The B2C segment remains a key part of the Company’s overall strategy in its aim to achieve economies of scale. Candy
Club believes that this can be accomplished through big-data customer insights, consumer-facing advertising and brand
building efforts which will, directly and indirectly, benefit the Company’s B2C and B2B segments.
In FY2019 the Company made infrastructure investments in an Enterprise software system (“ERP”) to manage and integrate
all of its core operating functions and in automated assembly equipment it uses in its manufacturing processes. Both projects
were designed to improve the Company’s efficiency and profitability. With further margin improvement initiatives being
implemented throughout FY2020 and additional scale it expects from its B2B segment.
2
Candy Club Holdings Limited
Directors' report
31 December 2019
Significant changes in the state of affairs
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. A further
1,448,862 fully paid ordinary shares were issued to the lead manager.
Since completing its IPO, the company has issued a further 23,929,856 fully paid ordinary shares raising $1,914,388, before
costs. It has also issued 11,890,492 fully paid ordinary shares on the conversion of debt and to settle creditors valued at
$892,935.
During the year company has issued 2,738,165 unlisted options over ordinary shares under its ESOP. In addition the
company issued 42,253,897 listed options (ASX: CLBO) in relation to its borrowings.
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 17 January 2020, the company issued 55,068,023 fully paid ordinary shares with a value of $3,761,791 to settle various
current liabilities. In addition the company issued 27,774,939 listed options (ASX : CLBO). The options have an exercise
price of 10 cents and are exercisable at any time expiring on 31 May 2023.
On 17 January 2020, the company has 18,700,000 unlisted options as remuneration to key management personnel. These
options have a value of $352,093.
On 29 January 2020, the company announced that the company had received convertible debt totalling US$600,000 from
directors and major shareholders. Interest is payable 1% per month and the balance is convertible into shares $0.125 per
share at the holder's option.
On 18 March 2020, the company announced that it had entered into a non-binding term sheet with an inventory financing
lender of up to US $1.5 million.
On 18 March 2020, the company announced that it has entered into additional bridging loans with directors totalling US
$650,000. The loans will carry a 12% annual interest rate and can be converted into shares at conversion price of $0.04 per
shares. A listed Candy Club Holding Option (ASX: CLBO) will be included for each converted share.
During the week beginning 16 March 2020, the US, state and local governments announced a series of measures aimed at
preventing the spread of COVID-19 (“measures”), which had the subsequent effect of impacting the state of the US economy
(i.e. impact on supply chain, customers, availability of finance, consumer confidence, etc.).
In addressing and implementing the necessary changes to ensure Candy Club comply with these measures, the Board has
agreed to implement, amongst others, the following:
●
●
●
●
Enacting Candy Club’s stated business continuity plan of enabling all Company employees, including head office and
sales staff, to work remotely, until further notice;
To date, no business interruptions have occurred in either the Company’s warehousing and distribution center
operations, located primarily in Indiana, nor in its supply chain of core product or packaging vendors, as we and our
facility are classified as a food manufacturer and currently considered “essential critical business infrastructure”; given
the fluidity of the situation this is subject to change in the future;
There are segments of the Company’s business that will be negatively impacted by these events, such as sales to retail
stores and hospitality outlets, and segments that may not be negatively impacted and could actually see an uptick as a
result of these measures, including e-commerce and grocery customers. It is still too early to tell how 2020 revenue,
earnings and cash flow will be impacted by the measures required by COVID-19; and
Requested management review and revise Candy Club’s 2020 operating plans, including operating expense
management solutions and associated cashflow budget, which is still on-going.
Management is still in the process of quantifying the other possible impacts associated with implementing these measures.
Management also recognises that the situation associated with the management of COVID-19 continues to evolve on a daily
basis and it is difficult to estimate with any degree of certainty the resulting impact (financial and operational) which this may
have on Candy Club and its future results and financial position.
3
Candy Club Holdings Limited
Directors' report
31 December 2019
No other matter or circumstance has arisen since 31 December 2019 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.
Business risks
Below is a summary of the key business risk relating to the consolidated entity.
Item
Summary
Sufficiency of funding
Consumer demand
Customer acquisition costs
Food safety and hygiene
Supply of confectionery
Privacy and Data
Intellectual Property
Reliance on Key Personnel
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.
If consumers do not perceive the Candy Club Branded confectionery to be of sufficient
quality, value or novelty, the consolidated entity may not be unable to acquire new
customers or retain existing customers, adversely affecting the consolidated entity’s
business operations and profitability.
Customer demand for subscription plans of the Candy Boxes is currently generated, in part,
from paid online media sources such as Facebook and Google. Customer acquisition costs,
in particular from online media sources may rise in the future and in such circumstances the
Company could find it difficult to acquire customers at a price sufficient to make a profit.
Selling food for human consumption carries inherent risks related to food safety. The
business carried on by the Company may be adversely affected to the extent there are any
food safety incidents involving the Candy Club Branded Confectionery (such as tampering
or contamination).
While the consolidated entity is not dependent on any one supplier of confectionery, its
business operations may be affected by the failure of a supplier to meet its contractual
obligations to the consolidated entity or to supply products that meet the consolidated
entity’s production standards. Any such failure by a supplier may have adverse implications
on the consolidated entity’s business.
The consolidated entity is reliant on third party suppliers for data processing and payment
services, and the consolidated entity and such suppliers collect, store and transmit
significant amounts of customer information. Any security breach or interruption in service
may adversely affect the Company’s reputation and substantially interrupt the consolidated
entity’s business operations.
The success of Candy Club’s business operations is reliant on its intellectual property, such
as customer data, trademarks, domain names, copyrights and know-how. If competitors
utilise or infringe the consolidated entity’s intellectual property, the consolidated may be
adversely affected.
