Frugl Group Limited
Annual Report 2022

Plain-text annual report

ACN 096 870 978 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2022 TABLE OF CONTENT DIRECTORS’ REPORT .................................................................................................................... 2 REMUNERATION REPORT (AUDITED) ........................................................................................... 4 AUDITOR’S INDEPENDENCE DECLARATION ............................................................................. 17 DIRECTORS’ DECLARATION ...................................................................................................... 18 INDEPENDENT AUDITOR’S REPORT ............................................................................................ 19 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME . 22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................... 23 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ............................................................ 24 CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................ 25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ........................................................ 26 ADDITIONAL SHAREHOLDERS’ INFORMATION ......................................................................... 48 CORPORATE DIRECTORY Non-Executive Chairman Managing Director and Chief Executive Officer Non-Executive Director BOARD OF DIRECTORS Mr Jonathon Wild Mr Sean Smith Mr Mathew Walker COMPANY SECRETARY Mr Steve Samuel REGISTERED OFFICE Suite 9, 330 Churchill Avenue Subiaco WA 6008 AUSTRALIA PRINCIPAL PLACE OF BUSINESS Suite 9, 330 Churchill Avenue Subiaco WA 6008 AUSTRALIA POSTAL ADDRESS PO Box 866 Subiaco WA 6904 AUSTRALIA CONTACT INFORMATION +61 8 6489 1600 (Telephone) +61 8 6489 1601 (Facsimile) info@fruglgroup.com www.fruglgroup.com EXCHANGE Australian Securities Exchange (ASX) Level 40, Central Park 152-158 St George's Terrace Perth WA 6000 ASX Codes: FGL (Shares), FGLOA (Options) AUDITORS HLB Mann Judd (WA Partnership) Level 4 130 Stirling Street Perth WA 6000 LAWYERS Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street Perth WA 6000 AUSTRALIA SHARE REGISTRY Automic Group Level 2, 267 St Georges Terrace, Perth WA 6000 AUSTRALIA 1300 288 664 (Telephone) hello@automic.com.au www.automic.com.au FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 1 DIRECTORS’ REPORT The directors of Frugl Group Limited (ASX: FGL) (Company or Frugl) submit herewith the annual financial report of the Company and its controlled entities (Group) for the financial year ended 30 June 2022. DIRECTORS The names and particulars of the directors of the Company in office during the year and until the date of this report are as follows. Directors were in office for the entire year unless otherwise stated. MR JONATHON WILD NON-EXECUTIVE CHAIRMAN Jon Wild has been a marketing leader for the past twenty years across a diverse range of categories and companies including Unilever, British Telecom (where he launched the O2 brand in Europe), Telstra, Orbitz Worldwide and more recently at Groupon (NASDAQ:GRPN) in roles including CMO (APAC) and VP of Marketing (North America). Jon has extensive mobile, digital and commercial experience having led marketing strategy from start-ups to large multinational corporate organisations. His passion for disruptive narratives combined with a strong understanding of how technology is constantly changing the interaction between people, brands and business have built Jon’s international reputation for marketing strategy leadership. Jon has not been a director of any other listed entity in the last three years. MR SEAN SMITH MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER Sean Smith has almost two decades of experience growing and leading teams for a range of different sized businesses including ASX listed Australian companies, NYSE-listed global businesses and one of Australia’s privately funded start-up success stories. Most recently as Head of Customer Experience for Woolworth’s Endeavour Drinks Group across its portfolio of liquor brands including Dan Murphy's, Cellarmasters, Langtons, WineMarket and BWS, Sean built customer experience and analytics teams focused on increasing customer retention, value and sustained profitability in a fast paced and crowded market environment. Sean’s extensive experience in the Australian marketplace includes Head of Marketing for online restaurant booking app, Dimmi, where he successfully launched the consumer proposition focusing on customer acquisition, retention and value growth. He led brand, communications and data strategy for HotelClub, an online hotel booking site owned by multinational travel business Orbitz Worldwide, where his focus included customer lifecycle strategy, customer experience and owned media commercialisation. Sean’s experience and expertise includes general management, P&L responsibility, omni-channel retail, customer experience, data strategy, marketing technology and marketing strategy. Sean has not been a director of any other listed entity in the last three years. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 2 DIRECTORS’ REPORT (CONTINUED) MR MATHEW WALKER NON-EXECUTIVE DIRECTOR Mathew Walker is a businessman and entrepreneur with extensive experience in the management of public and private companies, corporate governance and in the provision of corporate advice. In a management career spanning three decades, Mathew has served as executive Chairman or Managing Director for public companies with operations in North America, South America, Africa, Eastern Europe, Australia and Asia. Mathew is the co-founder and Chairman of the Cicero Advisory Services Pty Ltd (Cicero Advisory). He is also a director of eMetals Limited (ASX: EMT) and Blaze Minerals Limited (ASX: BLZ), and co- founder and director of the Stone Axe Pastoral Company. Mathew has been a director of the following listed entities in the last three years: eMetals Limited (appointed 29 July 2012) Blaze Minerals Limited (appointed 22 July 2020) MR STEVE SAMUEL COMPANY SECRETARY (Appointed 4 November 2021) Steve Samuel is a Chartered Accountant who commenced his career at a large international accounting firm and has since been involved with a number of technology start-up companies, based in Australia. DIRECTORS’ SHAREHOLDINGS The following table sets out the current directors’ relevant interests in shares and options of Frugl Group Limited at the date of this report and the relevant changes since 30 June 2021: Directors Mr Jonathon Wild Mr Sean Smith Mr Mathew Walker Ordinary Shares At Date of Report Net increase/ (decrease) Options over Ordinary Shares Net increase/ At Date of (decrease) Report 7,500,000 165,000 40,000,000 2,500,000 - 15,000,000 3,000,000 6,000,000 - (2,520,000) (4,035,000) (4,000,000) REMUNERATION OF KEY MANAGEMENT PERSONNEL Information about the remuneration of key management personnel is set out in the remuneration report on pages 4 - 9. The term ‘key management personnel’ refers to those persons having authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Company. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 3 REMUNERATION REPORT (AUDITED) The remuneration report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration B. Details of remuneration C. Share-based compensation D. Directors’ equity holdings E. Relationship between the remuneration policy and company performance The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. A. PRINCIPLES USED TO DETERMINE NATURE & AMOUNT OF REMUNERATION The whole Board form the Remuneration Committee. The remuneration policy has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component with the flexibility to offer specific long-term incentives based on key performance areas affecting the Group’s financial results. The Board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors and executives to manage the Group. The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives is as follows: • • • • The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the Board. All executives receive a base salary (which is based on factors such as length of service and experience) and superannuation. The Board reviews executive packages annually and determines policy recommendations by reference to executive performance and comparable information from industry sectors and other listed companies in similar industries. The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and retain the highest calibre of executives and reward them for performance that results in long term growth in shareholder wealth. The directors and executives who receive the superannuation guarantee contribution, as required by the government, received 10% of base salary for the year ended 30 June 2022 and do not receive any other retirement benefits. The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive directors and reviews the remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required, which during the year none was required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting and is presently limited to $250,000. Fees for non-executive directors are not linked to the performance of the Group. