iCandy Interactive Limited
Annual Report 2019

Plain-text annual report

ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 Financial Report For The Year Ended 31 December 2019 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 Financial Report For The Year Ended 31 December 2019 CONTENTS Corporate Governance Statement Directors' Report Auditor's Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Auditor's Report Additional Information for Listed Public Companies 1 14 21 22 23 24 25 26 56 57 62 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT iCandy Interactive Limited is listed on the Australian Securities Exchange (ASX). Accordingly, unless stated otherwise in this document, the Board's corporate governance arrangements comply with the recommendations of the ASX Corporate Governance Council as well as current standards of best practice. The corporate governance statement is current as at the date of this report and has been approved by the Board. Our approach to corporate governance (a) Framework and approach to corporate governance and responsibility The Board of iCandy Interactive Limited ("the Company") is committed to maintaining the highest standards of corporate governance. Corporate governance is about having a set of values that underpin the company's everyday activities - values that ensure fair dealing, transparency of actions, and protect the interests of stakeholders. The Board considers corporate governance forms part of a broader framework of corporate responsibility and regulatory oversight. In pursuing the commitment to best practice governance standards, the Board will continue to: - - renew and improve its governance practices; and monitor global developments in best practice corporate governance. The Board's approach has been guided by the principles and practices that are in our stakeholders' best interests while enduring full compliance with legal requirements. (b) Compliance with the ASX Corporate Governance Principles and Recommendations The ASX Listing Rules require listed companies to include in their Annual Report a statement disclosing the extent to which they have followed the ASX Corporate Governance Principles and Recommendations in the reporting period. Listed companies must identify the recommendations that have not been followed and provide reasons for the company's decision and this can be found on pages 8 to 13. Date of this statement This statement reflects our corporate governance policies and procedures as at 31 December 2019. The Board of Directors (a) Membership and expertise of the Board The Board has a broad range of relevant financial and other skills, experience and expertise to meet its objectives. The current Board composition, with details of individual Director's backgrounds, is set out in the Directors Report which is included in this Annual Report. (b) Board role and responsibility The Board is accountable to shareholders for iCandy Interactive Limited's performance. In summary, the Board's responsibilities include: - - - - - - - providing strategic direction and approving corporate strategic initiatives; planning for Board and executive succession; selecting and evaluation future Directors, the Chief Executive Officer ("CEO"); approving budget and monitoring management and financial performance; considering and approving the Annual Financial Report (including the Directors' Declaration) and the interim financial statements; approving iCandy Interactive Limited's risk management strategy, monitoring its effectiveness and maintaining a director and ongoing dialogue with iCandy Interactive Limited's auditors and regulators; and considering and reviewing the social and ethical impact of iCandy Interactive Limited's activities, setting standards for social and ethical practices and monitoring compliance with iCandy Interactive Limited's social responsibility policies and practices. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 1 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT The Board would normally delegate to management responsibility for: - - - - developing and implementing corporate strategies and making recommendations on significant corporate strategic initiatives; maintaining an effective risk management framework and keeping the Board and market fully informed about material risks; developing iCandy Interactive Limited's annual budget, recommending it to the Board for approval and managing day-to-day operations within budget; and managing day-to-day operations in accordance with standards for social and ethical practices which have been set up by the Board. The current circumstances, however, require all these functions to be exercised by the Board members or the Company Secretary. The company does not currently have a performance evaluation method due to the current size and limited nature of its operations. The Board has adopted a Board Charter which sets out the specific responsibilities of the Board, the requirements as to the Board's composition, the roles and responsibilities of the Chairman, Company Secretary and management, the establishment, operations and management of Board Committees, Directors' access to Company records and information, details of the Board's relationship with management, details of the Board's performance review and details of the Board's disclosure policy. A copy of the Company's Board Charter is contained in the Company's Corporate Governance Plan which is available on the Company's website. (c) Board size and composition The Board determines its size and composition, subject to the limits imposed by iCandy Interactive Limited's Constitution. The Constitution requires a minimum of three and a maximum of twenty Directors. In addition, at least two of the Directors shall ordinarily reside within Australia. Currently, the Board consists of five directors. The Board supports the principles of diversity; however, due to the size and scale of the company's operations, it has no female representative on the board at the present time. Election of the Board members is substantially the province of the Shareholders in general meetings. (d) The selection and role of the Chairman The Chairman is selected by the Board from the non-executive Directors. The Chairman's role includes: - - - - - - providing effective leadership on formulating the Board's strategy; representing the views of the Board to the public; ensuring that, when all Board members take office, they are fully briefed on the terms of their appointment, their duties and responsibilities; ensuring that the Board meets at regular intervals throughout the year, and that minutes of meetings accurately record decisions taken and, where appropriate, the view of individual Directors; guiding the agenda and conduct of all Board meetings; and reviewing the performance of the Board of Directors. The Board charters provides that where practical, the Chairman of the Board will be a non-executive director. The Chairman, Kin Wai Lau is an executive director and is not considered by the Board to be independent. (e) Directors' Independence The Board assesses each of the Directors against specific criteria to decide whether they are in a position to exercise independent judgement. Directors are considered to be independent if they are independent of management and free from any business or other relationship that could materially interfere with, or could reasonable be perceived to materially interfere with, the exercise of their unfettered and independent judgement. Materiality is assessed on a case-by-case basis by reference to each Directors' individual circumstances rather than general materiality thresholds. In assessing independence, the Board considers whether the Director has a business or other relationship with iCandy Interactive Limited, either directly, or as a partner, shareholder or officer of a company or other company that has an interest, or a business or other relationship, with iCandy Interactive Limited or another iCandy Interactive Limited group member. Presently, the Company's independent directors are Robert Kolodziej, Marcus Ungar and Masahiko Honma. The Company may seek to appoint additional independent Directors in the future to address the lack of independence of its Directors. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 2 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT (f) Avoidance of conflicts of interest by a Director In accordance with the Corporations Act 2001, any Director with a material personal interest in a matter being considered by the Board must not be present when the matter is being considered and may not vote on the matter. (g) Meetings of the Board and their conduct Meetings of the Board happen when and as appropriate. Details of Board meetings held and attended are tabled in the Directors' Report, which forms part of this Annual Report. (h) Succession planning The Board plans succession of its own members taking into account the skills, experience and expertise required and currently represented, and iCandy Interactive Limited's future direction. The Board is also responsible for CEO succession planning. (i) Review of Board performance The Board of iCandy Interactive Limited is responsible for evaluating the performance of the Board and individual Directors will be evaluated on an annual basis, with the aid of an independent advisory, if deemed required. The process for this can be found in Schedule 6 of the Company's Corporate Governance Plan. The Company's Corporate Governance Plan requires the Board to disclose whether or not performance evaluations were conducted during the relevant reporting period. Details of the performance evaluations conducted will be provided in the Company's Annual Reports. (j) Nomination and appointment of new Directors iCandy Interactive Limited has detailed guidelines for the appointment and selection of the Board. The Company's Corporate Governance Plan requires the Board to undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a Director. All material information relevant to a decision on whether or not to elect or re-elect a Director will be provided to security holders in a Notice of Meeting pursuant to which the resolution to elect or re-elect such Director will be voted on. (k) Retirement and re-election of Directors iCandy Interactive Limited's Constitution states that one-third of our Directors must retire each year. The maximum time that each Director can serve in any single term is three years. Any Director who has been appointed during the year must retire at the next annual general meeting. Eligible Directors who retire each year may offer themselves for re-election by shareholders at the next annual general meeting. (l) Compulsory retirement of Directors The Board has no limit on the number of terms of office which any Director may serve. (m) Board access to information and advice All Directors have unrestricted access to company records and information and receive regular detailed financial and operational report. The Company Secretary provides Directors with ongoing guidance on issues such as corporate governance, iCandy Interactive Limited's Constitution and the law. The Board collectively, and each Director individually has the right to seek independent professional advice at iCandy Interactive Limited's expense to help them carry out their responsibilities. While the Chairman's prior approval is needed, it may not unreasonably withheld and, in the its absence, Board approval may be sought. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 3 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT (n) Diversity Policy The Board has adopted a diversity policy which provides a framework for the Company to achieve, amongst other things, a diverse and skilled workforce, a workplace culture characterised by inclusive practices and behaviours for the benefits of all staff, improved employment and career development opportunities for women and a work environment that values and utilises the contributions of employees with diverse backgrounds, experiences and perspectives. The Diversity Policy of iCandy Interactive Limited is available on the Company's website. This diversity policy outlines requirements for the Board to develop measurable objectives for achieving diversity, an annually assess both the objectives and the progress in achieving those objectives. Accordingly, the Board has developed the following objectives regarding gender diversity and aims to achieve these objectives over the next five years as director and senior executive positions become vacant and appropriately qualified candidates becomes available. Women on the Board Women in Senior Executive positions Women employed by the company (o) Securities trading policy 2019 2020 - 2025 No. - - - % - - - No. 1 - - % 25% - - Directors and employees are subject to the Corporations Act restrictions on trading securities in the Company if they are in possession of inside information. This is regarded as any information that is non-public and, if it were public, that a reasonable person would expect to have a material effect on the price of the Company's securities. In addition, the Company has established a policy on the trading in iCandy Interactive Limited's securities, which applies to all Directors and employees. Key aspects of this policy are as follows: - - - - Directors and employees are encouraged to be long term holders of the company's securities and are discouraged from any short-term trading; Directors and employees may trade shares for 4 weeks following announcements of the annual results, half year results and the annual general meeting, provided the market has been fully informed. However, a trading embargo of 2 days applies immediately after any significant announcement; Directors and employees need to ensure that the market is fully informed before they can trade and to protect themselves should discuss the intended share trading with the Chairman or Company Secretary; and Trading outside the four-week period is required to be approved by the Chairman, prior to any transaction occurring. Generally, if the market is fully informed, the approval will be granted. Directors are required to notify the Company Secretary within 2 days of a change in their beneficial interest in the Company shares. Directors are also required to obtain a written acknowledgement of the Chairman (or the Board in the case of the Chairman) prior to trading. Directors' interest in the company's securities have not changed materially in the last 12 months. Board Committees (a) (b) (c) (d) (e) Board committees and membership Audit committee Board Risk Oversight Committee Board Nominations Committee Board Remuneration Committee Due to the size and nature of the existing Board and the magnitude of the Company's operations, the Company does not currently have the committees listed above. Pursuant to clause 5(h) of the Company's Board Charter, the full Board carries out the duties that would ordinarily be assigned to the above Committees under the written terms of reference for those committees. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 4 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Audit governance and independence (a) Approach to audit governance The Board is committed to these basic principles: - - iCandy Interactive Limited must produce true and fair financial reports; and Its accounting methods are comprehensive and relevant and comply with applicable accounting rules and policies. (b) Engagement and rotation of external auditor iCandy Interactive Limited's independent external auditor is Bentleys Audit & Corporate (WA) Pty Ltd. (c) Discussions with external auditor on independence The Board requires the external auditor to confirm that they have maintained their independence. (d) Relationship with auditor - - - - - - - - the audit partners and any audit firm employee on the iCandy Interactive Limited's audit are prohibited from being an officer of iCandy Interactive Limited; an immediate family member of an audit partner or any audit firm employee on the iCandy Interactive Limited's audit is prohibited from being a Director or an officer in a significant position at iCandy Interactive Limited; a former audit firm partner or employee on the iCandy Interactive Limited's audit is prohibited from being a Director or Officer in a significant position at iCandy Interactive Limited for at least five years and after the five years, can have no continuing financial relationship with the audit firm; members of the audit team and firm are prohibited from having a business relationship with iCandy Interactive Limited or any officer of iCandy Interactive Limited unless the relationship is clearly insignificant to both parties; the audit firm, its partners, its employees on the iCandy Interactive Limited's audit and their immediate family members are prohibited from having a direct or material indirect investment in iCandy Interactive Limited; officers of iCandy Interactive Limited are prohibited form receiving any remuneration from the audit firm; the audit firm is prohibited from having a financial interest in any company with a controlling interest in iCandy Interactive Limited; and the audit firm engagement team in any given year cannot include a person who have been an officer of iCandy Interactive Limited during that year. (e) Restrictions on non-audit services by the external auditor The external auditor is not restricted in the provision of non-audit services to iCandy Interactive Limited except as required by the Corporations Act or the ASX Listing Rules. (f) Attendance at Annual General Meeting iCandy Interactive Limited's external auditor attends the annual general meeting and is available to answer shareholders questions. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 5 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Controlling and managing risk (a) Approach to risk management Taking and managing risk are central to business and to building shareholder value. iCandy Interactive Limited's approach is to identify, assess and control the risks which affects its business. The intention is to enable risks to be balanced against appropriate rewards. The risk management approach links iCandy Interactive Limited's vision and values, objectives and strategies, and procedures and training. (b) Risk management roles and responsibilities The Board is responsible for approving and reviewing iCandy Interactive Limited's risk management strategy and policy. The Board is responsible for implementing the Board-approved risk management strategy and developing policies, controls, processes and procedures to identify and manage risks in all of iCandy Interactive Limited's activities. iCandy Interactive Limited does not comply with ASX recommendations on these issues as it does not have a formal verifiable system of risk management or any employees to implement such a system as it does not view this to be appropriate at the current time. It relies on the oversight of the Directors and the various committees, together with the periodic verification of the external auditor. (c) Company secretarial assurance The Board received periodic reports about the financial conditions and operational results of iCandy Interactive Limited. The CEO periodically provides formal statements to the Board that in all material respects: - - the company's periodic financial statements present a true and fair view of iCandy Interactive Limited's financial condition and operational results for those reporting periods; and that risk management and internal compliance and control systems are sound, appropriate and operating efficiently and effectively. Remuneration framework (a) Overview The remuneration of an executive Director will be decided by the Board, without the affected executive Director participating in that decision-making process. The total maximum remuneration of Non-Executive Directors are initially set by the Directors and subsequent variation is by ordinary resolution of Shareholders in general meeting in accordance with the Constitution, the Corporations Act and the ASX listing Rules, as applicable. The determination of Directors' remuneration within that maximum will be made by the Board having regard to the inputs and value to the Company of the respective contributions by each non-executive Director. The current amount has been set at an amount not to excess $150,000 per annum. In addition, a Director may be paid fees or other amounts, (e.g. subject to any necessary Shareholder approval, non-cash performance incentives such as Options) as the Directors determine whether a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. Directors are also entitled to be paid reasonable travelling, hotel and other expenses incurred by them respectively in or about the performance of their duties as Directors. The Board review and approves the remuneration policy to enable the Company to attract and retain executives and Directors who will create value for Shareholders having consideration to the amount considered to be commensurate for a company of its size and level of activity as well as the relevant Directors' time, commitment and responsibility. The Board is also responsible for reviewing any employee incentive and equity-based plans including the appropriateness of performance hurdles and total payments proposed. (b) Employee Share Options Scheme There are no Employee Share Options Schemes (ESOS) granted over un-issued shares to directors or executives as part of their remuneration. The issue of any options would require approval by Shareholders. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 6 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Corporate responsibility and sustainability (a) Approach to corporate responsibility and sustainability iCandy Interactive Limited's approach to corporate responsibility and sustainability is to manage its business in a way that produces positive outcomes for all stakeholders and maximises economic, social and environmental value simultaneously. In doing so, iCandy Interactive Limited accepts that the responsibilities flowing from this go beyond both strict legal obligations and financial bottom line. Transparency, the desire for fair dealing, and positive links into the community underpin our everyday activities and corporate responsibility practices. (b) Code of conduct iCandy Interactive Limited's Board and management are committed to their Code of Conduct (Code) which is based on their core values and on the expectations of their clients, of shareholders and of the broader community. The Code aims to promote a high level of professionalism and provide a benchmark for ethical and professional behaviour throughout the Company. It also promotes a healthy, respectful workplace and environment for all their employees. At the same time, the Code aims to support their business reputation and corporate image within the wider community and make employees aware of the consequences they face if they breach the Code. The ASX recommendations require that the Code of Conduct is reviewed periodically, specifically to reflect the ASX Corporate Governance Principles and Recommendations. (c) Insider trading policy and trading in iCandy Interactive Limited shares The Company Secretary has responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules, and overseeing and coordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public. iCandy Interactive Limited is committed to giving all shareholders comprehensive and equal access to information about our activities, and to fulfil continuous disclosure obligations to the broader market. iCandy Interactive Limited's policy is designed to ensure compliance with ASX Listing Rules continuous disclosure requirements. It ensures any information that a reasonable person would expect to have a material effect on the price of iCandy Interactive Limited's securities is disclosed. iCandy Interactive Limited currently maintains its own website and relies on communication in this medium and the ASX Company Announcements platform carrying all the relevant information. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 7 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Compliance with ASX Corporate Governance Council Good Practice Recommendations The table below outlines each of the ASX Best Practice Recommendations and the Company's compliance with those recommendations. Where the Company has met the relevant recommendation during the reporting period, this is indicated by a "YES" in the relevant column. Where the Company has not met or complied with a recommendation, this is indicated by a "NO" and an accompanying note explaining the reasons why the Company has not met the recommendation. Principles and Recommendations Complied Note Principle 1: Lay solid foundations for management and oversight Recommendation 1.1 A listed entity should have and disclose a board charter setting out: (a) (b) the respective roles and responsibilities of its board and management; and those matters expressly reserved to the board and those delegated to management. Recommendation 1.2 A listed entity should: (a) undertake appropriate checks before appointing a director or senior executive or putting someone forward for election as a director; and provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director. (b) Recommendations 1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. Recommendations 1.4 The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. Recommendation 1.5 A listed entity should: (a) (b) have and disclose a diversity policy; through its board or a committee of the board set measurable objectives for achieving gender diversity in the composition of its board, senior executives and workforce generally; and disclose in relation to each reporting period: (c) the measurable objectives set for that period to achieve gender diversity; the entity's progress towards achieving those objectives; and (1) (2) (3) either: (A) (B) the respective proportions of men and women on the board, in senior executive positions and across the whole workforce (including how the entity has defined "senior executive" for these purposes); or if the entity is a "relevant employer" under the Workplace Gender Equality Act, the entity's most recent "Gender Equality Indicators", as defined in and published under that Act. Recommendation 1.6 A listed entity should: (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and disclose for each reporting period whether a performance evaluation has been undertaken in accordance with that process during or in respect of that period. (b) Recommendation 1.7 A listed entity should: (a) have and disclose a process for evaluating the performance of its senior executives at least once every reporting period; and disclose for each reporting period whether a performance evaluation has been undertaken in accordance with that process during or in respect of that period. (b) Yes Yes Yes Yes Yes No No 1 2 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 8 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Principle 2: Structure the Board to be effective and add value Recommendation 2.1 The board of a listed entity should: (a) have a nomination committee which: (1) (2) has at least three members, a majority of whom are independent directors; and is chaired by an independent director, and disclose: (3) (4) (5) the charter of that committee; the members of the committee; and as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. Recommendations 2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills that the board currently has or is looking to achieve in its membership. Recommendation 2.3 A listed entity should disclose: (a) (b) the names of the directors considered by the board to be independent directors; if a director has an interest, position, affiliation or relationship of the type described in Box 2.3 but the board is of the opinion that it does not comprise the independence of the director, the nature of the interest, position or relationship in question and an explanation of why the board is of that opinion; and the length of service of each director. (c) Recommendations 2.4 A majority of the board of a listed entity should be independent directors. Recommendations 2.5 The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. Recommendations 2.6 A listed entity should have a program for inducting new directors and for periodically reviewing whether there is a need for existing directors to undertake professional development to maintain the skills and knowledge needed to perform their role as directors effectively. Principle 3 - Instil a culture of acting lawfully, ethically and responsibly Recommendation 3.1 A listed entity should articulate and disclose its values. Recommendation 3.2 A listed entity should: (a) (b) have and disclose a code of conduct for its directors, senior executives and employees; and ensure that the board or a committee of the board is informed of any material breaches of that code by a director or senior executive; and any other material breaches of that code that call into question the culture of the organisation. (c) Recommendation 3.3 A listed entity should: (a) (b) have and disclose a whistleblower policy; and ensure that the board or a committee of the board is informed of any material incidents reported under that policy. No 3 4 Yes Yes Yes No Yes Yes Yes Yes iCandy Interactive Limited Financial Report for the year ended 31 December 2019 9 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Recommendation 3.4 A listed entity should: (a) (b) have and disclose an anti-bribery and corruption policy; and ensure that the board or committee of the board is informed of any material breaches of that policy. Principle 4 - Safeguard the integrity of corporate reports Recommendation 4.1 The board of a listed entity should: (a) have an audit committee which: No No 5 6 (1) (2) has at least three members, a majority of whom are non-executive directors and a majority of whom are independent directors; and is chaired by an independent director, who is not the chair of the board, and disclose: (3) (4) (5) the charter of that committee; the relevant qualifications and experience of the members of the committee; and in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the process it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. Recommendations 4.2 The board of a listed entity should, before it approves the entity's financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. Yes Recommendations 4.3 A listed entity should disclose its processes to verify the integrity of any periodic corporate report it releases to the market that is not audited or reviewed by an external auditor. Yes Principle 