The consolidated entity is heavily reliant on key personnel, including the Company’s
Executive Director, Mr Keith Cohn. Candy Club’s continued success depends on the
continuing efforts and retention of its management team and staff, and if it is not able to
attract highly skilled staff to support its planned growth, its business operations may be
impacted.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
4
Candy Club Holdings Limited
Directors' report
31 December 2019
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.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Interests in shares:
Interests in options:
Interests in rights:
10,957,619 fully paid ordinary shares
16,231,333 options over ordinary shares
2,000,000 performance rights
Name:
Title:
Experience and expertise:
Robert Hines
Non-Executive Chairperson (resigned 3 October 2019)
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): N/A
N/A
Interests in shares:
N/A
Interests in options:
N/A
Interests in rights:
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.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Interests in shares:
Interests in options:
Interests in rights:
29,501,350 fully paid ordinary shares
11,214,711 options over ordinary shares
Nil
5
Candy Club Holdings Limited
Directors' report
31 December 2019
Name:
Title:
Qualifications:
Experience and expertise:
Zachry David Rosenberg
Non Executive Director (resigned 16 September 2019)
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:
N/A
Former directorships (last 3 years): N/A
N/A
Interests in shares:
N/A
Interests in options:
N/A
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
Mr James Baillieu
Non Executive Director (appointed 7 February 2019 and resigned 28 February 2019)
and appointed Chairman on 16 September 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.
Nil
Other current directorships:
Former directorships (last 3 years): Bidenergy Ltd (ASX: BID) - resigned 22 February 2019
Interests in shares:
Interests in options:
Interests in rights:
58,013,424 fully paid ordinary shares
25,161,506 options over ordinary shares
Nil
Name:
Title:
Experience and expertise:
Andrew Clark
Non-Executive Director (appointed 3 October 2019)
Andrew Clark joins the Candy Club Board with a wealth of knowledge gained in
executive and senior leadership positions whilst working for more than 20 years in the
Consumer Goods sector. Andrew's experiences have included domestic and global
roles held in large multi-national and national public businesses and smaller private
covering manufacturer/supplier, wholesaler/retailer and
equity businesses
technology/platform operations in the Australian, UK and US markets. Andrew has held
various roles at Cadbury Schweppes, Reckitt Benckiser (including Global Sales
Development Director and USA Vice President Trade Marketing); Nestle (Head of
Sales and Category); Metcash (General Manager Merchandise: Food and Non-Food)
and irexchange (CEO - FMCG).
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Nil
Interests in shares:
3,100,000 options over ordinary shares
Interests in options:
'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.
6
Candy Club Holdings Limited
Directors' report
31 December 2019
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.
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') held during the period ended 31 December 2019,
and the number of meetings attended by each director were:
Keith Cohn
Robert Hines
Chi Kan Tang
Zachry David Rosenberg
Andrew Clark
James Baillieu
Full Board
Attended
Held
6
4
6
5
1
1
6
5
6
5
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 board 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
●
7
Candy Club Holdings Limited
Directors' report
31 December 2019
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.
Voting and comments made at the company's 8 May 2019 Annual General Meeting ('AGM')
At the 8 May 2019 AGM, 92.92% of the votes received supported the adoption of the remuneration report for the year ended
31 December 2018. The company did not receive any specific feedback at the AGM regarding its remuneration practices.
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.
8
Candy Club Holdings Limited
Directors' report
31 December 2019
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
$
32,909
28,332
34,740
13,454
15,900
351,359
476,694
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,692
3,300
1,278
-
-
7,270
-
-
-
-
-
-
-
-
9,924
-
-
-
32,909
40,948
38,040
14,732
15,900
308,778
318,702
660,137
802,666
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
2019
Non-Executive Directors:
Robert Hines
Zachry Rosenberg
Chi Kan Tang
Andrew Clark
James Baillieu
Executive Directors:
Keith Cohn
24 Oct 2018 to 31 Dec 2018
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
Andrew Clark
James Baillieu
Executive Directors
Keith Cohn
Fixed remuneration
At risk - STI
At risk - LTI
24 Oct 2018
to 31 Dec
2018
2019
24 Oct 2018
to 31 Dec
2018
2019
24 Oct 2018
to 31 Dec
2018
2019
100%
76%
100%
100%
100%
100%
100%
100%
-
-
53%
79%
-
-
-
-
-
-
-
-
-
-
-
-
-
24%
-
-
-
-
-
-
-
-
47%
21%
9
Candy Club Holdings Limited
Directors' report
31 December 2019
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:
Details:
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. Employment can be terminated by either party at any time with or without
reason and with or without notice.
James Baillieu
Non-Executive Chairman
$50,000 per annum (plus superannuation)
Andrew Clark
Non-Executive Director
$55,000 per annum (plus superannuation)
Chi Kan Tang
Non-Executive Director
$40,000 per annum (plus superannuation).
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the period
ended 31 December 2019.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial period or future reporting years are as follows:
Grant date
Number of options
exercisable date
Expiry date
Exercise price
($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 2019.
Additional information
The earnings of the consolidated entity for the two years to 31 December 2019 are summarised below:
Sales revenue
Net loss attributable to owners
2019
$
2018
$
6,769,098
(7,844,962)
1,037,442
(1,298,090)
10
Candy Club Holdings Limited
Directors' report
31 December 2019
New accounting standards applied
The consolidated entity applied AAS16 for the first time in 2019. It has been applied retrospectively with the cumulative effect
of initially applying the standard recognised as an adjustment to accumulated losses at 1 Jan 2019. The comparatives have
not been re-stated and were reported under AASB 117 – Leases.
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($) *
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2019
2018
0.07
-
(5.39)
(5.39)
-
-
(1.73)
(1.73)
*
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.
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
the start of
the period
Held at
appointment Additions
Disposals/
other
Balance at
the end of
the period
Ordinary shares
Mr Keith Cohn
Mr Zachry Rosenberg *
Mr Chi Kan Tang
James Baillieu
Robert Hines *
*
resigned during the year
9,091,947
2,374,895
20,438,189
-
-
31,905,031
-
-
-
6,534,682
-
-
741,874
7,812,730
2,178,228
413,334
6,534,682 11,146,166
-
(3,116,769)
9,091,947
-
- 28,250,919
8,712,910
-
-
(413,334)
(3,530,103) 46,055,776
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
Zachry Rosenberg *
Robert Hines *
Ch Kan Tang
James Baillieu
*
resigned during the year
Balance at
the start of
the period
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the period
631,333
-
-
-
-
631,333
-
641,874
103,334
7,062,730
2,178,228
9,986,166
-
-
-
-
-
-
-
(641,874)
(103,334)
-
-
(745,208)
631,333
-
-
7,062,730
2,178,228
9,872,291
Loans from key management personnel and their related parties
Directors and their related entities have provided loans with a carrying value of $1,622,407 at 31 December 2019. The loans
includes a balance of $1,500,000 with interest payable at 2% per month. Interest is payable on the remainder of balance at
10% accruing daily. An amount of $87,005 has been offset against this amount representing the fair value of the options
which has not been issued at 31 December 2019, which related to this bridging finance.