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 4 REMUNERATION REPORT (AUDITED) • • In determining the level and make-up of executive remuneration, the Board negotiates a remuneration to reflect the market salary for a position and individual of comparable responsibility and experience. Due to the limited size of the Group and of its operations and financial affairs, the use of a separate remuneration committee is not considered appropriate. Remuneration is regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. If required, the Board may engage an external consultant to provide independent advice in the form of a written report detailing market levels of remuneration for comparable executive roles. No external remuneration consultant was used during the year. All remuneration paid to Directors and Executives is valued at the cost to the Group and expensed. Options are valued using the Black-Scholes methodology. The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and directors and executive performance. Currently, this is facilitated through the issue of options to the directors and executives to encourage the alignment of personal and shareholder interests. The Group believes this policy will be effective in increasing shareholder wealth. The Group currently has no performance-based remuneration component built into director and executive remuneration packages. NON-EXECUTIVE DIRECTORS The remuneration of Non-Executive directors consists of directors’ fees, payable in advance. Remuneration of Non-Executive directors is based on fees approved by the Board of directors and is set at levels to reflect market conditions and encourage the continued services of the directors. Non-Executive directors do not receive retirement benefits but are able to participate in share- based incentive programmes in accordance with Company policy. The Group’s Non-Executive directors are eligible to receive fees for their services in addition to their role and the reimbursement of reasonable expenses. OTHER BENEFITS No other benefits were paid to Non-Executive directors during the year. SERVICE CONTRACTS The Group has entered into services agreements with its executive Director and key management personnel (KMP). The Group has also entered into Non-Executive Director appointment letters outlining the policies and terms of the appointment including compensation to the office of Director. The principal terms of the executive service agreements existing at reporting date are set out below: MR JONATHON WILD NON-EXECUTIVE CHAIRMAN The Group entered into a consultancy agreement with Mr Jon Wild in respect of his appointment as a Non-Executive Chairman of the Group. Mr Wild is paid a fee of $96,000 per annum for his services as Non-Executive Chairman and is reimbursed for all reasonable expenses incurred in performing his duties. Payments for Mr Wild’s services are made to Wild Consulting, a related entity. The agreement may be terminated: (a) by providing the Group with written notice allowing reasonable time for the Group to plan for the departure; or in accordance with the law or the Company’s constitution. (b) FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 5 REMUNERATION REPORT (AUDITED) MR SEAN SMITH MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER The Group entered into an employment agreement with Mr Sean Smith in respect of his role as Managing Director and Chief Executive Officer of the Group. Mr Smith is paid a salary of $286,000 per annum (excluding superannuation) for his services as Managing Director and Chief Executive Officer. The agreement may be terminated: (a) by either party without cause with 3 months’ written notice or if the Group elects to with payment in lieu of notice; (b) by the Group, at any time with written notice and without payment (other than entitlements accrued to the date of termination) as a result of any occurrence which gives the Group a right of summary dismissal at common law; or (c) by Mr Smith immediately, by giving notice, if the Group is in breach of a material term of this agreement. MATHEW WALKER NON-EXECUTIVE DIRECTOR The Group entered into a consultancy agreement with Mr Mathew Walker in respect of his appointment as a Non-Executive Director of the Group. Mr Walker is paid a fee of $120,000 per annum for his services as Non-Executive Director and is reimbursed for all reasonable expenses incurred in performing his duties. Payments for Mr Walker’s services are made to Great Southern Flour Mills Pty Ltd, a related entity. The agreement may be terminated: (a) by providing the Group with written notice allowing reasonable time for the Group to plan for the departure; or in accordance with the law or the Group’s constitution. (b) B. DETAILS OF REMUNERATION Details of remuneration of key management personnel of Frugl Group Limited are set out below. The key management personnel of Frugl Group Limited are the directors as listed above. The Group does not have any other employees who are required to have their remuneration disclosed in accordance with the Corporations Act 2001. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 6 REMUNERATION REPORT (AUDITED) The table below shows the 2022 figures for remuneration received by the Group’s key management personnel: Directors 2022 Jonathon Wild(i) Sean Smith Mathew Walker(ii) Salary & Fees $ 96,000 279,500 120,000 495,500 Short-term Employee Benefits Superannuation $ Other Benefits $ Share- based Payments $ Post- employment Prescribed Benefits $ Total $ Performance Related % - 27,950 - 27,950 - - - - 12,000 24,000 - 36,000 - - - - 108,000 331,450 120,000 559,450 11% 7% 0% The table below shows the 2021 figures for remuneration received by the Group’s key management personnel: Directors 2021 Jonathon Wild(i) Sean Smith Mathew Walker(ii) Salary & Fees $ 96,000 260,000 120,000 476,000 Short-term Employee Benefits Superannuation $ Other Benefits $ Share- based Payments $ Post- employment Prescribed Benefits % Total $ Performance Related % - 24,700 - 24,700 - - - - - 13,810 18,414 32,224 - - - - 96,000 298,510 138,414 532,924 - 5% 13% Director fees for Jonathon Wild were paid to Wild Consulting Pty Ltd, a related entity of Mr Wild. (i) (ii) Director fees for Mathew Walker were paid to Great Southern Flour Mills Pty Ltd, a related entity of Mr Walker. RELATED PARTY TRANSACTIONS The Group entered into a mandate with Cicero Group Pty Ltd (CGC), a company related to Mr Walker for corporate administration services including financial reporting, company secretarial services, rent and administrative operations. CGC provided services to the amount of $120,000 (2021: $120,000). As at 30 June 2022 and 30 June 2021 no amounts were outstanding. Other than the above, no KMP has entered into a transaction with the Company. C. SHARE-BASED COMPENSATION Options can be issued to directors and executives as part of their remuneration. The options are based on performance criteria. During the 2022 financial year, 6,000,000 and 3,000,000 options exercisable at $0.10 on or before 20 July 2024 were issued to Mr Sean Smith and Mr Jonathon Wild, respectively. All options issued fully vested as no conditions were attached. No further options have been granted to directors since. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 7 REMUNERATION REPORT (AUDITED) Number of Options Issued 9,000,000 Grant Date Expiry Date Exercise Price Total Value(i) Recipient 19 Nov 2021 20 July 2024 $0.10 36,000 Directors (i) The fair value of the options at grant date was determined using the closing market price, on that date. D. DIRECTORS’ EQUITY HOLDINGS (i) Fully paid ordinary shares of Frugl Group Limited: The following fully paid ordinary shares were held directly, indirectly or beneficially by key management personnel and their related parties during the years ended 30 June 2022 and 30 June 2021: Directors 2022 Jonathon Wild Sean Smith Mathew Walker 2021 Jonathon Wild Sean Smith Mathew Walker Balance at 1 July No. Granted as remuneration No. 5,000,000 165,000 25,000,000 2,000,000 165,000 9,000,000 - - - - - - Acquired No. 2,500,000 - 15,000,000 3,000,000 - 16,000,000 Net other change* No. Balance at 30 June No. - - - - - - 7,500,000 165,000 40,000,000 5,000,000 165,000 25,000,000 (ii) Share options of Frugl Group Limited: The following options were held directly, indirectly or beneficially by key management personnel and their related parties during the years ended 30 June 2022 and 30 June 2021: Directors Balance at 1 July No. Granted as remuneration No. Options Exercised No. Options Lapsed(ii) No. Balance at 30 June No.(i) 5,520,000 10,035,000 4,000,000 2022 Jonathon Wild Sean Smith Mathew Walker 2021 Jonathon Wild Sean Smith Mathew Walker (i) Options are fully vested and exercisable. (ii) 5,520,000 7,035,000 - The options were valued at NIL when they lapsed. 3,000,000 6,000,000 - - 3,000,000 4,000,000 - - - - - - (5,520,000) (10,035,000) (4,000,000) - - - 3,000,000 6,000,000 - 5,520,000 10,035,000 4,000,000 FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 8 REMUNERATION REPORT (AUDITED) E. RELATIONSHIP BETWEEN THE REMUNERATION AND COMPANY PERFORMANCE Per the Group’s remuneration policy, directors’ remuneration can be linked to either short term or long-term performance conditions. The Board feels that other than the short-term incentives for the Group’s Managing Director and Chief Executive Officer, Mr Sean Smith, currently the terms and conditions of options and shares currently on issue to the directors are a sufficient incentive to align the goals of the directors with those of the shareholders to maximise shareholder wealth, and as such, has not set any performance conditions for the directors of the Group. The Board will continue to monitor this policy to ensure that it is appropriate for the Group in future years. The table below sets out summary information about the Group’s earnings and movement in shareholder wealth for the five years to 30 June 2022: Revenues from contracts with customers Loss from ordinary activities after tax attributable to members Net loss for the period attributable to members Share price at start of year ($) Share price at end of year ($) Basic & diluted profit/(loss) per share (i) Pre-consolidation basis (ii) Post-consolidation basis 30 June 2022 30 June 2021 30 June 2020 (ii) 30 June 2019(ii) 30 June 2018 (i) 142,827 27,286 5,772 10,887 12,220 (2,242,698) (1,230,250) (1,365,594) (3,182,653) (6,004,172) (2,242,698) (1,230,250) (1,365,594) (3,182,653) (6,004,172) 0.044 0.011 0.026 0.044 0.05 0.026 0.15 0.05 0.008 0.003 (0.012) (0.011) (0.02) (0.08) (0.006) ADOPTION OF REMUNERATION REPORT BY SHAREHOLDERS The adoption of the remuneration report for the financial year ended 30 June 2021 was put to the shareholders of the Group at the Annual General Meeting (AGM) held on 19 November 2021. 99.17% of votes were in favour of the resolution and the resolution was passed without amendment via a poll conducted at the meeting. The Group did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. - - END OF REMUNERATION REPORT - - FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 9 DIRECTORS’ REPORT (CONTINUED) AUDITOR’S INDEPENDENCE DECLARATION The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 17. DIRECTORS’ MEETINGS The following table sets out the number of Directors’ meetings held during the financial year ended 30 June 2022 and the number of meetings attended by each Director. During the period, 5 Board meetings were held. There is no separate nomination, remuneration or audit committee. Board Member Jonathon Wild Sean Smith Mathew Walker OPTIONS Board of Directors Eligible to Attend 3 3 3 Attended 3 3 3 Circular Resolutions Passed 1 1 1 At the date of this report 29,500,000 options over ordinary shares in the Group were on issue. As at 30 June 2022, options on issue are as detailed below. Type Expiry Date Exercise Price Number on issue Listed options (FGLOA) 20 July 2024 $0.10 29,500,000 PRINCIPAL ACTIVITIES The principal activities of the Group are the development, marketing and customer support of its grocery comparison and data analytics products and services. REVIEW OF OPERATIONS COMPANY OVERVIEW Frugl gathers product and pricing data from a range of retailers before further organising and enriching it via automated processing and advanced machine learning techniques. The data is then made available to shoppers via the Frugl Grocery mobile comparison and wellness app. Data collected from users via their usage of the app, which the Company harvests to develop retail intelligence in the form of behavioural and shopper segment data, forms the basis of its data analytics platform. The combined product, pricing and shopper data is then collated for use by the Company’s InFocus Analytics retail intelligence platform for commercial use by retailers, suppliers and other associated businesses. The below graphic outlines the Company’s avenues for commercialisation, providing an overview of the markets that the Company is working within. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 10 DIRECTORS’ REPORT (CONTINUED) Release of Version 3.0 of the Frugl Grocery App In January 2022, the Company completed the release of Version 3.0 of its Frugl Grocery comparison app. A refreshed user interface and mobile app utilising leading edge technologies including Flutter and Augmented Reality libraries has delivered substantial performance improvements and better user experience. Frugl Grocery added the capability to add unlimited retailers to the platform to enhance shopping options for users. Retailers may be within the grocery category, or any complementary categories the Company decides will add value to its users. Version 3.0 of the Frugl Grocery app has experienced record user growth following its release in January 2022. The refreshed user interface, addition of more retailers and substantial performance improvements have underpinned stronger user take up and retention of the Company’s leading grocery comparison app. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 11 DIRECTORS’ REPORT (CONTINUED) The unprecedented growth in Frugl Grocery app users has been supported by increasing press activity and the acknowledgement of Frugl’s role as an independent source of grocery insight and research. The substantial media activity across television, radio and online is helping to further establish the Frugl brand amongst shoppers, retail businesses, research organisations and journalists and plays an important role in the company’s future growth. Launch of the Frugl Grocery Price Index (Frugl GPI) Pricing and household basket analysis was undertaken on over two years of grocery data in readiness for the launch of the first quarterly Frugl GPI report subsequent to the year end, offering the public and grocery industry independent insights into grocery inflation at a total grocery, grocery category and demographic household level. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 12 DIRECTORS’ REPORT (CONTINUED) The initial launch on 20 July 2022, in conjunction with major media partnerships, was timed to come out a week prior to the official CPI announcement and has in its first week since launch generated unprecedented media attention, summarised as follows: FRUGL GPI PUBLISHED MEDIA Television & Radio Channel 9 Morning News (television, syndicated to 33 channels Australia-wide), SBS World News (television), TODAY Show (television), ABC Radio Sydney, Triple M Gold radio (plus 4 syndicated stations), KIIS FM Radio (plus 1 syndicated station), 2CC Canberra Radio, 5AA Radio, 4BC 1116 FM Radio (plus 4 syndicated stations), 4CA 846 AM radio, Newspapers The Australian (online), Daily Telegraph (print & online), The Herald Sun (print & online), The West Australian (online), Perth Now (online), Albany Advertiser (online), Courier Mail (online), Sound Telegraph (online), Broome Advertiser (online), Gold Coast Bulletin (print & online), Cairns Post (print & online), Townsville Bulletin (print & online), The Mercury (print), The Chronicle (online), The Advertiser (online), Geelong Advertiser (print & online), NTNews.com.au (online), Channel 9 Online (online), Australian Chinese Daily (online Chinese language), Melbourne Today (online Chinese language), Sydney Today (2 stories, online Chinese language), Australia Impressions (online Chinese language) Lifestyle Better Homes & Gardens (online & Pinterest), New Idea (online), That’s Life (print magazine), 9Honey|Kitchen (online), Convenience World Magazine (online), 1688.com.au (online Chinese language), WeSydney (online Chinese language) Finance & Trade Yahoo Finance Australia (online), Retail World Magazine (online), Savings.com.au (online), Beef Central (online) As was demonstrated during the period, media continues to be the key driver of user number growth on the Frugl Grocery app, with growing users key to the Company’s pathway to expanded commercialisation activities. It is anticipated the Frugl GPI will continue to drive media attention in the period ahead to support further user growth. Commercialisation On 16 August 2021, the Company announced that it had entered into an agreement with Millell Pty Ltd (Pet Circle) to supply ongoing data analytics on a range of markets relevant to its pet supplies business. The Services provided by Frugl will be powered by the Company’s InFocus Analytics platform that will empower the Pet Circle management to focus on their pricing strategies and tactics. Pet Circle is a rapidly expanding force in the pet supplies industry having launched ten years ago offering the first fully online store offering for customers in the pet supplies marketplace. The Business now has a base of 500,000 regular customers across Australia. The Company continues business development discussions with major retailers, consultants, suppliers and government agencies and is confident that it will deliver future quarterly revenue growth. In addition, the Company is in discussions with potential transactional partners for the Frugl Grocery app which will introduce new revenue streams for the Company heading into the next financial year. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 13 DIRECTORS’ REPORT (CONTINUED) CHANGES TO SECURITIES On 19 July 2021, the Company completed the allotment of 16,500,000 fully paid ordinary shares to professional and sophisticated investors at $0.05 per share, with 1-for-1 free attaching options exercisable at $0.10 within 3 years from the date of issue, to raise $825,000 (before costs). On 22 February 2022, the Company completed a Share Purchase Plan (“SPP”) and issued 21,550,000 fully paid ordinary shares to eligible shareholders at a price of $0.02 per share to raise $431,000. FINANCIAL REVIEW For the year ended 30 June 2022 the Group incurred a net loss of $2,242,698 (2021: $1,230,250), a net operating cash outflow of $1,916,969 (2021: $1,497,451), has net current liabilities of $830,825 (2021: net current assets $159,819) and net liabilities of $824,379 (2021: net assets $159,819). RISK MANAGEMENT The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned with the risks and opportunities identified by the Board. The key risks that the Board has currently identified are: Technology Risk Intellectual Property Rights • • • Competition Risk • Reliance on Key Personnel Risk The Group believes that it is crucial for all Board members to be part of the process of managing risks through governance and oversight, and as such the Board has not established a separate risk management committee. Furthermore, the Board has a number of mechanisms in place to ensure management’s objectives and activities are aligned to the Board. These include the following: • Board approval of a strategic plan, which encompasses strategy statements designed to • meet stakeholders needs and manage business risk. Implementation of Board approved operating plans and Board monitoring of the progress against budgets. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Group plans to release a fully operating version of the Frugl data comparison software for browser and phone-based users. This technology is expected to produce vast amounts of high- quality data that is valuable to large grocery retailers. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group’s activities to date have not been subject to any particular and significant environmental regulation under Laws of either the Commonwealth of Australia or a State or Territory of Australia. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 14 DIRECTORS’ REPORT (CONTINUED) SIGNIFICANT EVENTS AFTER THE BALANCE DATE On 18 July 2022, the Group entered into a binding loan facility agreement (“Facility”) with Mathew Walker, a Company director, available on call. The facility has a principal amount of $1,000,000, bears an interest rate of 1% per month payable monthly in arrears, secured against the Company’s 2022 Financial Year Research and Development Offset Rebate and repayable on the earlier of the Company completing a capital raising of no less than $1,000,000 and 30 June 2023. On 30 August 2022, the terms of the Facility were amended, with the maturity of the Facility now on the earlier of the Company successfully completing a capital raising of no less than $2,000,000 and 30 June 2023. As at 30 June 2022, the Company has drawn down $700,000 from this facility. On 20 July 2022, the Group announced that it has released its inaugural Frugl Grocery Price Index (“Frugl GPI”), nationally in partnership with News Ltd. The Frugl GPI is a quarterly report that provides a series of statistics that measure price changes over time on a selection of everyday grocery items. Released quarterly, the Frugl GPI reports on grocery inflationary changes at a topline level, whilst also revealing inflationary trends for a range of grocery categories and different shopper household types. On 28 September 2022, the Group announced that it has completed a non-renounceable entitlement offer (“Entitlement Offer”) to eligible shareholders on a 1 for 2 basis at $0.01 per Share raising $621,974 (before costs). INDEMNITIES AND INSURANCE OF DIRECTORS AND OFFICERS During the reporting period and up to the date of this report, the Group has paid premiums insuring all the directors of Frugl Group Limited against costs incurred in defending conduct involving a breach of duty and/or a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001. The Group has agreed to indemnify all directors and executive officers of the Group against liabilities to another person (other than the Group or a related body corporate) that may arise from their position as directors of the Group, except where the liability has arisen as a result of a wilful breach of duty in relation to the Group. The agreement stipulates that the Group will meet the full amount of any such liabilities, including costs and expenses. The Group has paid a total of $41,741 in insurance premiums, relating to Director and Officer insurance, during the financial year (2021: $25,673). INDEMNITIES OF AUDITORS No indemnities have been given or insurance premiums paid, during or since the end of the year, for any person who is or has been an auditor of the Group. DIVIDENDS No dividends were paid or declared during the financial year and no recommendation for payment of dividends has been made. NON-AUDIT SERVICES The Group may decide to employ the auditor on assignments additional to their statutory duties where the auditor’s expertise and experience with the Group and/or Group are important. No non- audit services were provided by the Group’s current auditors, HLB Mann Judd during the year. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 15 DIRECTORS’ REPORT (CONTINUED) COMPLIANCE CORPORATE GOVERNANCE STATEMENT The Board of Directors is responsible for the corporate governance of the Group. The Board guides and monitors the business affairs of the Group on behalf of the shareholders by whom they are elected and to whom they are accountable. The Corporate Governance policies and practices of the Group are reviewed annually in accordance with the standards required of the Group by the Directors, the ASX, ASIC and other relevant stakeholders, to ensure that the highest appropriate governance standards are maintained, commensurate with the size and operations of the Group. The ASX Corporate Governance Council released the fourth edition of its Corporate Governance Principles and Recommendations on 27 February 2019 to take effect for the first full financial year commencing on or after 1 July 2020. The Group’s Corporate Governance Statement, and associated policy documents complies as far as possible with the spirit and intentions of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations as appropriate, having regard to the size of the Group and the nature of its enterprise. The Corporate Governance Statement can be found on the Group’s web site: www.fruglgroup.com.au INDEPENDENT PROFESSIONAL ADVICE Directors of the Group are expected to exercise considered and independent judgement on matters before them and may need to seek independent professional advice. A director with prior written approval from the Chairman may, at the Group’s expense obtain independent professional advice to properly discharge his responsibilities. BOARD COMPOSITION The Board consists of one Executive and two Non-Executive Directors. Details of their skills, experience and expertise and the year of office held by each director have been included in the Directors’ Report. The number of Board meetings and the attendance of the directors are set out in the Directors’ Report. The Board will decide on the choice of any new director upon the creation of any new Board position and if any casual vacancy arises. Decisions to appoint new directors will be minuted. The Board considers that due to the size and complexity of the Group’s affairs it does not merit the establishment of a separate nomination committee. Until the situation changes the Board of the Group will carry out any necessary nomination committee functions. SHARE TRADING POLICY Directors, officers and employees are prohibited from dealing in the Group shares when they possess inside information. The Board is to be notified promptly of any trading of shares in the Group by any director or officer of the Group. This Directors’ report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001. For, and on behalf of, the Board of the Company, Jonathon Wild Chairman Perth, Western Australia this 29th day of September 2022. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 16 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Frugl Group Limited for the year ended 30 June 2022, 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. Perth, Western Australia 29 September 2022 N G Neill Partner FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 17 DIRECTORS’ DECLARATION The Directors declare that: (a) (b) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; in the Directors’ opinion, the attached consolidated financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with Australian Accounting Standards and International Financial Reporting Standards as disclosed in Note 2 and giving a true and fair view of the financial position of the Group as at 30 June 2022 and its performance for the year ended on that date; (c) the audited remuneration disclosures set out in the Directors’ Report comply with Accounting Standard AASB 124 Related Party Disclosures and the Corporations Act and Regulations 2001; and (d) the Directors have been given the declarations required by s.295A of the Corporations Act 2001 for the year ended 30 June 2022. Signed in accordance with a resolution of the Board of Directors made pursuant to s.295(5) of the Corporations Act 2001. For, and on behalf of, the Board of the Company, Jonathon Wild Chairman Perth, Western Australia this 29th day of September 2022. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 18 INDEPENDENT AUDITOR’S REPORT To the members of Frugl Group Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Frugl Group Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the 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 30 June 2022 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 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 Note 2.15 in the financial report, which indicates that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that other than the matter described in the Material uncertainty related to going concern section above, there are no key audit matters to be communicated in our report. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 19 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 30 June 2022 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We, also: - Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. - - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 20 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. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Frugl Group Limited for the year ended 30 June 2022 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 Perth, Western Australia 29 September 2022 N G Neill Partner FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 21 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 30 June 2022 Revenue from contracts with customers Other income R+D Tax Rebate Government grant and subsidies Fair value gain on contingent consideration Research and development costs, materials and consultants Directors’ fees, salaries, superannuation and consulting expenses Public company costs, fees, share registry, shareholder expenses Occupancy expenses Employee expenses Legal fees Accounting and audit fees Insurances Interest expenses Corporate fees Share-based payments Marketing and investor relations expenses Other expenses from ordinary activities Loss before income tax expense Income tax expense Loss after income tax expense from continuing operations Discontinued operations: Gain on deconsolidation of subsidiary Loss after income tax expense Loss after income tax expense for the year attributable to the owners of the Company Other comprehensive income, net of tax: Items that may be reclassified subsequently to profit or loss Total comprehensive loss for the year Loss per share from continuing operations Basic and diluted loss per share (cents per share) Earnings/ (loss) per share from discontinued operations Basic and diluted earnings/ (loss) per share (cents per share) Notes 3.1 11.3.1 2022 $ 2021 $ 142,827 1,144 354,021 - - 497,992 (346,781) (514,828) (93,523) (91,552) (1,012,385) (22,639) (63,961) (41,741) (11,682) (132,422) (52,000) (257,811) (99,365) (2,242,698) - (2,242,698) 27,286 25,843 438,162 176,436 223,961 891,688 (216,358) (515,604) (52,177) (46,249) (580,833) (129,973) (96,926) (25,673) (32,380) (120,000) (214,473) (108,969) (233,466) (1,477,393) - (1,477,393) - (2,242,698) 247,143 (1,230,250) (2,242,698) (1,230,250) - (2,242,698) - (1,230,250) 4.1 4.1 (0.012) (0.011) - 0.002 The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes, which form an integral part of the financial report. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2022 Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non-current assets Plant and equipment Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Employee entitlements Total current liabilities Total liabilities Net assets/(liabilities) Equity Issued capital Reserves Accumulated losses Total equity/(deficit) Notes 16 6 2022 $ 2021 $ 73,807 82,397 63,960 220,164 253,416 36,572 63,960 353,948 6,446 6,446 226,610 - - 353,948 7 8 9 10 294,391 700,000 56,598 1,050,989 1,050,989 131,173 - 62,956 194,129 194,129 (824,379) 159,819 35,269,801 52,000 (36,146,180) (824,379) 34,063,301 1,329,473 (35,232,955) 159,819 The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes, which form an integral part of the financial report. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 23 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the financial year ended 30 June 2022 Share Capital $ Option Reserve $ Accumulated Losses $ Non-Controlling Interests $ Total $ Balance at 1 July 2020 32,244,951 1,230,000 (34,002,705) (39,637) (567,391) Loss for the year Other comprehensive income for the year Total comprehensive loss for the year - - - - - - (1,230,250) - (1,230,250) - - - (1,230,250) - (1,230,250) Disposal of subsidiary Shares/Options issued during the year Share issue costs Reversal of lapsed performance shares Balance at 30 June 2021 - 1,960,000 (141,650) - 34,063,301 - 99,473 - - 1,329,473 - - - - (35,232,955) 39,637 - - - - Balance at 1 July 2021 34,063,301 1,329,473 (35,232,955) Loss for the year Other comprehensive income for the year Total comprehensive loss for the year - - - - - - (2,242,698) - (2,242,698) Options lapsed during the year Shares/Options issued during the year Share issue costs Balance at 30 June 2022 - 1,256,000 (49,500) 35,269,801 (1,329,473) 52,000 - 52,000 1,329,473 - - (36,146,180) - - - - - - - - 39,637 2,059,473 (141,650) - 159,819 159,819 (2,242,698) - (2,242,698) - 1,308,000 (49,500) (824,379) The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes, which form an integral part of the financial report. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 24 CONSOLIDATED STATEMENT OF CASH FLOWS for the financial year ended 30 June 2022 Cash flows from operating activities Payments to suppliers and employees Receipts from customers Government grants Interest received Interest paid R&D Tax Rebate Net cash used in operating activities Cash flows from investing activities Payments for property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issues of shares Payments of share issue costs Proceeds from borrowings Repayments of borrowings Net cash generated by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Notes 2022 $ 2021 $ (2,388,684) 125,155 - 1,011 (8,472) 354,021 (1,916,969) (2,122,799) 17,936 176,436 2,036 (9,222) 438,162 (1,497,451) (10,157) (10,157) 1,256,000 (49,500) 541,017 - 1,747,517 (179,609) 253,416 73,807 - - 1,845,000 (141,650) - (223,158) 1,480,192 (77,259) 270,675 253,416 16 9.1 9.1 8 8 16 The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes, which form an integral part of the financial report. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2022 1. GENERAL INFORMATION Frugl Group Limited (the Company) is a limited company incorporated in Australia. The principal activities in the course of the financial year was the development, marketing and customer support of its grocery comparison and data analytics products and services. 2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law. The financial statements comprise the consolidated financial statements of the Group and its controlled entities (collectively the Group). The financial statements were authorised for issue by the directors on 29 September 2022. 2.1. BASIS OF PREPARATION The financial statements comprise the consolidated financial statements of the Group. For the purposes of preparing the consolidated financial statements, the Group is a for-profit entity. Material accounting policies adopted in the preparation of these financial statements are presented below. They have been consistently applied unless otherwise stated. 2.1.1. Statement of compliance These financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and the Corporations Act 2001 (Cth). 2.1.2. Historical cost convention The financial report has been prepared on the accruals basis and under the historical cost convention. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.2. PRINCIPLES OF CONSOLIDATION The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: • has power over the investee; • • has the ability to its power to affect its returns. is exposed, or has rights, to variable returns from its involvement in with the investee; and The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements listed above. When the Company has less than a majority of the voting rights if an investee, it has the power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights are sufficient to give it power, including: • the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; rights arising from other contractual arrangements; and • potential voting rights held by the Company, other vote holders or other parties; • • any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at shareholder meetings. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically income and expenses of a subsidiary acquired or disposed of during the period are included in the consolidated statement of comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. 2.2.1. Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. 2.2.2. Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non- controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date control is lost. Subsequently it is accounted for as an equity-accounted investee or put through profit and loss or through other comprehensive income depending on the election adopted. 2.2.3. Transactions eliminated on consolidation All intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.3. TAXATION 2.3.1. Income tax The income tax expense/(income) for the year comprises current income tax expense/(income) and deferred tax expense/(income). Current income tax expense charged to profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items recognised outside profit or loss. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.3.2. Goods and Services Tax (GST) Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the consolidated statement of financial position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as a current asset or liability in the consolidated statement of financial position. Cash flows are presented in the consolidated statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. 2.4. RESEARCH & DEVELOPMENT EXPENDITURE An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following has been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; • • • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and its ability to measure reliably the expenditure attributable to the intangible asset during its development. • Subsequent to initial recognition, capitalised development costs are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit, which will normally be the useful life of the asset. During the period of development, the asset is tested for impairment annually. 2.5. TRADE AND OTHER RECEIVABLES Trade and other receivables arise from the Group’s transactions with its customers and are normally settled within 30 days. Consistent with both the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the assets, trade and other receivables are subsequently measured at amortised cost. The Group determines expected credit losses based on the Group’s historical credit loss experience, adjusted for factors that are specific to the financial asset as well as current and future expected economic conditions relevant to the financial asset. When material, the time value of money is incorporated into the measurement of expected credit losses. There has been no change in the estimation techniques or significant assumptions made during the reporting period. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.6. EMPLOYEE BENEFITS 2.6.1. Short-term benefits Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled wholly within 12 months of the reporting date represent present obligations resulting from employees' services provided to the reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay at the reporting date including related on-costs, such as workers’ compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Group as the benefits are taken by the employees. 2.6.2. Other long-term benefits The Group's obligation in respect of long-term employee benefits other than defined benefit plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the Reserve Bank of Australia's cash rate at the report date that have maturity dates approximating the terms of the Group’s obligations. Any actuarial gains or losses are recognised in profit or loss in the period in which they arise. 2.6.3. Termination benefits When applicable, the Group recognises a liability and expense for termination benefits at the earlier of: (a) the date when the Group can no longer withdraw the offer for termination benefits; and (b) when the Group recognises costs for restructuring pursuant to AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the costs include termination benefits. In either case, unless the number of employees affected is known, the obligation for termination benefits is measured on the basis of the number of employees expected to be affected. Termination benefits that are expected to be settled wholly before 12 months after the annual reporting period in which the benefits are recognised are measured at the (undiscounted) amounts expected to be paid. All other termination benefits are accounted for on the same basis as other long-term employee benefits. 2.6.4. Equity-settled compensation The Group operates an employee share option plan. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to market conditions not being met. 2.7. SHARE-BASED PAYMENTS TRANSACTIONS Under AASB 2 Share-Based Payments, the Group must recognise the fair value of options granted to directors, employees and consultants as compensation as an expense on a pro-rata basis over the vesting period in profit or loss with a corresponding adjustment to equity. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 30 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.8. BORROWINGS Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. 2.9. PROVISIONS Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will results, and that outflow can be reliably measured. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. 2.10. CONTINGENT LIABILITIES Contingent liabilities are not recognised but are disclosed in the consolidated financial statements, unless the possibility of settlement is remote, in which case no disclosure is made. If settlement becomes probable and the amount can be reliably estimated, a provision is recognised. The amount disclosed as a contingent liability is the best estimate of the settlement. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.11. EARNINGS PER SHARE 2.11.1. Basic earnings per share Basic earnings per share is determined by dividing net profit or loss after income tax attributable to members of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. 2.11.2. 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. When the Group makes a loss, the number of shares is not adjusted by the potential ordinary shares as the impact would be to reduce the loss per share. 2.12. REVENUE AND OTHER INCOME The Group is in the business of sale and distribution and marketing of its grocery comparison products and services. Revenue from contracts with customers is recognised when control of the goods or services are transferred to the Customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group’s revenue accounting policy is detailed below: Revenue from sale, distribution and marketing of grocery comparison products Revenue from sale, distribution and marketing of grocery comparison products is recognised over time over the life of the service contract as the Groups service obligations under the contract are satisfied. Sales of Books Revenue from the sale of books is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the book. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g. customer loyalty points). In determining the transaction price for the sale of equipment, the Group considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any). 2.12.1. Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. The Group’s income from the Australian Government’s Research & Development (R&D) Tax Incentive and the Australian Government’s COVID-19 stimulus packages is accounted for as a government grant. 