5 - Make timely and balanced disclosure Recommendations 5.1 A listed entity should have and disclose a written policy for complying with its continuous disclose obligations under listing rule 3.1 Recommendations 5.2 A listed entity should ensure that its board receives copies of all material market announcements promptly after they have been made. Recommendations 5.3 A listed entity that gives a new and substantive investor or analyst presentation should release a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation. Yes Yes Yes iCandy Interactive Limited Financial Report for the year ended 31 December 2019 10 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Principle 6 - Respect the rights of security holders Recommendations 6.1 A listed entity should provide information about itself and its governance to investors via its website. Yes Recommendations 6.2 A listed entity should have an investor relations program that facilitates effective two-way communication with investors. Recommendations 6.3 A listed entity should disclose how it facilitates and encourages participation at meetings of security holders. Recommendations 6.4 A listed entity should ensure that all substantive resolutions at a meeting of security holders are decided by a poll rather than by a show of hands. Recommendations 6.5 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. Yes Yes Yes Yes Principle 7 - Recognise and manage risk Recommendation 7.1 The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: No 7 (1) (2) has at least three members, a majority of whom are independent directors; and is chaired by an independent director, and disclose: (3) (4) (5) the charter of that committee; the members of the committee; and in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) If it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity's risk management framework. Recommendation 7.2 The board or a committee of the board should: (a) review the entity's risk management framework at least annually to satisfy itself that it continues to be sound and that the entity is operating with due regard to the risk appetite set by the board; and disclose, in relation to each reporting period, whether such a review has taken place. (b) Recommendation 7.3 A listed entity should disclose: (a) (b) if it has an internal audit function, how the function is structure and what role it performs; or if it does not have any internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its governance, risk management and internal control processes. Yes Yes Recommendations 7.4 A listed entity should disclose whether it has any material exposure to environmental or social risks and, if it does, how it manages or intends to manage those risks. Yes iCandy Interactive Limited Financial Report for the year ended 31 December 2019 11 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Principle 8 -Remunerate fairly and responsibly Recommendation 8.1 The board of a listed entity should: (a) have a remuneration committee which: (1) (2) has at least three members, a majority of whom are independent directors; and is chaired by an independent director, and disclose: (3) (4) (5) the charter of that committee; the members of the committee; and in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. No 8 Recommendations 8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of non- executive directors and the remuneration of executive directors and other senior executives. Yes Recommendation 8.3 A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and No 9 (b) disclose that policy or a summary of it. Note 1 The Board is responsible for evaluating the performance of the Board and individual Directors will be evaluated on an annual basis, with the aid of an independent advisor, if deemed required. The Company's Corporate Governance Plan requires the Board to disclose whether or not performance evaluations were conducted during the relevant reporting period with details of the performance evaluations conducted will be provided in the Company's Annual Report. No evaluation has taken place to the date of this report. Note 2 The Company has not undertaken a performance evaluation of its senior executives noting that the Company currently does not employ any executives. Performance reviews will take place once senior executive roles are occupied. Note 3 Due to the size and nature of the existing Board, the Company does not currently have a Nomination Committee. The full Board carries out the duties that would ordinarily be assigned to the Nomination Committee and the Board devotes time on an annual basis to discuss Board succession issues. All members of the Board are involved in the Company's nomination process, to the maximum extent permitted under the Corporations Act and ASX Listing Rules. Note 4 The current Chairman of the Company, is not deemed an independent director due to his indirect shareholdings in the Company via Fatfish Blockchain Limited, of which he is an Executive Director. Note 5 The Company does not currently operate under a documented Anti-bribery and corruption policy given the size, nature and geographical location of its operations. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 12 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CORPORATE GOVERNANCE STATEMENT Note 6 Due to the size and nature of the existing Board, the Company does not currently have Audit Committee. The full Board carries out the duties that would ordinarily be assigned to the Audit Committee under the written terms of reference for that committee and devotes time annually to fulfilling the roles and responsibilities associated with maintaining the Company's internal audit function and arrangements with external auditors. All members of the Board are involved in the Company's audit function to ensure the proper maintenance of the entity and the integrity of all financial report. Note 7 Due to the size and nature of the existing Board, the Company does not currently have a Risk Management Committee. The full Board carries out the duties that would ordinarily be assigned to the Risk Management Committee and devotes time annually to fulfilling the roles and responsibilities associated with overseeing risk and maintaining the entity's risk management framework and associated internal compliance and control procedures. Note 8 Due to the size and nature of the existing Board, the Company does not currently have a Remuneration Committee. The full Board carries out the duties that would ordinarily be assigned to the Remuneration Committee and devotes time annually to fulfilling the roles and responsibilities associated with setting the level and composition of remuneration for Directors, ensuring that such remuneration is appropriate and not excessive. Note 9 The Company does not currently have any equity based remuneration schemes in place. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 13 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 DIRECTORS' REPORT Your directors present their report on the consolidated entity (referred to herein as the Group) consisting of iCandy Interactive Limited and its controlled entities for the financial period ended 31 December 2019. General Information Directors The following persons were directors of iCandy Interactive Limited during the whole of the financial period and up to the date of this report, unless otherwise stated. Kin Wai Lau Executive Director and Chairman Appointed on 20 March 2015 Lum Piew Executive Director Appointed 17 May 2019 Kin Wai is a serial tech entrepreneur with extensive international start-up, senior management and investment experience. Since founding his first company at age 23, Kin Wai has built companies across telecom software, internet media and biotech. He is one of the handful of entrepreneurs in Southeast Asia that have real track-record of multiple exists. Kin Wai was named by the media as one of the youngest ever MDs of a publicly traded firm in Southeast Asia when he IPO'd his first company at the age of 28. He has since been involved in building other tech companies, with three of them being listed on major stock exchanges in the region. Kin Wai began his career as research staff and a PhD candidate at the Imperial College, London, before starting up his own company. Kin Wai frequently supports entrepreneurial campaigns in colleges and universities and is a regular judge at innovation and start-up competitions in Singapore. Kin Wai graduated with first class honours in Electronics & Electrical Engineering from the University of Manchester, United Kingdom. He also has a Master in Business, Administration from the University of Oxford. Other current directorships of listed companies Fatfish Blockchain Limited - appointed July 2014 Former directorships of listed companies in last three years N/A Lum Piew spent 26 years engaged in technology and managemnt consulting with Acenture. He has led the Communications, Media and Technology practice in Malaysia as its Managing Director over the last 12 years. His extensive experience includes managing large-scale digital transformation programs. He grew the Accenture practice from consulting to outsourcing, and pivoting to digital transformation serving clients across telco's, media and internet companies including Telenor, Grab, Google and Facebook. At its peak, the Malaysia practice was Accenture's largest practice in both revenues and staff numbers in Southeast Asia. Other current directorships of listed companies N/A Former directorships of listed companies in last three years N/A iCandy Interactive Limited Financial Report for the year ended 31 December 2019 14 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 DIRECTORS' REPORT Robert Kolodziej Non-Executive Director Appointed 27 May 2015 Marcus Ungar Non-Executive Director Appointed 1 April 2018 Masahiko Honma Non-Executive Director Appointed 22 June 2018 Robert is a senior advisor at Bell Porter Securities and has over 20 years' experience in investment management. He has wide macroeconomic understanding across many areas of financial markets and specialises in strategic investment advice for high net worth clients, small cap fund managers and family officers. Robert has expertise with small capitalisation companies especially in the technology and renewable sector and has been arranging transactions in equity capital markets for these companies. Prior to working in stockbroking, Robert worked for Ernst & Young in the property trust area while at the same time running a business specialising in eco-tourism. Since then, he has worked in the property development sector specialising in due diligence and strategy. Separately from his role at Bell Potter Securities, he is also an Executive Director at Kollins Capital, a financial services and corporate advisory firm. Other current directorships of listed companies N/A Former directorships of listed companies in last three years N/A Marcus is a founding member of CGAM Pty Ltd which is a private equity firm based in Sydney. CGAM invests in innovative, high quality technology companies seeking growth stage investment. He is currently the CEO of Investorlend Pty Limited. Investorlend is an investment platform which enables its investors to participate in commercial loans and equity linked investments. Marcus has also continued his association with Compass Global Markets which specialises in foreign exchange and international payments. Other current directorships of listed companies N/A Former directorships of listed companies in last three years N/A Mr Honma is the founder of IncubateFund. Mr Honma started his career with overseeing information technology investments in Silicon Valley at JAFCO's overseas investment arm. He has also held roles in Accenture's venture capital arm and in 2007 founded Core People Partners, a fund specialising in incubation of internet businesses. Mr Honma has a stellar track record of creating and supporting mobile gaming start-ups including Pokelabo and Gumi. Both have grown from 2 to 3 persons teams when Mr Honma joined as the first outside investor in 2008, into companies with 280 and 400 employees respectively. Pokelabo, which Mr Honma co-founded and took the first CEO role of was successfully acquired by GREE, mobile gaming giant in Japan, with the valuation of over US$174 million in an all-cash deal in 2012. Other current directorships of listed companies N/A Former directorships of listed companies in last three years N/A iCandy Interactive Limited Financial Report for the year ended 31 December 2019 15 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 DIRECTORS' REPORT Phillip Lord Executive Director Resigned 21 June 2019 Phillip has been a serial investor in tech and early stage companies with 20 years of experience in global equity, debt, and M&A markets. He was formerly MD for Jefferies & Nomura, working in Tokyo, Hong Kong, Singapore & London. He expressed that he was super excited about joining iCandy and to have the opportunity to drive growth for the Company within the gaming industry, and its surrounding verticals like in-game advertising and micropayment. He has also stated that there is a revolution happening in blockchain technology and is positive that the blockchain technology could facilitate in-game micro- payment purchase in the gaming industry for the free-to-play business model of mobile games. Other current directorships of listed companies N/A Former directorships of listed companies in last three years N/A Company Secretary Mr Andrew Draffin and Ms Jiahui Lan Appointed 1 April 2018 Andrew is a director of the accounting firm DW Accounting & Advisory Pty Ltd. He holds a Bachelor of Commerce and is a member of the Chartered Accountants Australia and New Zealand. Andrew is a Director, Chief Financial Offer and Company Secretary of listed, unlisted and private companies across a broad range of industries. His focus is on financial reporting, treasury management, management accounting and corporate services, areas where he has gained over 18 years experience. Jiahui is a director of the accounting firm DW Accounting & Advisory Pty Ltd. She holds a Bachelor of Business (Accounting). Jiahui is a Director and Company Secretary of listed, unlisted and private companies across a range of industries. Her focus is on financial reporting, management accounting and corporate services, areas where she has gained over 10 years experience. Shareholdings of directors and other key management personnel The interest of each Director and other key management personnel, directly and indirectly, in the shares and options of the Company at the date of this report are as follows: Kin Wai Lau* Lum Piew (appointed 17 May 2019) Robert Kolodziej Marcus Ungar Masahiko Honma Phillip Lord (resigned 21 June 2019) Date of this report 31 December 2019 Ordinary Shares Share Options Ordinary Shares Share Options 192,500,001 - 192,500,001 - - 250,000 - - - - - - - - - 250,000 - - - - - - - - *Shares are held in Fatfish Internet Pte Ltd, a subsidiary of Fatfish Blockchain Limited, of which Mr Kin Wai Lau is a director of. Meetings of directors During the financial year, 24 meetings of directors (including circular resolutions) were held. Attendances by each director during the year were as follows: Kin Wai Lau Lum Piew Robert Kolodziej Marcus Ungar Masahiko Honma Phillip Lord Directors' Meetings Number eligible to attend 24 8 24 24 24 12 Number attend 24 8 24 24 24 12 Principle Activities and Significant Changes in Nature of Activities The Company's business plan is to develop and publish 'freenium' games for smartphones, which are free-to-download and free-to-play for players. The 'freenium' game model is proven to be a successful business model employed by many global mobile game companies. The Company plans to generate revenue through the following approaches. - - - - In-game purchases - players can purchase virtual items or currencies which are used within the Company's games to improve character levels, speed up the game progress and/or enhance playing experience; Mobile advertising - which allows iCandy to advertise third-party products and services in the Company's games; Game merchandise sales - players can purchase game related merchandise branded with logos and artwork of the Company's various games; and Publishing of games - publishing of mobile interactive entertainment for multiple mobile operating system platforms. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 16 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 DIRECTORS' REPORT Review of Operations For the financial year ended 31 December 2019, the Group reported a lower loss after tax, mainly because of lower impairment expense and unrealised movement in fair value of intangibles in the current financial year. However, the Group reported a lower revenue, mainly due to the expected fall in revenue of existing mobile games while there is a delay in the launching of the new games that the Group is developing in-house. The Group has been developing 4 new games in-house. These four new games are now expected to launch in the financial year ending 31 December 2020 and expected to bring significant positive impact to the financials of Group. The first amongst these 4 new games, Rocky Rampage, has garnered a significant 500,000 users at its pre-registration phase. Rocky Rampage is expected to go live in early April 2020. The Group expects to drive revenue in FY 2020 through the following initiatives: (i) Release of 4 new self developed game titles; (ii) Identify more publishing opportunities; and (iii) Penetrate the Chinese mobile game market via partnership with Chinese Internet conglomerate Alibaba Group (9Games). Beyond FY2020, the Group believes that its investment in esports will pay off. The group achieved a significant milestone during the financial year ended 31 December 2019 entering into the field of esports, having made a major investment to obtain 42.5% stake in global esports tournament and media network startup, Esports Players League (“ESPL”). Since the investment by the Group, ESPL has went on to secure an investment from highly regarded early stage venture capital firm, 500 Startups. ESPL is currently planning to launch a global footprint across 16 countries in initial phase, covering Asia, Europe and America, with central focus on mobile esports. Operating Results The consolidated loss of the consolidated entity after providing for income tax amounted to $2,323,035. (2018: loss of $3,445,405) Financial Position The net assets of the Group have decreased by $584,101 from $2,965,972 as at 31 December 2018 to $2,381,871 as at 31 December 2019. Dividend Paid or Recommended It is not recommended that a dividend be declared and no dividends were paid or declared during and since the end of the financial year. Reconciliation to Preliminary Results The following tables reconcile statutory consolidated net losses after tax to preliminary consolidated net losses after tax in Appendix 4E: Consolidated statement of profit or loss Appendix 4E Adjustments Statutory Financial Report Statutory net loss after tax (2,391,100) 68,065 (2,323,035) The following table reconciles statutory consolidated statement of financial position to preliminary consolidated statement of financial position in Appendix 4E. Consolidated statement of financial position Appendix 4E Adjustments Statutory Financial Report Total Assets Total Liabilities 4,280,091 1,815,071 (83,149) - 4,196,942 1,815,071 The audit had just commenced before the lodgement of the Company's Appendix 4E. Listed below are the major items that have affected the Consolidated Statement of Profit or Loss and Consolidated Statement of Financial Position. 1. iCandy Digital Pte Ltd, a subsidiary of iCandy Interactive Limited entered into a co-founding agreement and co-founded eSports Pte Ltd, a Company incorporated in Singapore. The Company subsequently equity accounted for this investment and recognised a share of net loss of associates of $82,756. Matters Subsequent to the End of the Financial Year On 7 January 2020 , the Company issued Tranche 5 acquisition shares in relation to the PT Joyseed Berbagi Sukses transaction. A total of 326,389 fully paid ordinary shares were issued at a deemed price of $0.09 per share. On 29 January 2020, the Company announced it had terminated its Global Game Development and Publishing Agreements with MoviGame due to technical and resource constraints. MoviGame was unable to implement certain changes and adaptions to the game, Penguin Dash, to meet the requirements of the Company as its global publisher. The Company has been monitoring the potential impact of Covid -19 on its operations. There has so far been no impact on our financial position and we don't expect it to as the Company expects that the video games industry will increase in demand due to the global movement restrictions imposed by governments. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 17 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 DIRECTORS' REPORT Future Developments The Company plans to implement its business strategy as outlined above. The Company will continue to keep stakeholders informed of any future developments via its compliance with the continuous disclosure requirements. Environmental Issues The Company's operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. Audit/Non-Audit Services Auditors' remuneration is disclosed In Note 6. No non-audit services have been provided by the auditor or their related practices. Indemnifying Officers or Auditors An indemnity has been given by the Company in favour of the directors to the extent that Corporations Act 2001 allows. No payment or agreement has been given in relation to a premium in respect of a contract insuring against a liability incurred as an officer for the costs or expenses to defend legal proceedings. No other insurance premiums of indemnity has been paid or provided in respect of any directors or auditors. Capital Raising and Capital Structure As at 31 December 2019, the Company has 337,190,644 fully paid ordinary shares. During the year, a total of 28,182,707 fully paid ordinary shares were issued. Please refer to Note 18 - Issued capital for further details. Summary of Options Table below reflects the options on issue at the date this of report. Issuing entity Issue Date Class of shares Exercise Price Expiry Date Number of shares under option 10,000,000 iCandy Interactive Limited iCandy Interactive Limited iCandy Interactive Limited 26 November 2018 Unlisted options 14 June 2019 15,500,000 Unlisted options 22 July 2019 1,249,998 Unlisted options $0.050 $0.080 $0.060 26 November 2020 14 June 2021 22 July 2022 Option holders do not have any rights to participate in any issues or other interest in the company or any other entity. For details of options issued to directors and executives as remuneration, refer to Remuneration Report. There have been no shares issued since the end of the financial year resulting from exercise of options. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Auditor's Independence Declaration A copy of the auditor's independence declaration as required by section 307c of the Corporations Act 2001 is attached on page 21. REMUNERATION REPORT - AUDITED This remuneration report sets out remuneration information for non-executive directors, executive directors and other key management personnel. Remuneration Policies Remuneration levels are competively set to attract the most qualified and experienced Directors and Senior Executives. The Board may obtain independent advice on the appropriateness of remuneration packages. No independent advice was sought during or since the end of the period under review with regards to remuneration. There are no schemes for retirement benefits. The directors are reimbursed for expenses incurred by them in the course of their duties as directors of the company. There is no link between the provision of any monetary benefits and performance of the company. The Group's earnings and movement in shareholder's wealth for the past five years are detailed in the following table: 31 December 2019 31 December 2018 31 December 2017 31 December 2016 Nine months ending 31 December 2015 Revenue Net (loss) before tax Net (loss) after tax Share price at start of the year Share price at end of the year Dividends paid Basic (loss) per share 2,815,704 2,237,230 1,656,454 154,246 (2,312,065) (3,480,281) (3,362,941) (408,768) (250,254) (2,323,035) (3,445,405) (3,113,914) (422,090) (250,254) $0.00 $0.00 - - - - - (0.68) (1.18) (1.23) (0.19) (0.14) 1,573,617 $0.00 $0.14 $0.14 $0.16 $0.05 $0.03 $0.16 $0.05 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 18 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 DIRECTORS' REPORT Key management remuneration policy The key management personnel of the company are represented by the directors. The key management personnel remuneration policy is therefore the same as the directors' remuneration policy. Directors and executives disclosed in this report Name Position Held Kin Wai Lau Lum Piew (appointed 17 May 2019) Robert Kolodziej Marcus Ungar Masahiko Honma Phillip Lord (Resigned 21 June 2019) Executive Director and Chairman Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Remuneration of Directors and Other Key Management Personnel (KMP) for the Year Ended 31 December 2019 Kin Wai Lau Lum Piew (appointed 17 May 2019) Robert Kolodziej Marcus Ungar Masahiko Honma Phillip Lord (Resigned 21 June 2019) Salaries, fees and leave Shares, Options/Incentive Rights Superannuation Total 25,309 - - 25,309 24,500 - - 24,500 - - 12,000 12,000 - - 18,000 18,000 - - - - - - 38,000 38,000 - - 117,809 117,809 Remuneration of Directors and Other Key Management Personnel (KMP) for the Year Ended 31 December 2018 Kin Wai Lau Phillip Lord (Resigned 21 June 2019) Robert Kolodziej Marcus Ungar (appointed 1 April 2018) Masahiko Honma (appointed 22 June 2018) Donald Hand Low (resigned 1 April 2018) Salaries, fees and leave Shares, Options/Incentive Rights Superannuation Total - - 24,907 24,907 - - 84,164 84,164 - - 12,000 12,000 - - 18,000 18,000 - - - - 6,000 - - 6,000 - - 145,071 145,071 No post-employment benefits were paid to the directors. The directors do not participate in any incentive programs. KMP Shareholdings The number of ordinary shares in iCandy Interactive Limited held by each KMP of the Group during the financial year are as follows: Name Balance at beginning of year Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year Balance at end of year Kin Wai Lau* Lum Piew (appointed 17 May 2019) Robert Kolodziej Marcus Ungar Masahiko Honma Phillip Lord (Resigned 21 June 2019) 192,500,001 - 250,000 - - - - - - 192,500,001 - - - - - - - 250,000 - - - - - - - - - - - - *Shares were held in Fatfish Internet Pte Ltd, a subsidiary of Fatfish Blockchain Limited, of which Mr Kin Wai Lau is a director of. The number of listed and unlisted options in iCandy Interactive Limited held by each KMP of the Group during the financial year are as follows: Name Balance at beginning of year Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year Balance at end of year Kin Wai Lau Lum Piew (appointed 17 May 2019) Robert Kolodziej Marcus Ungar Masahiko Honma Phillip Lord (Resigned 21 June 2019) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - iCandy Interactive Limited Financial Report for the year ended 31 December 2019 19 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 DIRECTORS' REPORT Share options granted to directors and executives No shares or options were granted to Directors or Executives during the year. At the end of the financial year, no unlisted options were held by any Director and other key management personnel, directly and indirectly. Other transactions and balances with Key Management Personnel: There were no other transactions and balances during the reporting period. In 2017, Mr Kin Wai Lau had loaned Appxplore (iCandy) Limited, formerly known as iCandy Ventures Limited AUD $211,909 (SGD $200,000). This concludes the remuneration report, which has been audited. The Directors' Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors made pursuant to s.298(2) of the Corporations Act 2001. Mr Kin Wai Lau Director Dated 31 March 2020 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 20 To The Board of Directors Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 As lead audit partner for the audit of the financial statements of iCandy Interactive Limited for the financial year ended 31 December 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Yours Faithfully, BENTLEYS Chartered Accountants MARK DELAURENTIS CA Partner Dated at Perth this 31st day of March 2020 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 Continuing operations Revenue Other income Cost of sales Gross Profit Marketing expenses Audit fees Provision for doubtful debts Legal and professional fees Share based payments Occupancy expenses Employee benefits expense Depreciation and amortisation expense Impairment expense Interest expense Computer expenses Other expenses Travel expenses Unrealised movement in fair value of intangibles Share of net profits of associates and joint ventures Loss before income tax Tax expense/(benefit) Loss for the year attributable to members of the company Other comprehensive income: Items that may be reclassified subsequently to profit or loss when specific conditions are met: Exchange differences on translating foreign operations, net of tax Total other comprehensive income/(loss) for the year Total comprehensive income for the year Net profit attributable to: Owners of the parent entity Non-controlling interest Total comprehensive income attributable to: Members of the parent entity Non-controlling interest Earnings per share Basic loss per share (cents) Diluted loss per share (cents) Note 3(a) 3(b) 13 15 4 Group 2019 $ 2018 $ 2,237,230 247,680 (1,805,479) 679,431 (17,458) (56,680) (6,183) (247,390) (111,625) (16,769) (882,080) (1,090,949) (180,000) (6,001) (1,113) (149,621) (48,250) (94,621) (82,756) (2,312,065) (10,970) (2,323,035) 120,353 120,353 120,353 (2,202,682) (2,223,264) (99,771) (2,323,035) (2,101,410) (101,272) (2,202,682) 2,815,704 160,425 (1,507,858) 1,468,271 (33,968) (60,594) (2,759) (224,342) (457,457) (82,139) (619,208) (1,100,703) (1,143,465) - (618) (188,097) (30,898) (1,004,304) - (3,480,281) 34,876 (3,445,405) 15,537 15,537 15,537 (3,429,868) (3,445,405) - (3,445,405) (3,429,868) - (3,429,868) 7 7 (0.68) (0.68) (1.18) (1.18) The accompanying notes form part of these financial statements. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 22 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other financial assets Other assets Right-of-use assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Other non-current assets Investments accounted for using the equity method TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Other financial liabilities Lease liability Current tax liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings Equity attributable to owners of the parent entity Non-controlling interest TOTAL EQUITY Group Note 2019 $ 2018 $ 8 9 10 14 18 12 13 14 15 16 17 18 4(d) 19 27 414,229 352,513 1,415,336 70,817 49,933 2,302,828 124,273 1,747,035 - 22,806 1,894,114 4,196,942 1,009,471 742,905 53,219 1,539 1,807,134 7,937 7,937 1,815,071 2,381,871 359,888 159,777 1,421,012 8,070 - 1,948,747 115,217 2,632,292 - - 2,747,509 4,696,256 929,822 790,118 - 1,528 1,721,468 8,816 8,816 1,730,284 2,965,972 30,306,207 (19,226,026) (8,572,973) 2,507,208 (125,337) 2,381,871 29,201,668 (19,890,013) (6,345,683) 2,965,972 - 2,965,972 The accompanying notes form part of these financial statements. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 23 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019 Consolidated Group Balance at 1 January 2018 Comprehensive income Loss for the year Other comprehensive income for the year Total comprehensive income for the year Issued Capital Accumulated Losses $ $ Foreign Currency Translation Reserve $ Reserve Option Reserve $ Other Components of Equity $ Subtotal Non-controlling interests $ $ 27,056,445 (3,786,258) (73,008) 885,980 (20,289,999) 3,793,160 - - - (3,445,405) - (3,445,405) - 15,537 15,537 Transactions with owners, in their capacity as owners, and other transfers Shares issued during the year Transaction costs Options issued during the year Options expired during the year Total transactions with owners and other transfers Balance at 31 December 2018 2,145,223 - - - 2,145,223 29,201,668 - - - 885,980 885,980 - - - - - (6,345,683) (57,471) - - - - - 457,457 (885,980) (428,523) 457,457 - - - - - - - - (20,289,999) (3,445,405) 15,537 (3,429,868) 2,145,223 - 457,457 - 2,602,680 2,965,972 Balance at 1 January 2019 Effects of adoption of AASB 16 Balance at 1 January 2019 (restated) Comprehensive income Loss for the year Other comprehensive income for the year Total comprehensive income for the year Transactions with owners, in their capacity as owners, and other transfers Shares issued during the year Transaction costs Options issued during the year Recognition of non-controlling interest in PT Joyseed Berbagi Sukses Total transactions with owners and other transfers Balance at 31 December 2019 29,201,668 (6,345,683) (57,471) 457,457 (20,289,999) 2,965,972 - (4,026) - - - (4,026) 29,201,668 (6,349,709) (57,471) 457,457 (20,289,999) 2,961,946 - - - (2,223,264) - (2,223,264) - 121,854 121,854 1,711,605 (607,066) - - 1,104,539 30,306,207 - - - - - - - - - - (8,572,973) 64,383 - - - - - 542,133 - 542,133 999,590 - - - - - - - - (20,289,999) (2,223,264) 121,854 (2,101,410) (99,771) (1,501) (2,323,035) 120,353 (101,272) (2,202,682) 1,711,605 (607,066) 542,133 - 1,646,672 2,507,208 - - - (24,066) (24,066) (125,338) 1,711,605 (607,066) 542,133 (24,066) 1,622,606 2,381,870 The accompanying notes form part of these financial statements. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 24 Total $ 3,793,160 (3,445,405) 15,537 (3,429,868) 2,145,223 - 457,457 - 2,602,680 2,965,972 2,965,972 (4,026) 2,961,946 - - - - - - - - - - - - - ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Net cash generated by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Purchase of property, plant and equipment Purchase of intangible assets Purchase of investments Cash acquired from acquisition of subsidary Loans to related parties: - payments made - proceeds from repayments Net cash (used in)/generated by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Payments for capital raising costs Payments of lease liability - principal Payments of lease liability - interest Loans to related parties: - payments made - proceeds from repayments Net cash provided by (used in) financing activities Net increase in cash held Cash and cash equivalents at beginning of financial year Effect of exchange rates on cash holdings in foreign currencies Cash and cash equivalents at end of financial year 8 Group Note 2019 $ 2018 $ 2,249,822 (3,274,883) (1,025,061) 2,695,908 (2,820,057) (124,149) 21 61,855 (31,271) (139,476) (145,023) 1,686 - 35,679 (216,550) 1,500,006 (128,882) (66,290) (6,001) - - 1,298,833 57,222 359,888 (2,881) 414,229 982 (37,553) (300,000) - - (88,892) 209,573 (215,890) 545,207 - - - - - 545,207 205,168 142,241 12,479 359,888 The accompanying notes form part of these financial statements. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 25 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 These consolidated financial statements and notes represent those of iCandy Interactive Limited and Controlled Entities ("group"). The financial statements were authorised for issue on 31 March 2020 by the directors of the company. Note 1 Summary of Significant Accounting Policies Basis of Preparation These general purpose consolidated financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. (a) Principles of Consolidation iCandy Interactive Limited's financial statements consolidated those of the Parent Company and all of its subsidiaries as of 31 December 2019. The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 31 December. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Inter-company transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Business Combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is obtained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial instrument, are recognised as expenses in profit or loss when incurred. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. Goodwill Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of: (i) the consideration transferred at fair value; (ii) any non-controlling interest (determined under either fair value or proportionate interest method); and (iii) the acquisition date fair value of any previously held equity interest; over the acquisition date fair value of any identifiable assets acquired and liabilities assumed. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Group. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 26 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 1: Summary of Significant Accounting Policies (Cont'd) When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable AASB Accounting Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 9: Financial Instruments: Recognition and Measurement, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than 100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest's proportionate share of the subsidiary's identifiable net assets (proportionate interest method). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective note to the financial statements disclosing the business combination. Under the full goodwill method, the fair value of the non-controlling interest is determined using valuation techniques which make the maximum use of market information where available. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested for impairment annually and is allocated to the Group's cash-generating units or groups of cash-generating units, representing the lowest level at which goodwill is monitored and not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of. (b) 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 for the current period. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred 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 that are recognised outside profit or loss or arising from a business combination. A deferred tax liability shall be recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from: (a) the initial recognition of goodwill; or (b) the initial recognition of an asset or liability in a transaction which: (i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, 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 and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. When an investment property that is depreciable is held by the entity in a business model whose objective is to consume substantially all of the economic benefits embodied in the property through use over time (rather than through sale), the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of such property will be recovered entirely through use. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that is probably 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: (i) a legally enforceable right of set-off exists; and (ii) 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. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 27 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 1: Summary of Significant Accounting Policies (Cont'd) (c) Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable accounting standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. (d) Digital Currencies Digital currencies are indefinite life intangible assets initially recognised at cost. The digital currencies are subsequently measured at fair value by reference to the quote price in an active digital currency market. Any increases or decreases in the fair value of the digital currencies are recognised through the profit and loss, similar to any gains or losses upon the disposals of digital currencies. (e) Accounting for Common Control Where the acquisition of entities that are deemed to be under common control occurs then consideration is required to determine the accounting acquirer. A new entity formed to effect a business combination through the issue of equity interests will not be regarded as the accounting acquirer, rather one of the combining entities that existed prior to the business combination shall be identified as the accounting acquirer. The pooling of interests method is adopted for business combinations under common control. Existing book values for assets and liabilities at the date of acquisition will be recognised and fair value adjustments including new intangibles or goodwill will not be recognised. Any premium between the fair value of consideration paid and the book value of net assets is debited to a separate category of equity. (f) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(k) for details of impairment). The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset's employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 28 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 1: Summary of Significant Accounting Policies (Cont'd) Depreciation The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over the asset's useful life to the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Leasehold improvements Plant and equipment Signages Depreciation Rate 10-25% 10-25% 10-25% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. Gains shall not be classified as revenue. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. (g) Financial Instruments Recognition and Initial Measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument. For financial assets, this is the date that the Group commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments (except for trade receivables) are initially measured at fair value plus transactions costs except where the instrument is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Classification and Subsequent Measurement Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost. — — amortised cost; or fair value through profit or loss. A financial liability is measured at fair value through profit and loss if the financial liability is: Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition. The Group does not designate any interests in subsidiaries, associates or joint ventures as being subject to the requirements of Accounting Standards specifically applicable to financial instruments. (i) Financial assets at fair value through profit or loss Financial assets are classified at 'fair value through profit or loss" when they are held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying amount included in profit or loss. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. (iii) Financial Liabilities Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 29 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 1: Summary of Significant Accounting Policies (Cont'd) Impairment A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a "loss" event) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified intro profit or loss at this point. In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account. When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered. (h) Impairment of Assets At the end of each reporting period, the company assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information, including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs of disposal and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment ). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the entity estimates the recoverable amount of the cash- generating unit to which the asset belongs. Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use. When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (i) Investments in Associates An associate is an entity over which the company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the entity but is not control or joint control of those policies. Investments in associates are accounted for in the financial statements by applying the equity method of accounting, whereby the investment is initially recognised at cost (including transaction costs) and adjusted thereafter for the post-acquisition change in the company’s share of net assets of the associate. In addition, the Company’s share of the profit or loss and other comprehensive income is included in the financial statements. The carrying amount of the investment includes, when applicable, goodwill relating to the associate. Any discount on acquisition, whereby the Company’s share of the net fair value of the associate exceeds the cost of investment, is recognised in profit or loss in the period in which the investment is acquired. Profits and losses resulting from transactions between the Company and the associate are eliminated to the extent of the Company’s interest in the associate. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, the Company discontinues recognising its share of further losses unless it has incurred legal or constructive obligations or made payments on behalf of the associate. When the associate subsequently makes profits, the Company will resume recognising its share of those profits once its share of the profits equals the share of the losses not recognised. The requirements of AASB 128: Investments in Associates and Joint Ventures and AASB 9: Financial Instruments are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with AASB 136: Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently increases. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 30 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 1: Summary of Significant Accounting Policies (Cont'd) (j) Interests in Joint Arrangements Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about relevant activities are required. Separate joint venture entities providing joint venturers with an interest to net assets are classified as a joint venture and accounted for using the equity method. Refer to Note 1(mn) for a description of the equity method of accounting. Joint operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure to each liability of the arrangement. The company’s interests in the assets, liabilities, revenue and expenses of joint operations are included in the respective line items of the financial statements. Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties’ interests. When the Company makes purchases from a joint operation, it does not recognise its share of the gains and losses from the joint arrangement until it resells those goods/assets to a third party. (k) Intangible Assets Other than Goodwill Computer software Computer software is recorded at cost. Where software is acquired at no cost, or for a nominal cost, the cost is its fair value, as at the date of acquisition. It has a finite life and is carried at cost less accumulated amortisation and any impairment losses. Software has an estimated useful life of between one and three years. It is assessed annually for impairment. (l) Foreign Currency Transactions and Balances Functional and presentation currency The functional currency of the Company is the currency of the primary economic environment in which that entity operates. The financial statements are presented in Australian dollars, which is the Company’s functional currency. Transaction and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except exchange differences that arise from net investment hedges. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income, otherwise the exchange difference is recognised in the profit or loss. The Company The financial results and position of foreign operations whose functional currency is different from the entity’s presentation currency are translated as follows: — — — assets and liabilities are translated at exchange rates prevailing at the end of the reporting period; income and expenses are translated at exchange rates on the date of transaction; and all resulting exchange differences are recognised in other comprehensive income. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position and allocated to non- controlling interest where relevant. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of. (m) Employee Benefits Short-term employee benefits Provision is made for the Company’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The company’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as part of current trade and other payables in the statement of financial position. The company’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 31 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 1: Summary of Significant Accounting Policies (Cont'd) Other long-term employee benefits Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. The company’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as part of current trade and other payables in the statement of financial position. The company’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position. (n) 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 result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. (o) Cash and Cash Equivalents Cash and cash equivalents include cash on hand and deposits available on demand with banks. Bank overdrafts are reporting within short-term borrowings in current liabilities in the statement of financial position. (p) Revenue and Other Income Accounting policy for revenue recognition Revenue is recognised and measure at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is recognised with reference to the completion by the Company of specific performance obligations of contracts with customers, as described below. Revenue from contracts with customers The Company elected to adopt the provisions of AASB 15: Revenue from Contracts with Customers with effect from 1 January 2018. Revenue is recognised on the purchase of mobile gaming applications and licencing services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. All contracts with effect from 1 January 2018 (either written, verbal or implied) are identified, together with the separate performance obligations within the contract and the transaction price is determined. Adjustments are made for the time value of money excluding credit risk and the transaction price is allocated to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good/service. The estimation approach is taken if no distinct observable prices exists and revenue is recognised when each performance obligation is satisfied. Credit risk is presented separately as an expense, rather than adjusted to revenue. For goods, the performance obligation is satisfied when the customer takes control of the goods. For services, the performance obligation is satisfied when the service has been performed, typically for promises to transfer services to customers. For performance obligations satisfied over time, the Company selects an appropriate measure of progress to determine how much revenue is recognised as the performance obligation is satisfied. Mobile game applications revenue Revenue from mobile game application sales are recognised at the time of the game application purchase. Publishing revenue The Company receives revenue for publishing income in relation to mobile game applications. The publishing revenue is recognised at the time the service is provided. Interest Interest revenue is recognised using the effective interest method. All revenue is stated net of the amount of goods and services tax. (q) Trade and Other Receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1(h) for further discussion on the determination of impairment losses. (r) Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 32 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 1: Summary of Significant Accounting Policies (Cont'd) (s) 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 Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. (t) Government Grants Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs it is compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis. (u) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the company retrospectively applies an accounting policy, makes a retrospective restatement or reclassifies items in its financial statements, an additional (third) statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements is presented. (v) Critical Accounting Estimates and Judgements The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the company. (i) Key judgements and estimates - Intellectual Property - Research and Development In determining the development expenditures to be capitalised, the Group makes estimates and assumptions based on expected future economic benefits generated by products that are the result of those development expenditures. Other important estimates and assumptions in this assessment process are the distinction between R&D and the estimated useful life. Development costs associated with intangible assets are only capitalised by the Group when it can demonstrate the technical feasibility of completing the asset so that the asset will be available for use or sale, how the asset will generate future economic benefits and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Development costs in respect to software are internally generated, and have a finite useful life. The amortisation method is line over the period of the expected benefit, being 5 years. Impairment testing is undertaken when impairment indicators exist. (ii) Key Estimate - Taxation Refer to Note 4 - Income Tax (iii) Key judgements and estimates - Impairment The Group assess impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. There is also judgement applied in determining recoverability of asset. (v) Key judgements and estimates - Share-based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model, using the assumptions detailed in Note 21 - Share-based payments. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 33 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 1: Summary of Significant Accounting Policies (Cont'd) (w) Going Concern Note The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. The Company incurred a loss for the period after tax of $2,323,035 (31 December 2018: loss of $3,445,405) and net cash outflows from operating activities of $1,025,061 (2018 Outflows: $124,149) The ability of the Company to continue as a going concern is principally dependent on the Company to increase cashflow from existing businesses, managing cashflow in line with available funds and the ability of the Company to secure funds by raising capital from equity markets. These conditions indicates uncertainty that may cast doubt about the ability of the Company to continue as a going concern. In the event the above matters are achieved, the Company will be required to raise funds for working capital from debt or equity sources. The directors have prepared a cash flow forecast, which indicates that the Company will have sufficient cash flows to meet all commitments and working capital requirements for the 12 month period from the date of signing this financial report. Based on the cash flow forecasts and other factors to above, the directors are satisfied that the going concern basis or preparation is appropriate. In particular, given the Company's history of raising capital to date, the directors are confident of the Company's ability to raise additional funds as and when they are required. Should the Company be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or to the amount and classification of liabilities that might result should the Company be unable to continue as a going concern and meet its debts as and when they fall due. (x) New and amended accounting poliies adopted by the Group Initial application of AASB 16 The Group has adopted AASB 16: Leases retrospectively with the cumulative effect of initially applying AASB 16 recognised at 1 January 2019. In accordance with AASB 16, the comparatives for the 2018 reporting period have not been restated. The Group has recognised a lease liability and right-of-use asset for all leases (with the exception of short- term and low- value leases) recognised as operating leases under AASB 117: Leases where the Group is the lessee. There has been no significant change from prior year treatment for leases where the Group is a lessor. The lease liabilities are measured at the present value of the remaining lease payments. The Group's incremental borrowing rate as at 1 January 2019 was used to discount the lease payments. The right-of-use asset for manufacturing equipment was measured at its carrying amount as if AASB 16 had been applied since the commencement date, but discounted using the Group's weighted average incremental borrowing rate on 1 January 2019. The right of use assets for the remaining leases were measured and recognised in the statement of financial position as at 1 January 2019 by taking into consideration the lease liability and prepaid and accrued lease payments previously recognised as at 1 January 2019 (that are related to the lease). iCandy Interactive Limited Financial Report for the year ended 31 December 2019 34 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 2 Parent Information The following information has been extracted from the books and records of the financial information of the parent entity set out below and has been prepared in accordance with Australian Accounting Standards. STATEMENT OF FINANCIAL POSITION ASSETS Current Assets Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Non-current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued Capital Retained earnings Reserves TOTAL EQUITY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Loss for the year Other comprehensive income for the year Total comprehensive income 2019 $ 2018 $ 233,955 2,712,931 2,946,886 89,458 3,718,136 3,807,594 848,877 - 848,877 841,622 - 841,622 2,098,009 2,965,972 30,306,206 (29,207,787) 999,590 2,098,009 29,201,668 (26,693,153) 457,457 2,965,972 (2,514,634) - (2,514,634) (2,543,889) - (2,543,889) On consolidation of the Group, iCandy Interactive Limited's investment cost in Appxplore (iCandy) Limited - formerly known as iCandy Ventures Limited ($15,000,000) and iCandy Digital Pte Ltd ($5,000,000) has been allocated to equity. Refer to Note 25(b) for a detailed explanation on the adoption of this accounting policy. Note 3 Revenue and Other Income The Group has recognised the following amounts relating to revenue in the statement of profit or loss. (a) Revenue from continuing operations Sales revenue - sale of in-app applications - ads and sponsorships - publishing income - services (b) Other income - interest received - unrealised foreign exchange gin/(loss) - other income Group 2019 $ 2018 $ 1,235,559 2,318,224 568,948 85,694 347,029 - 390,586 106,894 2,237,230 2,815,704 61,855 (21,368) 207,193 247,680 62,171 24,450 73,804 160,425 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 35 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 4 Tax Expense (a) The components of tax (expense) income comprise: Current tax Deferred tax (b) The prima facie tax on profit from ordinary activities before income tax is reconciled to income tax as follows: Prima Facie tax payable on profit from ordinary activities before income tax at 27.5% (2018: 27.5%) consolidated group parent entity — — Add: Tax effect of: — — — current year tax loss not brought into account income tax payable by foreign subsidiary write back of deferred tax liabilities brought into account Income tax attributable to entity (c) Deferred tax assets not brought into account Group 2019 $ 2018 $ Note (11,849) 879 (10,970) 86,618 (51,742) 34,876 (635,818) (957,077) 635,818 12,699 (1,729) 10,970 957,077 23,556 (58,432) (34,876) Deferred tax assets not brought to account, the benefits of which will only be realised if it is probable that taxable profit will be available against which the unutilised tax losses can be utilised. Temporary differences Tax Losses: — Operating losses (d) Deferred tax liabilities Deferred tax liabilities brought into account by foreign subsidiary Note 5 Key Management Personnel Compensation 1,722,865 1,209,662 7,937 7,937 8,816 8,816 Refer to the Remuneration Report contained in the Directors' Report for details of the remuneration paid or payable to each member of the Group's key management personnel (KMP) for the year ended 31 December 2019. The totals of remuneration paid to KMP of the company and the Group during the year are as follows: Short-term employee benefits Share-based payments Total KMP compensation Short-term employee benefits 2019 $ 117,809 - 117,809 2018 $ 145,071 - 145,071 – these amounts include fees and benefits paid to the non-executive chair and non-executive directors as well as all salary, paid leave benefits, fringe benefits and cash bonuses awarded to executive directors and other key management personnel. Share-based payments – these amounts represent the expense related to the participation of KMP in equity-settled benefit schemes as measured by the fair value of the options, rights and shares granted on grant date. Further information in relation to KMP remuneration can be found in the Remuneration Report. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 36 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 6 Auditor’s Remuneration Remuneration of the auditor for: — — auditing or reviewing the financial statements auditing or reviewing the financial report of subsidiaries Note 7 Earnings per Share (a) Reconciliation of earnings to profit or loss Loss Earnings used in the calculation of basic and dilutive EPS (b) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS Note 8 Cash and Cash Equivalents Cash at bank and on hand Reconciliation of cash Cash and cash equivalents 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 Note 9 Trade and Other Receivables CURRENT Trade receivables Provision for impairment Other receivables GST receivables Total current trade and other receivables Group 2019 $ 2018 $ 53,224 3,456 56,680 35,549 25,045 60,594 Group 2019 $ 2018 $ (2,223,264) (3,445,405) (2,223,264) (3,445,405) No. No. 327,634,307 291,469,218 327,634,307 291,469,218 Note Group 2019 $ 414,229 414,229 2018 $ 359,888 359,888 21 414,229 414,229 359,888 359,888 Note Group 2019 $ 2018 $ 194,154 136,169 9b (4,527) (2,888) 189,627 133,281 158,418 4,468 18,973 7,523 352,513 159,777 The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The loss allowance provision as at 31 December 2019 is determined as follows; the expected credit losses also incorporate forward-looking information. There has been no impact with the application of AASB 9: Financial Instruments iCandy Interactive Limited Financial Report for the year ended 31 December 2019 37 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 9: Trade and Other Receivables (cont'd) The "amounts written off" are all due to customers declaring bankruptcy, or term receivables that have now become unrecoverable. 2019 Expected loss rate Gross carrying amount Loss allowing provision 2018 Expected loss rate Gross carrying amount Loss allowing provision Credit risk Current >30 days past due >60 days past due >90 days past due Total $ 1.27% 357,040 (4,527) 1.78% 162,665 (2,888) $ $ $ 0% - - 0% - - 0% - - 0% - - $ 0 357,040 (4,527) 162,665 (2,888) 0% - - 0% - - The Group has no significant concentration of credit risk with respect to any single counter party or group of counter parties other than those receivables specifically provided for and mentioned within Note 9. The class of assets described as Trade and Other Receivables is considered to be the main source of credit risk related to the Group. On a geographic basis, the Group has significant credit risk exposures in Malaysia given the substantial operations in that region. The Group's exposure to credit risk for receivables at the end of the reporting period in those regions are as follows: AUD Australia Singapore Malaysia Indonesia Group 2019 $ 4,559 746 343,650 3,558 2018 $ 4,314 133,282 22,181 - 352,513 159,777 The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit loss. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor's current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date. There has been no change in the estimation techniques or significant assumptions made during the current reporting period. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier. None of the trade receivables that have been written off is subject to enforcement activities. (a) Collateral Held as Security No collateral was held as security at balance date or date the date of this report. (b) Financial Assets Measured at Amortised Cost Trade and other Receivables — Total current — Total non-current Total financial assets measured at amortised cost Group 2019 $ 2018 $ 352,513 - 352,513 159,777 - 159,777 Note 24 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 38 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 10 Other Financial Assets CURRENT Amount receivable from: - other related parties - others Investments held Convertible notes Total current assets Total Other Financial Assets Current Non-Current Terms of Receivables: All receivables are at call. There are no securities attached. Group 2019 $ 2018 $ 1,317,286 23,383 1,340,669 - 74,667 1,415,336 1,426,823 (5,811) 1,421,012 - - 1,421,012 1,415,336 - 1,415,336 1,421,012 - 1,421,012 Amount receivables of $1,309,248 (SGD 1,235,669) has an interest rate of 5% per annum attached. No interest are charged on the remaining receivables. Note 11 Interests in Subsidiaries (a) Information about Principal Subsidiaries The subsidiaries listed below have share capital consisting solely of ordinary shares or ordinary units which are held directly by the Group. The proportion of ownership interests held equals the voting rights held by Group. Name of subsidiary Place of Incorporation iCandy Digital Pte Ltd Appxplore (iCandy) Limited Appxplore (iCandy) Sdn Bhd Inzen (iCandy) Pte Ltd iCandy Play Limited iCandy Games Limited PT Joyseed Berhagi Sukses Beetleroar Sdn Bhd Singapore British Virgin Island Malaysia Singapore British Virgin Island British Virgin Island Indonesia Malaysia Ownership interest held by the Group Proportion of non-controlling interests 2019 (%) 100% 100% 100% 100% 100% 100% 67% 40% 2018 (%) 100% 100% 100% 100% 100% 100% - - 2019 (%) 2018 (%) - - - - - - 33% 60% - - - - - - - - Subsidiary financial statements used in the preparation of these consolidated financial statements have also been prepared as at the same reporting date as the Group’s financial statements. (b) Significant Restrictions There are no significant restrictions over the Group's ability to access or use assets and settle liabilities, of the Group. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 39 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 12 Plant and Equipment PLANT AND EQUIPMENT Plant and equipment: At cost Accumulated depreciation Leasehold improvements At cost Accumulated amortisation Signage At cost Accumulated amortisation Total plant and equipment Group 2019 $ 2018 $ 171,725 126,833 (79,986) 91,739 64,095 (32,741) 31,354 1,779 (599) 1,180 (55,134) 71,699 62,908 (20,723) 42,185 1,746 (413) 1,333 124,273 115,217 (a) Movements in Carrying Amounts Movements in carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year. Consolidated Group: Balance at 1 January 2018 Additions Depreciation expense Foreign exchange movement Balance at 31 December 2018 Additions Additions through acquisition of entity Depreciation expense Foreign exchange movement Balance at 31 December 2019 Plant and Equipment $ Leasehold Improvements $ Signage Total $ $ 53,640 30,334 (17,086) 4,811 71,699 31,271 10,419 (24,674) 3,024 91,739 43,672 6,363 (11,946) 4,096 42,185 - - (11,627) 796 31,354 598 856 (146) 25 97,910 37,553 (29,178) 8,932 1,333 115,217 - - (178) 25 31,271 10,419 (36,479) 3,845 1,180 124,273 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 40 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 13 Intangible Assets Goodwill Cost Accumulated impairment losses Net carrying amount Games Portfolio Cost Accumulated amortisation and impairment losses Net carrying amount Computer software: Cost Accumulated amortisation and impairment losses Net carrying amount Research and development Cost Accumulated amortisation and impairment losses Net carrying amount Cryptocurrency Cost Accumulated amortisation and impairment losses Net carrying amount Total intangible assets Consolidated Group: Consolidated Group 2019 $ 2018 $ 283,862 - 283,862 - - - 2,600,000 2,600,000 (1,850,000) (1,150,000) 750,000 1,450,000 1,980,833 1,940,131 (1,404,483) 576,350 (987,597) 952,534 258,224 2,038,175 (183,803) (1,892,372) 74,421 145,803 1,200,673 1,082,827 (1,138,271) (998,872) 62,402 83,955 1,747,035 2,632,292 Note Goodwill Games Portfolio Computer Software Research and Development Cryptocurrency Total Year ended 31 December 2018 Balance at the beginning of the year Reclassification from prepayments Additions Amortisation charge Impairment losses Movement in fair value Movement in foreign currency Year ended 31 December 2019 Balance at the beginning of the year Reclassification from prepayments Additions Amortisation charge Impairment losses Movement in fair value Movement in foreign currency - - - - - - - - - - 28 283,862 - - - - $ $ $ - - 2,600,000 (303,333) (846,667) - - 1,450,000 1,204,776 508,353 - 1,713,129 - - - - 610,781 610,781 472,046 3,072,046 (388,026) (380,169) - - - - - - (1,071,528) (846,667) (1,004,304) (1,004,304) 135,784 952,534 17,619 145,803 5,432 158,835 83,955 2,632,292 1,450,000 952,534 145,803 83,955 2,632,292 - - (520,000) (180,000) - - - - - - - 63,560 (396,167) (74,419) - - 19,983 - - 3,037 74,421 - - (85,766) 653 - 347,422 (990,586) (180,000) (85,766) 23,673 Closing value at 31 December 2019 283,862 750,000 576,350 62,402 1,747,035 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 41 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 13: Intangible Assets (Cont'd) On 17 June 2019, Appxplore (iCandy) Limited received 3,000,000 NOX tokens from Nitro Interactive Limited for publishing services. Intangible assets, other than goodwill, have finite useful lives. The current amortisation charges for intangible assets are included under depreciation and amortisation expense per the statement of profit or loss. Cryptocurrencies are valued at fair value at reporting date. Management has selected the coinmarketcap exchange as its exchange to gather information on determining the fair value of the cryptocurrency. Games Portfolio The recoverable amount of this games portfolio has been determined using the value in use method based on the net present value of project earnings before interest, tax and depreciation using cash flow projections based on financial budgets approved by senior management covering 1 year forecast. A growth rate of 3% was used to extrapolate management's cash flow forecast for a further 4 years. The cash flow projections were prepared based on past experience and contracts that are in place. A discount rate of 12% has been applied. Note 14 Other Assets CURRENT Prepayments Total Other Assets Current Non-Current Note 15 Associates Set out below are the associates of the Grouop. Name Classification Group 2019 $ 2018 $ 70,817 70,817 8,070 8,070 70,817 - 70,817 8,070 - 8,070 Place of business/ incorporation Proportion of ordinary share interests/participating share Measurement Method Carrying amount 2019 % 2018 % 2019 $ 2018 $ Esports.com Pte Ltd Associate Singapore 42.55% - Equity 22,806 - Esports.com Pte Ltd was co-founded with a consortium of partners in October 2019 to launch a global esports venture, named Esports Pro League ("ESPL"). ESPL is a global esports tournament and media network that will be developing an integrated and open ecosystem for tournaments, media, brands, publishers, teams and players with a focus on community and digital interactivity. Esports.com Pte Ltd is a private company and therefore, no quoted market prices are available for their shares. (a) Summarised financial information for associates Set out below is the summarised financial information for Esports.com Pte Ltd. The disclosed information reflects the amounts presented in the Australian Accounting Standards financial statements of the associates including adjustments made by the Group when applying the equity method and adjustments for any differences in accounting policies between the Group and the associates. Summarised financial position Total current assets Total non-current assets Total current liabilities Total non-current liabilities Net assets Group's share (%) Group's share of associates net assets Esports.com Pte Ltd 2019 2018 $ $ 75,031 - (21,432) - 53,599 42.55% 22,806 - - - - - - - iCandy Interactive Limited Financial Report for the year ended 31 December 2019 42 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 15 : Associates (cont'd) Summaried financial performance Revenue Loss after tax Other comprehensive income Total comprehensive income Group's share (%) Group's share of associates net assets Reconciliation to carrying amount Group's share of associates' opening net assets Investments during the period Group's share of net loss after tax Foreign exchange movement Note 16 Trade and Other Payables CURRENT Unsecured liabilities Trade payables Sundry payables and accrued expenses (a) Financial liabilities at amortised cost classified as trade and other payables Trade and other payables — Total current — Total non-current Financial liabilities as trade and other payables Note 17 Other Financial Liabilities CURRENT Amounts payable to: - other related parties Total Other Financial Liabilities Current Non-Current Terms of payables: All payables are at call. There are no securities attached. No interest is payable on amounts owing. Esports.com Pte Ltd 2019 2018 $ $ - (194,490) - (194,490) 42.55% (82,756) Esports.com Pte Ltd 2019 2018 $ $ - 105,955 (82,756) (393) 22,806 - - - - - - - - - - - Note Group 2019 $ 2018 $ 104,664 904,807 1,009,471 121,219 808,603 929,822 Group 2019 $ 2018 $ 1,009,471 - 1,009,471 929,822 - 929,822 25 Group 2019 $ 2018 $ 742,905 742,905 790,118 790,118 742,905 - 742,905 790,118 - 790,118 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 43 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 18 Leases Amounts recognised in the balance sheet. Right of use assets Office space Lease liabilities Current Non current Note 19 Issued Capital 337,190,644 fully paid ordinary shares (2018: 309,007,937 fully paid ordinary shares) The Group has authorised share capital amounting to 337,190,644 ordinary shares. Group 2019 $ 2018 $ 49,933 49,933 53,219 - 53,219 - - - - - Group 2019 $ 30,306,207 2018 $ 29,201,668 30,306,207 29,201,668 (a) Ordinary Shares At the beginning of the reporting period Shares issued during the year Transaction costs At the end of the reporting period Group 2019 2018 No. $ No. $ 309,007,937 29,201,668 277,192,746 27,056,445 28,182,707 1,711,605 31,815,191 2,145,223 - (607,066) - - 337,190,644 30,306,207 309,007,937 29,201,668 On 4 January 2019, 8 April 2019, 22 July 2019 and 18 October 2019, 326,839 fully paid ordinary shares were issued on each date. This was in relation to the acquisition of 67% of PT Joyseed Berbagi Sukses. There are a total of 8 tranches of 326,389 fully paid ordinary shares to be issued. Tranche 1, Tranche 2, Tranche 3 and Tranche 4 have been issued. Shares were issued at $0.09 per share. No cash was raised. On 8 April 2019, 250,000 fully paid ordinary shares were issued to MMR Corporate as consultancy fees. Shares were issued at $0.07 per share and no cash was raised. On 12 April 2019, 25,000,100 fully paid ordinary shares were issued under a private placement and cleansing offer. Shares were issued at $0.06 per share raising a total of $1,381,948, net of capital raising costs. On 22 July 2019, the following shares were issued: 927,051 fully paid ordinary shares were issued under an agreement with Meta.us as part of a Convertible Note investment. Shares were issued at $0.04 per share and no cash was raised. 700,000 fully paid ordinary shares were issued to Damian Kwok as consultancy fees. Shares were issued at $0.06 per share and no cash was raised. - - (b) Options There were no listed options on issue for the financial year ended 31 December 2019. The following reconciles with the outstanding listed options to subscribe for fully paid ordinary shares in the Company at the beginning and end of the financial year. Balance at beginning of the year Granted during the financial year Expired during the financial year Released from escrow Balance and Exercisable at the end of the year Group 2019 No. 2018 No. 30,533,333 (30,533,333) - - - 27,716,666 - - 2,816,667 30,533,333 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 44 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 19: Issued Capital (Cont'd) The following reconciles with the outstanding unlisted options to subscribe for fully paid ordinary shares in the Company at the beginning and end of the financial year. Balance at beginning of the year Granted during the financial year Expired during the financial year Released from escrow Balance and Exercisable at the end of the year On 14 June 2019, the following unlisted options were issued: Group 2019 No. 2018 No. 30,500,000 16,749,998 (20,500,000) - 26,749,998 33,316,667 10,000,000 (10,000,000) (2,816,667) 30,500,000 - - 7,500,000 unlisted options issued as Broker Options in relation to the private placement conducted on 12 April 2019. These options have an exercise price of $0.08 and expiry date of 14 June 2021. 