11
Candy Club Holdings Limited
Directors' report
31 December 2019
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;
During the current year, an assessment was made and it was determined that it was probable that the conditions attached
to the class A performance shares may be achieved. An expense of $19,848 has been recognised,
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
48 months from the date of grant
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 *
31 May 2023
13 June 2019 and 7 November 2019
27 March 2023
3 July 2019
23 October 2023
14 November 2019
15 January 2024
17 January 2020 ***
15 January 2024
17 January 2020
15 January 2024
17 January 2020
15 January 2024
17 January 2020
Exercise
price
Number
under option
687,488
$1.6577
1,582,128
$0.0041
2,000,000
$0.3000
$1.6570
87,668
$0.1000 42,253,897
2,578,165
$0.1550
160,000
$0.0760
3,100,000
$0.0000
5,200,000
$0.2000
5,200,000
$0.2500
5,200,000
$0.3000
68,049,346
Exercise price is US$1.17
Exercise price is US$0.0029
*
**
*** Exercise price is 150% of the company's 10 day VWAP immediately prior to exercise.
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 2019 and up to the date of this report.
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.
12
Candy Club Holdings Limited
Directors' report
31 December 2019
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 24 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 24 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.
13
Candy Club Holdings Limited
Directors' report
31 December 2019
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
31 March 2020
14
Auditor’s independence declaration
As lead auditor for the audit of the consolidated financial report of Candy Club Holdings Limited
for the year ended 31 December 2019, 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 the Candy Club Holdings Limited and the entities it controlled
during the period.
HLB Mann Judd
Chartered Accountants
Jude Lau
Partner
Melbourne
31 March 2020
Candy Club Holdings Limited
Contents
31 December 2019
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of Candy Club Holdings Limited
Shareholder information
General information
17
18
19
20
21
49
50
54
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
Principal place of business
C/- Moray & Agnew Lawyers
Level 6, 505 Little Collins Street
Melbourne VIC 3000, Australia
5855 Green Valley Circle
Suite 101
Culver City, CA 90230
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 31 March 2020. The
directors have the power to amend and reissue the financial statements.
16
Candy Club Holdings Limited
Consolidated statement of profit or loss and other comprehensive income
For the period ended 31 December 2019
Revenue
Other income
Interest revenue calculated using the effective interest method
Expenses
Cost of sales
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
Note
2019
$
24 Oct 2018
to 31 Dec
2018
$
4
5
6
6
7
6,798,720
1,037,442
123,596
268
-
15
(5,850,971)
(1,046,225)
(1,860,285)
(3,552,812)
(258,994)
(256,878)
(217,549)
(115,119)
(977,209)
(631,504)
(702,277)
(252,257)
(413,923)
(551,141)
(99,610)
(6,368)
(48,075)
(64,341)
(177,210)
(20,345)
(7,844,962)
(1,298,090)
-
-
Loss after income tax expense for the period attributable to the owners of
Candy Club Holdings Limited
(7,844,962)
(1,298,090)
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive loss for the period, net of tax
Total comprehensive loss for the period attributable to the owners of Candy
Club Holdings Limited
(26,247)
(87,122)
(26,247)
(87,122)
(7,871,209)
(1,385,212)
Cents
Cents
Basic earnings per share
Diluted earnings per share
34
34
(5.39)
(5.39)
(1.73)
(1.73)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
17
Candy Club Holdings Limited
Consolidated statement of financial position
As at 31 December 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangibles
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Total non-current liabilities
Total liabilities
Net liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total deficiency in equity
Consolidated
Note
2019
$
2018
$
8
9
10
11
12
13
14
15
16
17
18
775,541
354,603
3,422,375
105,213
4,657,732
12,496
172,466
2,449,498
845,005
3,479,465
34,079
599,046
79,799
35,684
748,608
65,049
-
7,300
75,684
148,033
5,406,340
3,627,498
4,242,461
-
2,234,021
249,376
71,367
6,797,225
4,199,303
174,551
578,067
-
-
4,951,921
282,751
282,751
-
-
7,079,976
4,951,921
(1,673,636)
(1,324,423)
19
20
21,736,694 16,132,144
(16,158,477)
(1,298,090)
(14,247,955)
(9,162,375)
(1,673,636)
(1,324,423)
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
18
Candy Club Holdings Limited
Consolidated statement of changes in equity
For the period ended 31 December 2019
Consolidated
Balance at 24 October 2018
Loss after income tax expense for the period
Other comprehensive loss for the period, net of tax
Total comprehensive loss 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 19)
Share based payments (note 20)
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)
Consolidated
Issued
Reserves
Accumulated
capital
$
$
losses
$
Total
deficiency in
equity
$
Balance at 1 January 2019
16,132,144
(16,158,477)
(1,298,090)
(1,324,423)
Impact of adoption of AASB 16 - restated balance at 1
January 2019
-
-
(19,323)
(19,323)
Balance at 1 January 2019 - restated
16,132,144
(16,158,477)
(1,317,413)
(1,343,746)
Loss after income tax expense for the period
Other comprehensive loss for the period, net of tax
Total comprehensive loss for the period
-
-
-
-
(26,247)
(7,844,962)
-
(7,844,962)
(26,247)
(26,247)
(7,844,962)
(7,871,209)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 19)
Share based payments (note 20)
5,604,550
-
-
1,936,769
-
-
5,604,550
1,936,769
Balance at 31 December 2019
21,736,694
(14,247,955)
(9,162,375)
(1,673,636)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
19
Candy Club Holdings Limited
Consolidated statement of cash flows
For the period ended 31 December 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Other revenue
Interest and other finance costs paid
Consolidated
Note
2019
$
24 Oct 2018
to 31 Dec
2018
$
6,412,410
(15,476,057)
1,044,014
(2,059,738)
(9,063,647)
268
29,622
(241,548)
(1,015,724)
15
-
-
Net cash (used in) operating activities
31
(9,275,305)
(1,015,709)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Cash acquired from commonly controlled acquisition
Proceeds from release of security deposits
Net cash from/(used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Share issue transaction costs
Repayment of lease liabilities
Funds received ahead of shares issued
(29,678)
(77,278)
-
40,000
(7,270)
-
485,727
-
(66,956)
478,457
6,938,392
2,578,707
(649,801)
(235,745)
1,500,000
200
567,192
(29,206)
-
-
Net cash from financing activities
10,131,553
538,186
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
789,292
12,496
(26,247)
934
-
11,562
775,541
12,496
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
20
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
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.