2.12.2. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Interest income FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 32 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.13. SEGMENT REPORTING An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. The operations of the business are regularly reviewed by the Group's Managing Director to determine if segment reporting is required. The Group operates in one industry and develops a single technology. The Group solely operates within the geographical location of Australia on the basis that NextGen Networks Limited, incorporated in New Zealand, is 100% dormant. 2.14. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Management discusses with the Board the development, selection and disclosure of the Group's critical accounting policies and estimates and the application of these policies and estimates. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 2.14.1. Key Estimate - Taxation Balances disclosed in the financial statements and the notes thereto, related to taxation, are based on the best estimates of directors. These estimates take into account both the financial performance and position of the Group as they pertain to current income taxation legislation, and the directors understanding thereof. No adjustment has been made for pending or future taxation legislation. The current income tax position represents that directors' best estimate, pending an assessment by tax authorities in relevant jurisdictions. Refer Note 5 Income Tax. 2.14.2. Key Estimate – R&D Tax Incentive Where the Group receives the Australian Government’s R&D Tax Incentive, the Group accounts for the amount refundable on accrual basis. In determining the amount of the R&D provision at year end, there is an estimation process utilising a conservative approach. Any changes to the estimation are recorded in the subsequent financial year. 2.14.3. Share-Based Payments Goods or services received or acquired in a share-based payment transaction are recognised as an increase in equity if the goods or services were received in an equity-settled share-based payment transaction or as a liability if the goods and services were acquired in a cash settled share- based payment transaction. For equity-settled share-based transactions, goods or services received are measured directly at the fair value of the goods or services received provided this can be estimated reliably. If a reliable estimate cannot be made the value of the goods or services is determined indirectly by reference to the fair value of the equity instrument granted using a 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. Transactions with employees and others providing similar services are measured by reference to the fair value at grant date of the equity instrument granted using a Black-Scholes option pricing model. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.14.4. Identifying performance obligations The Group provides users access to its software application Frugl (App), which users can download from the Apple App Store or Google Play Store (Application Stores) and subscribe to the platform on a month-by-month basis. The subscription is a promise from the Group to the user that they will be allowed access to the App for the month. Granting and supporting the access to the App is the sole performance obligation for the Group. The timing of revenue recognition for the Group focuses on the successful subscription to the App by the user. Once the user has accepted the terms and conditions of the App and successfully subscribes, revenue is recognised. 2.15. GOING CONCERN The financial report has been prepared on the going concern basis which contemplates continuity of normal business activities and realisation of assets and settlement of liabilities in the ordinary course of business. For the year ended 30 June 2022 the Group incurred a net loss of $2,242,698 (2021: $1,230,250), has net current liabilities of $830,825 (2021: net current assets $159,819), a net cash outflow from operating activities amounting to $1,916,969 (2021: $1,497,451) and had cash available of $73,807. The Directors have reviewed the business outlook, cash flow forecasts and immediate capital requirements and are of the opinion that the use of the going concern basis of accounting is appropriate as the Directors believe the Group will be able to pay its debts as and when they fall due. In forming this view the Directors have taken into consideration the following: • On 30 August 2022, the terms of the binding loan facility agreement (“Facility”) with Mr Mathew Walker were amended, with the maturity of the Facility now on the earlier of the Company successfully completing a capital raising of no less than $2,000,000 and 30 June 2023; • On 28 September 2022, the Group announced that it has completed a non-renounceable entitlement offer (“Entitlement Offer”) to eligible shareholders on a 1 for 2 basis at $0.01 per Share raising $621,974 (before costs); • Research and development expenditure projects are undertaken to which the Group will • seek to apply for the R&D tax incentive rebate (R&D Rebate) at 43.5%; and The Group’s ability to reduce operational expenditure as and when required including, but not limited to, reviewing all expenditure for deferral or elimination, until the Group has sufficient funds to meet its liabilities as and when they fall due. The Directors have carefully assessed the uncertainties relating to the likelihood of securing additional funding and the Group’s ability to effectively manage its expenditures and cash flows from operations. Should the Group not be successful in obtaining adequate funding, adequately reducing operational expenditure as required, or further defer debt facilities, there is a material uncertainty that may cast significant doubt as to the ability of the Group to continue as a going concern and whether it will be able to realise its assets and discharge its liabilities in the ordinary course of business. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2.16. ADOPTION OF NEW AND REVISED STANDARDS 2.16.1. Standards and Interpretations applicable to 30 June 2022 In the year ended 30 June 2022, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company’s operations and effective for the year reporting periods beginning on or after 1 July 2021. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and therefore no material change is necessary to Group accounting policies. 2.16.2. Standards and Interpretations in issue not yet adopted applicable to 30 June 2022 The Directors have also reviewed all of the new and revised Standards and Interpretations in issue not yet adopted that are relevant to the Company and effective for the year reporting periods beginning on or after 1 July 2022. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations in issue not yet adopted on the Company and therefore no material change is necessary to Group accounting policies. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. REVENUE 3.1. REVENUE FROM CONTRACTS WITH CUSTOMERS: CONTINUING OPERATIONS Revenue from sale, distribution and marketing of grocery comparison products Revenue from book sales 2022 $ 2021 $ 142,827 - 142,827 25,382 1,904 27,286 Revenue from contracts with customers is generated wholly within the geographical location of Australia and is recognised at the point in time the product is delivered to the customer. 4. LOSS PER SHARE 4.1. BASIC LOSS PER SHARE From continuing operations From discontinued operations 2022 Cents Per Share 2021 Cents Per Share (0.012) - (0.011) 0.002 The profit/ (loss) and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows: Loss for the year - from continuing operations Profit for the year - from discontinued operations 2022 $ 2021 $ (2,242,698) - (1,477,393) 247,143 No. No. Weighted average number of ordinary shares for the purposes of basic loss per share 189,872,740 139,510,302 4.2. DILUTED LOSS PER SHARE There are no potential ordinary shares that are considered dilutive, as a result no dilutive loss per share has been disclosed. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. INCOME TAX 5.1. INCOME TAX RECOGNISED IN PROFIT OR LOSS Current tax Deferred tax 2022 $ 2021 $ - - - - - - The income tax expense for the year can be reconciled to the accounting (loss) as follows: Loss before tax Income tax (benefit) calculated at 25% (2021: 26%) Effect of expenses not deductible and income in determining taxable profit or loss Current year deferred taxes not booked Other deductible/other non-deductible and non-assessable items Effect of current year tax losses not recognised as deferred tax assets Income tax expense in consolidated statement of comprehensive income 2022 $ 2021 $ (2,242,698) (1,230,250) (560,675) (319,865) (59,514) (36,096) (390,013) - 197,306 656,285 512,572 - - The tax rate used for the 2022 year of 25% (2021: 26%) is the corporate tax rate of payable by small business entities on taxable profits under Australian law. 5.2. TAX LOSSES Deferred tax assets on the unused revenue tax losses of $13,561,431 (2021: $11,362,296) have not been recognised as the future recovery of these losses is subject to the Group satisfying the requirements imposed by the regulatory authorities, including the application of the available fraction rules. The benefit of deferred tax assets not brought to account will only be brought to account if: (a) (b) Future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised. The conditions for deductibility imposed by tax legislation continue to be complied with and no changes in tax legislation adversely affect the Group in realising the benefit. 5.3. DEFERRED TAX ASSETS Deferred tax assets recognised directly in equity Revenue income tax losses not brought to account at 25% (2021: 26%) Other temporary differences Unrecognised deferred tax assets relating to the above temporary differences 54,427 115,959 3,390,359 59,365 2,954,197 26,261 3,504,151 3,096,417 FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. CURRENT TRADE AND OTHER RECEIVABLES Trade debtors Provision for expected credit loss Other receivables 2022 $ 2021 $ 65,505 (1,100) 17,992 82,397 9,350 - 27,222 36,572 Trade receivable are non-interest bearing and generally on terms of 14-60 days. Other than those receivables fully provided for, all receivables are considered fully recoverable. 6.1. FAIR VALUE AND CREDIT RISK Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value. 