The following Accounting Standards and Interpretations have been adopted by the consolidated entity:
AASB 16 Leases
The consolidated entity has adopted AASB 16 from 1 January 2019. The standard replaces AASB 117 'Leases' and for
lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-
value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position.
Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included
in operating costs) and an interest expense on the recognised lease liabilities (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 improve as the
operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the
statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments
are separately disclosed in financing activities. For lessor accounting, the standard does not substantially change how a
lessor accounts for leases.
Impact of adoption
The consolidated entity has adopted AASB 16: Leases retrospectively from 1 January 2019. In accordance with AASB 16.C7
the comparatives for the 2018 reporting period have not been restated.
The consolidated entity has recognised a lease liability and right-of-use asset for all leases recognised as operating leases
under AASB 117: Leases where the consolidated entity is the lessee.
There has been no significant change from prior year treatment for leases where the consolidated entity is a lessor.
Lease liabilities are shown at the present value of the remaining lease payments. The consolidated entity’s incremental
borrowing rate of 7% as at 1 January 2019 has been used to discount the lease payments.
The right-of-use assets which the consolidated entity entered into as a lessee in respect of its office premises was measured
at its carrying amount as if AASB 16: Leases had been applied since the commencement date, but discounted using the
consolidated entity’s weighted average incremental borrowing rate on 1 January 2019.
The right-of-use assets for the remaining leases have been measured and recognised in the statement of financial position
as at 1 January 2019 by taking into consideration the lease liability and the deferred rental (that are related to the lease).
The following practical expedients have been used by the consolidated entity in applying AASB 16 for the first time:
●
●
●
●
●
For a portfolio of leases that have reasonably similar characteristics, a single discount rate has been applied.
Leases that have remaining lease term of less than 12 months as at 1 January 2019 have been accounted for in the
same was as short-term leases.
The use of hindsight to determine lease terms on contracts that have options to extend or terminate.
Applying AASB 16 to leases previously identified as leases under AASB 117: Leases and Interpretation 4: Determining
whether an arrangement contains a lease without reassessing whether they are, or contain, a lease at the date of initial
application.
Not applying AASB 16 to leases previously not identified as containing a lease under AASB 117 and Interpretation 4.
The difference between the undiscounted amount of operating lease commitments at 31 December 2019 of $1,268,252 and
the discounted operating lease commitments as at 1 January 2019 of $1,093,168 was $175,084 which is due to discounting
the operating lease commitments at the consolidated entity's incremental borrowing rate.
21
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 1. Significant accounting policies (continued)
The right of use asset relates solely to the leased office premises occupied by the consolidated in the United States.
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 $7,844,962 for the period ended 31 December 2019 (2018: $1,298,090), and had
a net working capital deficiency of $2,139,493 (2018: $1,472,456). In addition, the consolidated entity had negative cash
from operating activities of $9,275,305 (2018: $1,015,708).
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:
●
●
●
●
●
●
●
●
The company successfully completed its business pivot in 2019 from a B2C subscription only model to one that is
heavily focused on its B2B business while running its B2C business for maximum return on investment. In 2019 the
B2B business grew during its ‘proof of concept stage’ with an impressive and growing list of customers, big and small;
The company’s products are selling extremely well at retail as evidenced by the company’s top customers reordering
at a 90% rate on a monthly/quarterly basis and is on track to scale revenues significantly in 2020;
Improving gross margins, an improved financial position and a lean operating structure have the company poised to
eliminate cash burn throughout 2020 as it targets profitability later this year;
The consolidated entity has received term sheets from accounts receivable and purchase order lenders to provide
additional working capital to the business based on the value of these assets;
Since 31 December 2019, the company has issued 55,068,023 fully paid ordinary shares with a value of $3,761,791 to
settle various current liabilities;
Since 31 December 2019, the company has announced that it has received additional convertible bridging finance of
US$ 1,250,000 to assist with working capital requirements. The board is in discussions with other parties relating to
further funding;
Since 31 December 2019, the consolidated entity has entered into a non-binding term sheet with an inventory financing
lender of up to US $1,500,000; and
The company has the ability to raise additional capital under its 15% general placement capacity and is currently
negotiating with several parties about securing additional equity investment in the company.
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 board are still reviewing the
impact that COVID-19 will have on the consolidated entity. Refer to note 30 for the company' response to date and summary
of expected impacts.
In the event that consolidated entity is unsuccessful in implementing the above-stated initiatives, a material uncertainty exists,
that may cast significant doubt on the consolidated entity's ability to continue as a going concern and its ability to recover
assets and discharge liabilities in normal course of business and at the amounts shown in the financial report.
Should the consolidated entity be unable to continue as a going concern it may be required to realise its assets and discharge
its liabilities other than in the normal course of business and at amounts different from those stated in the financial
statements.
Reporting period
The company was incorporated on 24 October 2018. This comparative information covers the period from that date until 31
December 2018.
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').
22
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 1. Significant accounting policies (continued)
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.
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 28.
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 2019 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.
The consolidated entity operates the business of selling candies. During the year it commenced its B2B business and
currently manages this business line as part of the overall candy selling business, whereby no discrete financial information
between the B2C and B2B lines is maintained other than the revenue generated. The Board being the chief operating
decision maker monitors the financial performance and position of the group as a whole and not by the business line. To this
end, the group has been assessed as one business segment during the year ended 31 December 2019.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Candy Club Holdings Limited's functional and
presentation currency.
23
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 1. Significant accounting policies (continued)
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.
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 recognised as a 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.
24
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 1. Significant accounting policies (continued)
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
●
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
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.
25
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 1. Significant accounting policies (continued)
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.
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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at
the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to
profit or loss as incurred.
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.
26
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 1. Significant accounting policies (continued)
Contract liabilities
Contract liabilities represent the consolidated entity's obligation to transfer goods or services to a customer and are
recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its
unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services
to the customer.
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.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of
fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is
reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on
an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset
is fully written down.
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.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past
event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to
settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The
increase in the provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
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.
27
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
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 2019. The
consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations.
28
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
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.
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. 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.
The consolidated entity operates the business of selling candies. During the year it commenced its B2B business and
currently manages this business line as part of the overall candy selling business, whereby no discrete financial information
between the B2C and B2B lines is maintained other than the revenue generated. The Board being the chief operating
decision maker monitors the financial performance and position of the group as a whole and not by the business line. To this
end, the group has been assessed as one business segment during the year ended 31 December 2019. Refer to note 4 for
split of total revenue per business line.
29
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 4. Revenue
Revenue from contracts with customers
Sales of goods
Other revenue
Other revenue
Revenue
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
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
6,769,098
1,037,442
29,622
-
6,798,720
1,037,442
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
5,192,659
1,576,439
950,168
87,274
6,769,098
1,037,442
6,769,098
1,037,442
Timing of revenue recognition
Goods transferred at a point in time - being when shipped and ownership transfers
6,769,098
1,037,442
Note 5. Other income
Gain on early termination of lease
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
123,596
-
30
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 6. Expenses
Loss before income tax includes the following specific expenses:
Depreciation
Plant and equipment
Right of use assets
Total depreciation
Amortisation
Intangible assets
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable on borrowings
Interest and finance charges paid/payable on lease liabilities
Non cash finance charges relating to conversion of short-term debt
Finance costs expensed
Note 7. 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 30%
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
31
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
38,519
191,478
6,368
-
229,997
6,368
26,881
-
256,878
6,368
290,481
61,980
279,043
20,345
-
-
631,504
20,345
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
(7,844,962)
(1,298,090)
(2,353,489)
(389,427)
611,460
1,927,617
(498,395)
285,436
27,371
88,915
390,178
(110,344)
17,344
3,334
-
-
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 7. Income tax expense (continued)
Australian tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
960,208
8,753
288,062
2,626
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.
US tax losses
The company's US subsidiaries have total tax losses valued at $11,449,167 (2018: $7,512,522) 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 8. Current assets - trade and other receivables
Trade receivables
Other receivables
BAS receivable
Consolidated
2019
$
2018
$
218,243
126,627
9,733
56,629
107,628
8,209
354,603
172,466
Refer to note 22 for information on credit risk. No allowance for credit loss has been recognised as none of the balances are
considered impaired.
Note 9. Current assets - inventories
Stock on hand - at cost
Less: Provision for impairment
Consolidated
2019
$
2018
$
4,344,441
(922,066)
2,484,762
(35,264)
3,422,375
2,449,498
32
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 10. Current assets - other
Prepayments
Prepaid IPO costs
Consolidated
2019
$
2018
$
105,213
-
83,205
761,800
105,213
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 11. Non-current assets - right-of-use assets
Land and buildings - right-of-use
Less: Accumulated depreciation
Plant and equipment - right-of-use
Consolidated
2019
$
2018
$
393,671
(25,674)
367,997
231,049
599,046
-
-
-
-
-
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period are set out
below:
Consolidated
Balance at 24 October 2018
Balance at 31 December 2018
Additions
Early termination of lease
Recognised on adoption of AASB 16
Depreciation expense
Land and Plant and
buildings
equipment
$
$
Total
$
-
-
-
-
393,671
(836,520)
1,002,324
(191,478)
-
231,049
-
-
-
-
624,720
(836,520)
1,002,324
(191,478)
Balance at 31 December 2019
367,997
231,049
599,046
Note 12. Non-current assets - other
Security deposits
Consolidated
2019
$
2018
$
35,684
75,684
33
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 13. Current liabilities - trade and other payables
Trade payables
Funds received ahead of shares issued *
Interest payable **
Other payables
Consolidated
2019
$
2018
$
2,040,282
1,500,000
120,383
581,796
2,826,440
-
9,470
1,363,393
4,242,461
4,199,303
Refer to note 22 for further information on financial instruments.
All trade and other payables are unsecured liabilities and recognised at amortised cost.
* This amount was reclassified as issued capital subsequent to 31 December 2019 as outlined in note 30. The shares were
issued to a member of key management personnel. Refer to note 27.
** Represents accrued interest payable on bridging finance, refer to note 15. The majority of the interest payable was to key
management personnel refer to note 27.
Note 14. Current liabilities - contract liabilities
Contract liabilities
Note 15. Current liabilities - borrowings
Bridging finance - from director related entities
Loan facility - CircleUp
Consolidated
2019
$
2018
$
-
174,551
Consolidated
2019
$
2018
$
1,622,407
611,614
578,067
-
2,234,021
578,067
Refer to note 22 for further information on financial instruments.
The bridging finance includes a balance of $1,500,000 with interest payable at 2% per month and lines fees of 3% on the
principle sum. Interest is payable on the remainder of the balance at 10% per annum accruing daily. An amount of $87,005
has been offset against this amount representing the fair value of the options as part of the amortised cost calculation. This
amount has been reclassified to issued capital post 31 December 2019. Refer to note 30. These loans may be converted
into fully paid ordinary shares at the discretion of the lender at share price of $0.08 subject to shareholder approval.
CircleUp provided a revolving line of credit to Candy Club based on the company’s Direct-To-Consumer (DTC) cash flows. An
initial Maximum Facility Amount of US$1,000,000 was approved, and CircleUp will seek to re-evaluate the maximum credit
limit on demand as Candy Club grows. Initial availability was US$700,000 based on DTC sales. Interest accrues daily as
simple interest (non-compounding) on the principal balance outstanding at a rate of Prime + 5%. During the twelve months
ended 30 June 2019, Candy Club paid interest of US$42,509 and has an outstanding principle balance of US$428,496 as
of 31 December 2019. The loan is secured against the assets of the consolidated entity's US subsidiaries. At 31 December
2019 these assets had a carrying value of $5,000,247. There have been no defaults on this loan during the year.
34
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 16. Current liabilities - lease liabilities
Lease liability
Refer to note 22 for further information on financial instruments.
Note 17. Current liabilities - provisions
Legal claims
Refer to note 25 for further details.
Consolidated
2019
$
2018
$
249,376
-
Consolidated
2019
$
2018
$
71,367
-
Legal claims
The provision represents a claim by a customer of the computer retailing division. This claim is expected to be settled in the
next financial year and the outcome of this claim is not expected to exceed the amount provided for, based on independent
legal advice.