7. TRADE AND OTHER PAYABLES Current Unsecured trade creditors Revenue received in advance Sundry creditors and accruals 2022 $ 2021 $ 252,391 22,000 20,000 294,391 103,173 - 28,000 131,173 Trade and other payables are non-interest bearing. Due to the short-term nature of these payables, their carrying amount is assumed to approximate their fair value. 8. BORROWINGS Balance at beginning of period Loan from Director (cash)(i) Loan from Director (expenses paid on behalf of the Company) Interest and borrowing cost capitalised Repayments made(ii) Balance at end of period 2022 $ - 541,071 158,929 - - 700,000 2021 $ 195,600 - - 27,558 (223,158) - (i) On 18 July 2022, the Company formalised a binding loan facility agreement (“Facility”) with Mathew Walker, a Company director, available on call. The facility has a principal amount of $1,000,000, bears an interest rate of 1% per month payable monthly in arrears, secured against the Company’s 2022 Financial Year Research and Development Offset Rebate and repayable on the earlier of the Company completing a capital raising of no less than $1,000,000 or on 30 June 2023. As at 30 June 2022, the Company has drawn down $700,000 from this facility. (ii) The loan in the previous year bears an interest rate of 1.25% per month and is secured against the Company’s 2020 Financial Year Research and Development Offset Rebate. The Loan was issued by Rocking Horse Nominees Pty Ltd, and was repaid during the period following the receipt of the Rebate. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. ISSUED CAPITAL 201,550,000 fully paid ordinary shares (2021: 163,500,000) 9.1. FULLY PAID ORDINARY SHARES 2022 $ 2021 $ 35,269,801 34,063,301 All references to securities in the Group have been reported on a post-consolidation basis. Balance at beginning of year Issued for cash - placements Issued to supplier Share issue costs Balance at end of year 2022 2021 No. 163,500,000 38,050,000(i) - - 201,550,000 $ 34,063,301 1,256,000 - (49,500) 35,269,801 No. 99,000,000 61,500,000(ii) 3,000,000 - 163,500,000 $ 32,244,951 1,845,000 115,000 (141,650) 34,063,301 (i) The Group issued 16,500,000 shares on 19 July 2021 at $0.05 a share to raise $825,000 before costs. The Group also issued 21,550,000 shares on 24 February 2022 at $0.02 a share to raise $431,000 before costs. (ii) The Group issued 24,750,000 shares on 25 September 2020 at $0.03 a share to raise $742,500 before costs. The Group also issued 36,750,000 shares on 14 December 2020 at $0.03 a share to raise $1,102,500 before costs. Fully paid ordinary shares carry one vote per share and carry the right to dividends. Ordinary shares participate in the proceeds on winding up of the Group in proportion to the number of shares held. Ordinary shares have no par value. 10. RESERVES Option reserve at beginning of year Options issued during the year (Note 11.3.2) Options lapsed during the year Option reserve at end of year 2022 $ 1,329,473 52,000 (1,329,473) 52,000 2021 $ 1,230,000 99,473 - 1,329,473 The Option reserve arises on the grant of share options to executives, employees, consultants and advisors and upon issue of options to shareholders or buyers. Amounts are transferred out of reserve and into accumulated losses when options expire or lapse. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. SHARE OPTIONS Each option issued converts into one ordinary share of Frugl Group Limited on exercise. Options carry neither rights to dividends, nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. 11.1. MOVEMENTS IN SHARE OPTIONS DURING THE YEAR The following reconciles the share options outstanding at the beginning and end of the year: Balance at beginning of the year Granted during the year Lapsed during the year Balance at end of the year Exercisable at end of the year 2022 2021 Number of options 49,298,883 29,500,000 (49,298,883) 29,500,000 29,500,000 $ 1,329,473 52,000 (1,329,473) 52,000 52,000 Number of options 34,048,883 15,250,000 - 49,298,883 49,298,883 $ 1,230,000 99,473 - 1,329,473 1,329,473 11.2. SHARE OPTIONS EXERCISED DURING THE YEAR During the year no options were converted into shares (2021: Nil). 11.3. SHARE BASED PAYMENTS Share-based payments made during the year ended 30 June 2022 are summarised below. 11.3.1. Recognised Share-Based Payment Expense 2021 $ 32,224(ii) 30,846 36,403 115,000 214,473 (i) On 2 December 2021 the Company issued 9,000,000 Options to Directors, following shareholder approval on 19 Options issued to directors(i) Options issued to employees Options issued to adviser Shares issued to supplier 2022 $ 36,000(i) 16,000 - - 52,000 November 2021. The options had no vesting conditions and vested immediately on issue. (ii) During the 2021 financial year, the Group issued 7,000,000 options to key management personnel (refer to remuneration report for details), following shareholder approval on 30 November 2020. The options had no vesting conditions attached and vested immediately on issue. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11.3.2. Options Granted During the Year The Group granted the following options during the year ended 30 June 2022: Number of Options Issued Grant Date Expiry Date 9,000,000 4,000,000 16,500,000 19 Nov 2021 19 Nov 2021 19 July 2021 20 July 2024 20 July 2024 20 July 2024 Exercise Price $0.10 $0.10 $0.10 Total Value(i) Recipient 36,000(i) 16,000(i) Nil(ii) Directors Employees Placement Participants (i) The fair value of the options at grant date was determined using the closing market price, on that date. (ii) Options free attaching to placement. 12. FINANCIAL INSTRUMENTS 12.1. CAPITAL MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2021. The Group is not subject to any externally imposed capital requirements. 12.2. FINANCIAL RISK MANAGEMENT OBJECTIVES The Board of directors provides services to business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include interest rate risk, liquidity risk and credit risk. The Group seeks to minimise the effects of these risks by making use of credit risk policies and future cash requirements. These are approved by the Board of directors and are reviewed on a regular basis. 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 below. 12.3. INTEREST RATE RISK The Group is exposed to interest rate risk on its cash reserves held with the NAB or other acceptable Australian Banking entities. The risk of interest rate movements is managed by the Group by maintaining an appropriate mix between short term deposits and at call deposits. The Group is not subject to any other interest rate risk as none of its other financial assets or liabilities is subject to variable interest rates. The Group’s exposure to interest rate on financial assets subject to variable interest rates is detailed in the interest rate risk sensitivity analysis section of this note. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12.3. INTEREST RATE RISK (CONTINUED) 12.3.1. Interest rate sensitivity analysis The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Financial assets Cash and cash equivalents Trade and other receivables Other assets Financial liabilities Trade and other payables Borrowings 12.4. LIQUIDITY RISK Weighted average effective interest rate 0.5% N/A 0.25% Weighted average effective interest rate N/A 12% 2022 $ 73,807 82,397 63,960 220,164 2021 $ 253,416 36,572 63,960 353,948 2022 $ 294,391 700,000 994,391 2021 $ 131,173 - 131,173 Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations with financial liabilities. Ultimate responsibility for liquidity risk management rests with the Board of directors, which has established an appropriate liquidity risk management framework for the management of the Group’s short, medium, and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring forecast and actual cash flows and identifying when further capital raising initiatives are required as disclosed in Note 2.1.3. The Group presently has no significant source of operating income and it is reliant on equity contributions and cooperation of creditors and lenders to continue as a going concern. The Group is not materially exposed to liquidity risk. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12.5. CREDIT RISK Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. In respect of financing activities, the Group is exposed to credit risk from its operating activities (primarily trade and other receivables) and from its financing activities, including deposits with banks and financial institutions. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Group uses other publicly available financial information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The Group’s bank has an “AA-” long term issuer rating by Standards & Poors (S&P). 13. SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 2.2. Details of subsidiary companies are as follows: Entity Frugle Operations Pty Ltd Premium Pipe Services Pty Ltd NexGen Networks Limited Family Insights IP Pty Ltd Incorporation Australia Australia New Zealand Australia 2022 Ownership 100% 100% 100% 100% 2021 Ownership 100% 100% 100% 100% 14. KEY MANAGEMENT PERSONNEL DISCLOSURES 14.1. KEY MANAGEMENT PERSONNEL COMPENSATION The aggregate compensation made to key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Share-based payments 2022 $ 495,500 27,950 36,000 559,450 2021 $ 476,000 24,700 32,224 532,924 The compensation of each member of the key management personnel of the Group is set out in the Remuneration Report on pages 4 to 9. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15. RELATED PARTY TRANSACTIONS The immediate parent and ultimate controlling party of the Group is Frugl Group Limited. Balances and transactions between the Group and its subsidiaries, which are related parties of the Group, have been eliminated on consolidation and are not disclosed in this note. 15.1. LOANS TO KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES There have been no loans to key management personnel during the current or prior year and no balances were outstanding as at the reporting date. 15.2. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Key management personnel related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with key management personnel related parties are set out below. The Group entered into a mandate with Cicero Group Pty Ltd (CGC), a company related to Messrs Walker for corporate administration services including financial reporting, company secretarial services, rent and administrative operations. CGC provided services to the amount of $120,000 (2021: $120,000). As at 30 June 2022 and 30 June 2021 no amounts were outstanding. On 18 July 2022, the Group entered into a binding loan facility agreement (“Facility”) with Mathew Walker, a Company director, available on call. The facility has a principal amount of $1,000,000, bears an interest rate of 1% per month payable monthly in arrears, secured against the Company’s 2022 Financial Year Research and Development Offset Rebate and repayable on the earlier of the Company completing a capital raising of no less than $1,000,000 or on 30 June 2023. On 30 August 2022, the terms of the Facility were amended, with the maturity of the Facility now on the earlier of the Company successfully completing a capital raising of no less than $2,000,000 or on 30 June 2023. As at 30 June 2022, the Company has drawdown $700,000 from this facility. FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16. RECONCILIATION OF LOSS FOR THE YEAR TO NET CASH FLOWS FROM OPERATING ACTIVITIES (Loss) for the year Non-cash items Depreciation and amortisation Other expenses (non-cash) Share-based payments Gain on deconsolidation of subsidiary Fair Value movement on contingent consideration Movements in working capital (Increase)/ decrease in trade and other receivables (Decrease) in trade and other payables (incl. provisions) Net cash used in operating activities 2022 $ 2021 $ (2,242,698) (1,230,250) 3,969 159,991 52,000 - - (2,026,738) - 33,229 214,473 (247,143) (223,961) (1,453,651) (47,089) 156,858 (1,916,969) 22,603 (66,403) (1,497,451) Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to items in the statement of financial position as follows: Cash and cash equivalents 73,807 253,416 17. COMMITMENTS The Company has an agreement with Cicero Group Pty Ltd (CGC), a company related to Mr Walker, for corporate administration services including financial reporting, company secretarial services, and administrative operations. The charges for these services is $10,000 per month (exc. GST). Other commitments Monthly amount Within 12 months Total 2022 Corporate Fees 2021 Corporate Fees 10,000 10,000 120,000 120,000 120,000 120,000 FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 18. REMUNERATION OF AUDITORS The auditor of Frugl Group Limited and its subsidiary is HLB Mann Judd. During the prior year, Pitcher Partners BA & A Pty Ltd (Pitcher Partners) acted as auditor for part of that period. Audit and review of the financial statements – HLB Mann Judd Audit and review of the financial statements - Pitcher Partners 2022 $ 32,812 - 32,812 2021 $ 40,375 11,056 51,431 19. SEGMENT INFORMATION The Group identifies its operating segments based on the internal reports that are reviewed and used by the Board of directors (chief operating decision maker) in assessing performance and determining the allocation of resources. The Group operates primarily in development of the Frugl mobile application. The financial information presented income and the consolidated statement of financial position is the same as that presented to the chief operating decision maker. in the consolidated statement of comprehensive Unless stated otherwise, all amounts reported to the Board of directors as the chief operating decision maker is in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group. 20. EVENTS AFTER THE REPORTING PERIOD On 18 July 2022, the Group entered into a binding loan facility agreement (“Facility”) with Mathew Walker, a Company director, available on call. The facility has a principal amount of $1,000,000, bears an interest rate of 1% per month payable monthly in arrears, secured against the Company’s 2022 Financial Year Research and Development Offset Rebate and repayable on the earlier of the Company completing a capital raising of no less than $1,000,000 and 30 June 2023. On 30 August 2022, the terms of the Facility were amended, with the maturity of the Facility now on the earlier of the Company successfully completing a capital raising of no less than $2,000,000 and 30 June 2023. As at 30 June 2022, the Company has drawdown $700,000 from this facility. On 20 July 2022, the Group announced that it has released its inaugural Frugl Grocery Price Index (“Frugl GPI”), nationally in partnership with News Ltd. The Frugl GPI is a quarterly report that provides a series of statistics that measure price changes over time on a selection of everyday grocery items. Released quarterly, the Frugl GPI reports on grocery inflationary changes at a topline level, whilst also revealing inflationary trends for a range of grocery categories and different shopper household types. On 28 September 2022, the Group announced that it has completed a non-renounceable entitlement offer (“Entitlement Offer”) to eligible shareholders on a 1 for 2 basis at $0.01 per Share raising $621,974 (before costs). FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. PARENT ENTITY INFORMATION The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Refer to Note 2 for a summary of the significant accounting policies relating to the Group. Statement of financial position Assets Current assets Cash and cash equivalents Trade and other receivables Total current assets Total assets Liabilities Current liabilities Trade and other payables Employee entitlements Total current liabilities Non-current liabilities Borrowings Total non-current liabilities Total liabilities Net assets/ (liabilities) Equity Issued capital Reserves Accumulated losses Total equity/ (deficit) 2022 $ 2021 $ 69,533 11,417 80,950 80,950 54,632 27,342 81,974 700,000 700,000 781,974 (701,024) 224,910 18,721 243,631 243,631 55,968 35,964 91,932 - - 91,932 151,699 35,391,175 52,000 (36,022,825) (701,024) 34,063,301 1,329,473 (35,241,075) 151,699 Statement of profit or loss and other comprehensive income Net loss and comprehensive loss (781,750) (797,984) FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 47 ADDITIONAL SHAREHOLDERS’ INFORMATION Frugl Group Limited’s issued capital is as follows: ORDINARY FULLY PAID SHARES At the date of this report there are 264,849,607 Ordinary fully paid shares in the Group. Balance at the beginning of the year Movements of shares during the year and to the date of this report Total number of shares at the date of this report SHARES UNDER OPTION Number of shares 163,500,000 101,349,607 264,849,607 At the date of this report there are 29,500,000 unissued ordinary shares in respect of which options are outstanding. The balance is comprised of the following: Number of options 29,500,000 Expiry date 20 July 2024 Exercise price (cents) $0.10 Listed/Unlisted Listed No person entitled to exercise any option referred to above has had, by virtue of the option, a right to participate in any share issue of any other body corporate. RANGE OF SHARES AS AT 29 SEPTEMBER 2022 Range 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - > 100,001 Total Total Holders 815 385 191 515 174 2,080 Units % Issued Capital 0.08% 0.38% 0.57% 6.84% 92.14% 100.00% 216,890 995,367 1,499,482 18,117,014 244,020,854 264,849,607 FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 48 ADDITIONAL SHAREHOLDERS’ INFORMATION UNMARKETABLE PARCELS AS AT 29 SEPTEMBER 2022 $500.00 parcel at $0.015 Minimum parcel size 33,333 Holders Units 1,706 8,809,288 TOP 20 HOLDERS OF ORDINARY SHARES AS AT 29 SEPTEMBER 2022 HOLDER NAME # 1 GREAT SOUTHERN FLOUR MILLS PTY LTD 2 3 THE TRUST COMPANY (AUSTRALIA) LIMITED STATION NOMINEES PTY LTD 4 MR JONATHAN MARK WILD 5 PROFESSIONAL PAYMENT SERVICES PTY LTD 6 MR ROBERT GREGORY LOOBY 7 RIMOYNE PTY LTD 8 GOLDEN STATE CAPITAL 9 TERRITORY TRADING GROUP PTY LTD 10 MR GREGORY PETER WILSON 11 12 13 STARTRADE PTY LTD PETERLYN PTY LTD S3 CONSORTIUM HOLDINGS PTY LTD 14 MR OWEN JOHN CLARE 15 CHARLES BERNHARD CHILWELL 15 MR DANIEL FULLARD Units 60,000,000 22,027,300 20,250,000 13,151,653 11,850,000 8,960,000 5,934,999 5,750,000 5,251,941 5,000,000 4,814,805 4,500,000 2,500,000 2,352,440 2,300,000 2,175,000 SACCO DEVELOPMENTS AUSTRALIA PTY LIMITED 2,010,000 16 17 18 JOSHANDAL PTY LTD SCINTILLA STRATEGIC INVESTMENTS LIMITED 19 MR KEVIN COOPER 20 CARDUP SYNDICATE HOLDINGS PTY LTD 2,000,000 2,000,000 1,885,431 1,800,000 % 22.65% 8.32% 7.65% 4.97% 4.47% 3.38% 2.24% 2.17% 1.98% 1.89% 1.82% 1.70% 0.94% 0.89% 0.87% 0.82% 0.76% 0.76% 0.76% 0.71% 0.68% Total of Top 20 Holders of ORDINARY SHARES 186,513,569 70.42% FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 49 ADDITIONAL SHAREHOLDERS’ INFORMATION TOP 20 HOLDERS OF QUOTED OPTIONS AS AT 29 SEPTEMBER 2022 HOLDER NAME # 1 MR SEAN PAUL SMITH 2 ALISTAIR MCCALL 3 MR ROBERT GREGORY LOOBY 3 MR JONATHAN MARK WILD 4 GAZUMP RESOURCES PTY LTD 5 MR PRADEEP RAGHAVAN 6 7 STATION NOMINEES PTY LTD SUNSET CAPITAL MANAGEMENT PTY LTD 8 MRS HETAL SANGHAVI 9 RIMOYNE PTY LTD 10 MRS KAVEENAR SAMUELL 11 BEACHCOVE CAPITAL PTE LTD 12 MR MARIO DI LALLO & MRS ALISON VALERIE DI LALLO 12 MR PAUL SIMON DONGRAY 13 MR JIE WANG 14 CELTIC CAPITAL PTY LTD 14 MR MD AKRAM UDDIN 14 CHAMPAGNE CAPITAL PTY LTD 14 MR ALEXANDER LEWIT 15 MR GAURAV DANI 15 MR PRADEEP RAGHAVAN 15 15 JAINSON FAMILY PTY LTD JAYVEE INVESTMENTS PTY LTD 15 MR SHAISHAV PATEL 15 SPENTIAL SMSF PTY LTD 15 MR KANAK SHRIKRISHNA SAHASRABUDHE 15 MR IAN PRENTICE & MRS TRACEY GAY PRENTICE 15 NIKICHAY CONSULTING PTY LTD 15 MS MARIA SUZANNE MORALES 15 MS PAYAL SRIVASTAVA 16 MRS SHILPA SARAF 16 MR KAPLESHKUMAR NATVARLAL SHAH 17 SATPAL SINGH GILL 17 NAVDEEP KAUR GILL 17 SIMERAN KAUR CHEEMA 17 MR HARPREET SINGH CHEEMA 18 MR YOGENDRA BHANDARI 18 18 KAVYA GLOBAL NETWORK AUSTRALIA PTY LTD SUBURBAN HOLDINGS PTY LTD 18 MS ANGELA MARIA GIUSTI 18 MR NICHOLAS JAMES KELSO 18 LANDPATH PTY LTD 18 MS ANNABELLE SHAMIR Units 6,000,000 4,000,000 3,000,000 3,000,000 2,855,123 1,700,000 1,280,000 1,136,091 1,000,000 880,000 458,786 400,000 300,000 300,000 210,000 200,000 200,000 200,000 200,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 60,000 60,000 50,000 50,000 50,000 50,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 % 20.34% 13.56% 10.17% 10.17% 9.68% 5.76% 4.34% 3.85% 3.39% 2.98% 1.56% 1.36% 1.02% 1.02% 0.71% 0.68% 0.68% 0.68% 0.68% 0.34% 0.34% 0.34% 0.34% 0.34% 0.34% 0.34% 0.34% 0.34% 0.34% 0.34% 0.20% 0.20% 0.17% 0.17% 0.17% 0.17% 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 50 ADDITIONAL SHAREHOLDERS’ INFORMATION HOLDER NAME # 18 MR STEFANO SACCO 18 18 18 RAT CONSULTING PTY LTD JKR SUPER PTY LTD EVERBLU CAPITAL PTY LTD 18 MRS KELLY ANNE SMITH 18 MS BOZENA RAWICKA 18 18 10 BAY STREET PTY LIMITED SACCO DEVELOPMENTS AUSTRALIA PTY LIMITED 18 MISS CHUNG MAN LAU 18 MR JOHN RAWICKI 18 MR ALVIN BLUMENTHAL 18 SABRELINE PTY LTD Total of Top 20 Holders of QUOTED OPTIONS Units 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 29,500,000 % 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% 0.14% 100% FRUGL GROUP LIMITED | 2022 ANNUAL REPORT Page 51 

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