Movements in provisions
Movements in each class of provision during the current financial period, other than employee benefits, are set out below:
Consolidated - 2019
Carrying amount at the start of the period
Additional provisions recognised
Carrying amount at the end of the period
Note 18. Non-current liabilities - lease liabilities
Lease liability
Refer to note 22 for further information on financial instruments.
Note 19. Equity - issued capital
Legal
claims
$
-
71,367
71,367
Consolidated
2019
$
2018
$
282,751
-
Ordinary shares - fully paid
174,911,079 106,726,399 21,736,694 16,132,144
Consolidated
2019
Shares
2018
Shares
2019
$
2018
$
35
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 19. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
Balance
Incorporation founder shares issued
Investment in Candy Club Holdings Inc
Conversion of debt
Settlement of liabilities
Cost of capital raising
Balance
IPO shares
Shares issued to lead manager
Conversion of debt
Rights issue
Rights issue
Settlement of trade creditors
Conversion of debt
Cost of capital raising
24 October 2018
24 October 2018
12 November 2018
13 November 2018
28 November 2018
31 December 2018
19 February 2019
19 February 2019
5 August 2019
5 August 2019
2 October 2019
7 November 2019
7 November 2019
-
20,001
75,303,017
29,488,494
1,914,887
-
106,726,399
25,120,020
7,244,312
9,832,832
4,804,856
19,125,000
825,000
1,232,660
-
-
200
$0.0100
$0.1465 11,031,892
4,818,420
$0.1634
298,148
$0.1557
(16,516)
$0.0000
$0.2000
$0.2000
$0.0800
$0.0800
$0.0800
$0.0800
$0.0327
$0.0000
16,132,144
5,024,004
1,448,862
786,627
384,388
1,530,000
66,000
40,308
(3,675,639)
Balance
31 December 2019
174,911,079
21,736,694
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 20. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Commonly controlled reserve
Consolidated
2019
$
2018
$
(113,369)
3,063,391
(17,197,977)
(87,122)
1,126,622
(17,197,977)
(14,247,955)
(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.
36
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 20. Equity - reserves (continued)
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.
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 and previous financial period are set out below:
Consolidated
Balance at 24 October 2018
Foreign currency translation
Commonly controlled acquisition
Share based payments
Balance at 31 December 2018
Foreign currency translation
Share based payments
Foreign
currency
$
Share based Commonly
payments
controlled
$
$
Total
$
-
(87,122)
-
-
(87,122)
(26,247)
-
-
-
1,083,131
43,491
-
-
(17,197,977)
-
-
(87,122)
(16,114,846)
43,491
1,126,622
-
1,936,769
(17,197,977)
-
-
(16,158,477)
(26,247)
1,936,769
Balance at 31 December 2019
(113,369)
3,063,391
(17,197,977)
(14,247,955)
Note 21. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial period.
Note 22. 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.
37
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 22. Financial instruments (continued)
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 using US dollar
denominated receipts.
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.
The carrying amount of the consolidated entity's foreign currency denominated assets and liabilities at the reporting date
were as follows:
Consolidated
US dollars
Assets
Liabilities
2019
$
2018
$
2019
$
2018
$
4,251,639
2,850,047
3,651,263
4,584,082
Consolidated - 2019
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
AUD strengthened
Effect on
AUD weakened
Effect on
US dollars
20%
-
120,075
20%
-
(120,075)
Consolidated - 2018
% 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 exposed to credit risk in relation to it business to business customers, which
represented 23.29% (2018: 8.41%) of revenue from customers. 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
2019 was $218,243 (2018: $56,629). There was no impairment of trade receivables during the period. Average credit terms
are 30 days.
The consolidated entity credit risk by country is summarised below:-
38
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 22. Financial instruments (continued)
Australia
United States
Consolidated
2019
$
2018
$
9,733
344,870
8,209
164,257
354,603
172,466
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.
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 - 2019
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Funds received ahead of shares
issued
Interest-bearing - fixed rate
Bridging loans
Bridging loans
Loan facility
Total non-derivatives
-
-
-
2,040,282
702,179
1,500,000
10.00%
24.00%
9.75%
122,614
1,500,000
611,614
6,476,689
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,040,282
702,179
1,500,000
122,614
1,500,000
611,614
6,476,689
Consolidated - 2018
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.
39
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 22. Financial instruments (continued)
Measurement of financial assets
The totals for each category of financial instruments, measured in accordance with AASB 9: Financial Instruments as detailed
in the accounting policies to these financial statements, are as follows:
Financial assets
Financial assets measured at amortised cost
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Borrowings
Total financial liabilities
Consolidated
2019
$
2018
$
775,541
344,870
12,496
164,257
1,120,411
176,753
Consolidated
2019
$
2018
$
4,242,461
2,234,021
4,199,303
578,067
6,476,482
4,777,370
Note 23. 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
Post-employment benefits
Share-based payments
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
476,694
7,270
318,702
76,190
-
12,993
802,666
89,183
40
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 24. 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 25. Contingent liabilities/assets
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
40,450
26,000
-
-
-
3,500
27,500
31,000
40,450
57,000
96,389
66,500
The consolidated entity is currently defending a litigation claim brought against the consolidated entity by a former employee
in relation to their past employment. The consolidated entity has received legal advice that it has a strong case and has
instructed its legal counsel settle matter for a specified amount for which it has been accrued for. The matter is expected to
settle within the next 12 months. In the event that the matter is settled for an amount different to that accrued refer to note
17, the consolidated entity may be exposed to a contingent asset/liability.
The consolidated entity does not have any other contingencies.
Note 26. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$
2018
$
-
-
264,836
1,003,416
-
1,268,252
The consolidated entity's lease obligations are now recorded in the statement of financial after the adoption of the AASB 16
Leases.
Note 27. Related party transactions
Parent entity
Candy Club Holdings Limited is the parent entity.
41
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 27. Related party transactions (continued)
Subsidiaries
Interests in subsidiaries are set out in note 29.
Key management personnel
Disclosures relating to key management personnel are set out in note 23 and the remuneration report included in the
directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Other expenses:
Finances costs to key management personnel and their related entities.
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
159,119
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:
Current payables:
Other payables to key management personnel
Interest payable to key management personnel and their related entities
Funds received ahead of shares issued
Consolidated
2019
$
2018
$
274,225
117,632
1,500,000
574,703
9,470
-
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Current borrowings:
Loans from key management personnel and their related entities *
Consolidated
2019
$
2018
$
1,622,407
578,067
*
The bridging finance includes a balance of $1,500,000 with interest payable at 2% per month. Interest is payable on
the remainder of balance at 10% accruing daily. An amount of $87,005 has been offset against this amount representing
the fair value of the options which has not been issued at 31 December 2019, which related to this bridging finance.
42
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 27. Related party transactions (continued)
The movement in the loans from key management personnel and their related entities are
summarised as follows
Opening balance
New loans and accrued interest during the year
Conversion of loans into equity during the year
Fair value of options offset against carrying value of the loans
Repayment of loan
Non cash interest
Note 28. 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 loss
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity/(deficiency)
Consolidated
2019
$
2018
$
578,067
2,545,160
(788,159)
(413,637)
(578,067)
279,043
-
578,067
-
-
-
-
1,622,407
578,067
Parent
24 Oct 2018
to 31 Dec
2018
$
2019
$
(26,317,368)
(57,812)
(26,317,368)
(57,812)
Parent
2019
$
2018
$
406,092
777,453
406,092 16,305,725
3,428,713
231,392
3,428,713
231,392
21,807,919 16,132,145
-
(57,812)
1,544,641
(26,375,181)
(3,022,621) 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 2019 and 31 December
2018.
43
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 28. Parent entity information (continued)
Contingent liabilities
The parent entity had no contingent liabilities as at 31 December 2019 and 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 2019 and 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 29. 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
2018
2019
%
%
100.00%
100.00%
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:
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
44
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)
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 29. Interests in subsidiaries (continued)
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 17)
Total reserve recognised (Note 18)
Note 30. Events after the reporting period
Other reserve
6,166,085
11,031,892
17,197,977
On 17 January 2020, the company issued 55,068,023 fully paid ordinary shares with a value of $3,761,791 to settle various
current liabilities. In addition the company issued 27,774,939 listed options (ASX : CLBO). The options have an exercise
price of 10 cents and are exercisable at any time expiring on 31 May 2023.
On 17 January 2020, the company has 18,700,000 unlisted options as remuneration to key management personnel. These
options have a value of $352,093.
On 29 January 2020, the company announced that the company had received convertible debt totalling US$600,000 from
directors and major shareholders. Interest is payable 1% per month and the balance is convertible into shares $0.125 per
share at the holder's option.
On 18 March 2020, the company announced that it had entered into a non-binding term sheet with an inventory financing
lender of up to US $1.5 million.
On 18 March 2020, the company announced that it has entered into additional bridging loans with directors totalling US
$650,000. The loans will carry a 12% annual interest rate and can be converted into shares at conversion price of $0.04 per
shares. A listed Candy Club Holding Option (ASX: CLBO) will be included for each converted share.
During the week beginning 16 March 2020, the US, state and local governments announced a series of measures aimed at
preventing the spread of COVID-19 (“measures”), which had the subsequent effect of impacting the state of the US economy
(i.e. impact on supply chain, customers, availability of finance, consumer confidence, etc.).
In addressing and implementing the necessary changes to ensure Candy Club comply with these measures, the Board has
agreed to implement, amongst others, the following:
●
●
●
●
Enacting Candy Club’s stated business continuity plan of enabling all Company employees, including head office and
sales staff, to work remotely, until further notice;
To date, no business interruptions have occurred in either the Company’s warehousing and distribution centre
operations, located primarily in Indiana, nor in its supply chain of core product or packaging vendors, as we and our
facility are classified as a food manufacturer and currently considered “essential critical business infrastructure”; given
the fluidity of the situation this is subject to change in the future;
There are segments of the Company’s business that will be negatively impacted by these events, such as sales to retail
stores and hospitality outlets, and segments that may not be negatively impacted and could actually see an uptick as a
result of these measures, including e-commerce and grocery customers. It is still too early to tell how 2020 revenue,
earnings and cash flow will be impacted by the measures required by COVID-19; and
Requested management review and revise Candy Club’s 2020 operating plans, including operating expense
management solutions and associated cashflow budget, which is still on-going.
Management is still in the process of quantifying the other possible impacts associated with implementing these measures.
Management also recognises that the situation associated with the management of COVID-19 continues to evolve on a daily
basis and it is difficult to estimate with any degree of certainty the resulting impact (financial and operational) which this may
have on Candy Club and its future results and financial position.
No other matter or circumstance has arisen since 31 December 2019 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.
45
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 31. Reconciliation of loss after income tax to net cash used in operating activities
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
Loss after income tax expense for the period
(7,844,962)
(1,298,090)
Adjustments for:
Depreciation and amortisation
Share-based payments
Accrued interest
Settlement of operating liabilities through issue of shares
Non-cash finance costs
Gain on early termination of lease
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in inventories
Increase in other operating assets
Increase/(decrease) in trade and other payables
Increase in other provisions
Decrease in other operating liabilities
256,878
746,733
110,912
66,000
279,043
(123,596)
(182,137)
(972,877)
(22,008)
(1,486,107)
71,367
(174,551)
6,368
43,491
20,345
-
-
-
13,835
(28,682)
(1,276)
235,563
-
(7,263)
Net cash used in operating activities
(9,275,305)
(1,015,709)
Note 32. Non-cash investing and financing activities
During the year, the company issued 19,134,804 fully paid ordinary shares settling liabilities valued at $2,341,780.
Note 33. Changes in liabilities arising from financing activities
Consolidated
Balance at 24 October 2018
Net cash from financing activities
Interest accrued
Balance at 31 December 2018
Net cash from/(used in) financing activities
Recognised on adoption of AASB 16
Additions
Early termination of lease
Other changes
Leases
$
Loan
Facility
$
Bridging
loans
$
Total
$
-
-
-
-
-
-
-
567,192
10,875
-
567,192
10,875
-
(235,745)
1,097,102
393,671
(722,901)
-
-
611,614
-
-
-
-
578,067
1,967,093
-
-
-
(922,753)
578,067
2,342,962
1,097,102
393,671
(722,901)
(922,753)
Balance at 31 December 2019
532,127
611,614
1,622,407
2,766,148
46
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 34. Earnings per share
Consolidated
24 Oct 2018
to 31 Dec
2018
$
2019
$
Loss after income tax attributable to the owners of Candy Club Holdings Limited
(7,844,962)
(1,298,090)
Weighted average number of ordinary shares used in calculating basic earnings per share
145,612,717 74,925,607
Weighted average number of ordinary shares used in calculating diluted earnings per share 145,612,717 74,925,607
Number
Number
Basic earnings per share
Diluted earnings per share
Note 35. Share-based payments
Cents
Cents
(5.39)
(5.39)
(1.73)
(1.73)
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.
The terms of options are as follows:
2019
Balance at
the start of Granted
the period
Granted on Balance at
the end of
acquisition of
the period
CCH
2,357,284
2,357,284
2,738,165
2,738,165
-
-
5,095,449
5,095,449
Weighted average exercise price
$0.5479
$0.1504
$0.0000
$0.3343
47
Candy Club Holdings Limited
Notes to the consolidated financial statements
31 December 2019
Note 35. Share-based payments (continued)
2018
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
$0.0000
$1.6577
$0.5050
$0.5479
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 weighted average remaining contractual life of options outstanding at the end of the financial period was 2.54 years
(2018: 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
03/07/2019
14/11/2019
27/03/2023
23/10/2023
$0.1784
$0.1056
$0.2140
$0.0990
5.00%
5.00%
-
-
5.00%
5.00%
$0.069
$0.048
48
Candy Club Holdings Limited
Directors' declaration
31 December 2019
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 2019 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
31 March 2020
49
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 statement of financial position as at 31
December 2019, the statement of profit or loss and other comprehensive income, the statement of
changes in equity and the statement of cash flows for the year 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 2019 and of its
financial performance for the year 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 Related to 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 $7,844,962 (2018: loss of $1,298,090) during the year
ended 31 December 2019 and, as of that date, the current liabilities exceeded its current assets by
$2,139,493 (2018: $1,472,456). In addition, the Group’s net liabilities position as at 31 December
2019 was $1,673,636 (2018: 1,324,423). 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.
Emphasis of Matter - Effects of COVID-19
We draw attention to Note 30 Events after the reporting period to the financial statements, which
describes the uncertainties and possible effects on the Group arising from its management of the
on-going issues related to COVID. 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, we have determined the matters described below to be the
key audit matters to be communicated in our report.
Key Audit Matter
Inventory
Refer to note 9 - Inventories
The Group’s inventory balance of $3,422,375 is
significant to the financial statements and has
increased by $972,877 from the prior year, after
allowing for an increase in provision of $886,802).
The Group’s
includes
packaged candy canisters and raw materials.
inventory predominately
Inventory is required to be recorded at the lower of
cost and net realisable value applying the weighted
average cost method.
involves significant
inventory
The valuation of
judgement by management as value depends on
the age and type of packaged candy canisters and
raw materials.
How our audit addressed the key audit
matter
Our audit procedures included:
A physical verification of inventory at the
material location within the Group;
Performance of cut-off testing for both
inwards and outwards goods around the
year end date;
A review of subsequent product sales to
ensure inventory was valued at the lower
of cost and net realisable value, the
aging and condition of the inventory.
We evaluated management’s judgement
the
and assumptions
valuation of the inventory at balance
date; and
in determining
We assessed management’s judgements
in relation to the need for provisioning
against the value of inventory as well as
the related calculations.
We also considered
the adequacy of
disclosures in relation to inventory in the
notes to 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 year ended 31 December 2019, 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.
2
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.
3
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 7 to 12 of the directors’ report for the
year ended 31 December 2019.
In our opinion, the Remuneration Report of Candy Club Holdings Limited for the year ended 31
December 2019 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
31 March 2020
Jude Lau
Partner
4
Candy Club Holdings Limited
Shareholder information
31 December 2019
The shareholder information set out below was applicable as at 4 March 2020.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Number
Number
of holders
of ordinary ordinary
shares
shares
of
1 to 1,000
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
6
18
69
1,225
62,463
633,158
217 10,160,199
163 219,122,057
473 229,979,102
39
-
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
% of total
shares
issued
Number held
JCKB PTY LTD
CITICORP NOMINEES PTY LIMITED
INSTANZ NOMINEES PTY LTD (HEARTS A/C)
CHI KAN TANG
SABONE INTERNET INVESTMENTS LLC
JAMES CLIVE KNOX BAILLIEU
BEDWELL PTY LTD (BEDWELL DISCRETIONARY A/C)
KEC VENTURES II LP
10 BOLIVIANOS PTY LTD
SKYMAKER PTY LTD
HAMILTON HAWKES PTY LTD (WHITCOMBE FAMILY A/C)
MUTUAL TRUST PTY LTD
CROSSCUT VENTURES 3 LP
CHRIS BOLLENBACH
EQUITAS NOMINEES PTY LIMITED (PB-600687 A/C)
T G F HOLDINGS (QLD) PTY LTD (T FORD SUPERANNUATION A/C)
MR MICHAEL JOHN FIMERI
CERDIK
MR DEAN RODNEY RYAN & MRS JULIA LEONIE YAN (DEAN RYAN SUPER A/C)
BUMBLETON PTY LTD (WILLIAM COATS S/F A/C)
49,300,514
20,043,465
12,562,500
12,498,117
9,457,221
8,712,910
5,506,509
5,322,351
4,845,734
3,450,300
3,305,000
3,100,000
2,804,870
2,634,241
2,572,250
2,505,982
2,390,500
2,352,436
2,204,995
2,179,026
21.44
8.72
5.46
5.43
4.11
3.79
2.39
2.31
2.11
1.50
1.44
1.35
1.22
1.15
1.12
1.09
1.04
1.02
0.96
0.95
Unquoted equity securities
Options over ordinary shares issued
54
157,748,921
68.60
Number
on issue
Number
of holders
25,795,449
54
Candy Club Holdings Limited
Shareholder information
31 December 2019
Substantial holders
Substantial holders in the company are set out below:
James Baillieu and JCKB Pty Ltd
Chi Kan Tang
Instanz Nominees Pty Ltd ATF Hearts A/C and associates
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
shares
issued
Number held
58,013,424
29,513,501
13,598,575
25.23
12.83
5.91
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.
55