8,000,000 unlisted options were issued as Corporate Options in relation to the private placement conducted on the 12 April 2019. These options have an exercise price of $0.08 and expiry date of 14 June 2021. On 22 July 2019, 1,249,998 unlisted options were issued as employee options to the employees of subsidiary, Appxplore (iCandy) Sdn Bhd. These options have an exercise price of $0.06 and expiry date of 22 July 2022. The options issued during the financial year were calculated using the Black Scholes method and has a value of $236,617, $252,391 and $53,125 attached to them respectively. (c) Capital Management Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital include ordinary share capital and financial liabilities, supported by financial assets. The Group is not subject to any externally imposed capital requirements. Management effectively manages the Group’s capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. Total borrowings Less cash and cash equivalents Net debt Total equity Total capital Gearing ratio Note 9 Group 2019 $ 742,905 (414,229) 328,676 2018 $ 790,118 (359,888) 430,230 2,381,871 2,965,972 2,710,547 3,396,202 12% 13% iCandy Interactive Limited Financial Report for the year ended 31 December 2019 45 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 20 Operating Segments General Information Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and in determining the allocation of resources. The Group is managed primarily on the basis of product category and service offerings as the diversification of the Group's operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following: — the products sold and/or services provided by the segment; Types of products and services by segment (i) Development and sale of digital media (except games) The Group is engaged in the development of software for interactive digital media (except games). (ii) Design and development of intellectual properties for software applications and games The Group is also engaged in the design and development of intellectual properties for software applications and games. Basis of accounting for purposes of reporting by operating segments (a) Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision makers with respect to operating segments, are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the Group. (b) Segment assets Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of the economic value from the asset. In most instances, segment assets are clearly identifiable on the basis of their nature and physical location. (c) Segment liabilities Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. (d) Unallocated items The following items of revenue, expense, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: • Impairment of assets and other non-recurring items of revenue or expense • Income tax expense • Current tax liabilities • Other financial liabilities • Intangible assets (e) Segment information (i) Segment performance 31 December 2019 REVENUE External sales Total segment revenue Reconciliation of segment revenue to group revenue Total group revenue Development of digital media $ Development of Intellectual properties $ All Other Segments Total $ $ 3,498 3,498 1,595,927 1,595,927 637,805 637,805 2,237,230 2,237,230 2,237,230 Segment result from continuing operations before tax (636,400) (169,443) (1,352,971) (2,158,814) Reconciliation of segment result to group net profit/loss before tax Intersegment elimination Loss after tax from continuing operations (164,221) (2,323,035) iCandy Interactive Limited Financial Report for the year ended 31 December 2019 46 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 20: Operating Segments (Cont'd) 31 December 2018 REVENUE External sales Total segment revenue Reconciliation of segment revenue to group revenue Total group revenue Development of digital media $ Development of Intellectual properties $ All Other Segments Total $ $ 9,264 9,264 2,804,032 2,804,032 2,408 2,408 2,815,704 2,815,704 2,815,704 Segment result from continuing operations before tax (635,565) 263,717 (2,491,918) (2,863,766) Reconciliation of segment result to group net profit/loss before tax Intersegment elimination Loss after tax from continuing operations (ii) Segment assets 31 December 2019 Segment assets Segment assets include: — Additions to non-current assets (other than financial assets and deferred tax) Reconciliation of segment assets to group assets Intersegment eliminations Total group assets 31 December 2018 Segment assets Segment assets include: — Additions to non-current assets (other than financial assets and deferred tax) Reconciliation of segment assets to group assets Intersegment eliminations Total group assets (iii) Segment liabilities 31 December 2019 Segment liabilities Reconciliation of segment assets to group liabilities Intersegment eliminations Total group liabilities (581,639) (3,445,405) Development of digital media $ Development of Intellectual properties $ All Other Segments Total $ $ 603,149 2,222,451 26,071,164 28,896,764 576,886 310,492 25,733,684 26,621,062 Development of digital media $ Development of Intellectual properties $ (24,699,822) 4,196,942 Total All Other Segments $ $ 968,558 3,638,239 21,734,029 26,340,826 953,041 1,710,513 - 2,663,554 (21,644,570) 4,696,256 Development of digital media $ Development of Intellectual properties $ All Other Segments Total $ $ 492,167 368,466 954,438 1,815,071 - 1,815,071 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 47 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 20: Operating Segments (Cont'd) 31 December 2018 Segment liabilities Reconciliation of segment assets to group liabilities Intersegment eliminations Total group liabilities (iv) Revenue by geographical region Development of digital media $ Development of Intellectual properties $ All Other Segments Total $ $ 483,235 298,862 948,187 1,730,284 - 1,730,284 Revenue, including revenue from discontinued operations, attributable to external customers is disclosed below, based on the principal place of business. Australia Singapore Malaysia Indonesia Total revenue (v) Assets by geographical region The location of segment assets by geographical location of the assets is disclosed below: Australia Singapore Malaysia Indonesia Total Assets Note 21 Cash Flow Information (a) Reconciliation of Cash Flows from Operating Activities with Profit after Income Tax Loss after income tax Non-cash flows in profit - Depreciation, amortisation and impairment - Unrealised movement in fair value of intangibles - Provision for doubtful debts - Options issued for services - Shares issued for services - Unrealised foreign currency gain - Interest revenue Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: - - - - - (Increase)/decrease in trade and term receivables (Increase)/decrease in prepayments Increase/(decrease) in trade payables and accruals Increase/(decrease) in income taxes payable Increase/(decrease) in deferred taxes payable Net cash generated by operating activities 2019 $ 637,805 12,838 1,582,650 3,937 2,237,230 2018 $ 699,633 42,499 2,073,572 - 2,815,704 2019 $ 1,371,344 610,431 2,194,212 20,954 4,196,941 2018 $ 1,539,459 984,432 2,172,365 - 4,696,256 Group 2019 $ 2018 $ (2,323,035) (3,445,405) 1,270,949 2,244,168 94,621 1,004,304 6,183 53,125 58,500 52,050 (60,752) (192,736) (62,747) 79,649 11 (879) (1,025,061) 2,759 457,457 - (666,120) (62,001) 127,479 10,431 254,834 (478) (51,577) (124,149) iCandy Interactive Limited Financial Report for the year ended 31 December 2019 48 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 22 Share-based Payments The aggregate share-based payments for the financial year are set out below: Outstanding during the year Granted Exercised Released from escrow Expired Outstanding and exercisable at year-end 2019 2018 Number Weighted average exercise price $ 30,500,000 16,749,998 - (20,500,000) - 26,749,998 Number Weighted average exercise price $ 0.050 33,316,667 10,000,000 - (2,816,667) (10,000,000) 30,500,000 The following share-based payment arrangements were in existence during the current reporting period: Number Grant Date Expiry Date Exercise Price Fair value at (i) Options granted (ii) Options granted 15,500,000 1,249,998 14 June 2019 14 June 2021 22 July 2022 22 July 2019 $ $0.08 $0.06 grant date $ 489,008 53,125 Options were priced using the Black-Scholes model. Where relevant, the expected life used in the model has been adjusted based on management's best estimate of the effects of non-transferability of exercise restrictions. Expected volatility is based on the historical share price volatility of the Company over the reporting period. Number Share price at grant date Exercise Price Expected volatility Option life Risk-free interest rate 15,500,000 1,249,998 $0.052 $0.036 $0.080 $0.060 139% 160% 2 years 3 years 1.49% 1.02% Note 23 Events After the Reporting Period On 7 January 2020 , the Company issued Tranche 5 acquisition shares in relation to the PT Joyseed Berbagi Sukses transaction. A total of 326,389 fully paid ordinary shares were issued at a deemed price of $0.09 per share. On 29 January 2020, the Company announced it had terminated its Global Game Development and Publishing Agreements with MoviGame due to technical and resource constraints. MoviGame was unable to implement certain changes and adaptions to the game, Penguin Dash, to meet the requirements of the Company as its global publisher. The Company has been monitoring the potential impact of Covid -19 on its operations. There has so far been no impact on our financial position and we don't expect it to as the Company expects that the video games industry will increase in demand due to the global movement restrictions imposed by governments. Note 24 Related Party Transactions Related Parties (a) The Group's main related parties are as follows: i. Entities exercising control over the Group: The ultimate parent entity that exercises control over the Group is Fatfish Blockchain Limited, formerly known as Fatfish Internet Group Limited, which is incorporated in Australia. ii. Key Management Personnel: Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity are considered key management personnel. For details of disclosures relating to key management personnel, refer to Note 5. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 49 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 24: Related party Transactions (Cont'd) (b) Transactions with 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. The following transactions occurred with related parties: i. KMP related entities - Directors' fees/wages paid to Kin Wai Lau - Directors' fees paid to Lum Piew - Directors' fees paid to Robert Kolodziej - Directors' fees paid to Marcus Ungar - Directors' fees paid to Masahiko Honma - Directors' fees paid to Phillip Lord - Directors' fees and company secretarial fees paid to DHL Corporate Advisory, of which Mr Donald Low is a director and shareholder (c) Amount payable to and receivable from related parties i. Loans payable to Ultimate Parent Entity - Fatfish Blockchain Limited Beginning of the year Loans advanced Loan repayment made End of the year ii. Loan payable to Immediate Parent Entity - Fatfish Internet Pte Ltd Beginning of the year Loans advanced Loan repayment made Foreign currency movement End of the year iii. Loans to other related parties Beginning of the year Loans advanced Loans repayment received Foreign currency movement End of the year iv. Loans receivable from other related parties Beginning of the year Loans advanced Loan repayment received Foreign currency movement End of the year v. Loans receivable from immediate parent entity - Fatfish Internet Pte Ltd Beginning of the year Loans advanced Loan repayment received Foreign currency movement End of the year Group 2019 $ 2018 $ 25,309 24,500 12,000 18,000 - 38,000 - 24,907 - 12,000 18,000 - 84,164 6,000 117,809 145,071 Group 2019 $ 2018 $ 106,418 106,418 - (5,324) - - 101,094 106,418 379,511 439,991 - - 3,847 4,030 (100,750) 36,240 383,358 379,511 252,906 252,906 - - 5,547 - - - 258,453 252,906 1,257,856 1,251,498 5,159 - 54,271 - (100,000) 106,358 1,317,286 1,257,856 93,552 93,552 - - - - - - 93,552 93,552 (d) Other transactions and balances with Key Management Personnel: There were no other transactions and balances during the reporting period. In 2017, Mr Kin Wai Lau had loaned Appxplore (iCandy) Limited, formerly known as iCandy Ventures Limited AUD $211,909 (SGD $200,000). iCandy Interactive Limited Financial Report for the year ended 31 December 2019 50 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 25 Financial Risk Management The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable and loans to and from subsidiaries The totals for each category of financial instruments, measured in accordance with AASB 9: Financial Instruments as detailed in the accounting policies to these financial statements, are as follows: Financial Assets Cash and cash equivalents Loans and receivables Other financial assets Total Financial Assets Financial Liabilities Trade and other payables Other financial liabilities Total Financial Liabilities Financial Risk Management Policies Note 8 9 10 16 16 Group 2019 $ 2018 $ 414,229 352,513 359,888 159,777 1,415,336 1,421,012 2,182,078 1,940,677 1,009,471 742,905 929,822 790,118 1,752,376 1,719,940 The directors are responsible for iCandy Interactive Limited's risk management strategy and management is responsible for implementing the directors' strategy. A risk management program focuses on the unpredictability of finance markets and seeks to minimise potential adverse effects on financial performance. iCandy Interactive Limited uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case on interest rate and market risk. iCandy Interactive Limited does not use derivatives. The consolidated entity's financial instruments consist of deposits with banks and accounts receivables and payables. The main purpose of non- derivative financial instruments is to raise finance for group operations. Specific Financial Risk Exposures and Management The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk and foreign currency risk. a. Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. The Group does not have any significant risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is limited as the counterparties are banks with high credit ratings assigned by international credit rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represent the Group's maximum exposure to credit risk. b. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms: • preparing forward-looking cash flow analyses in relation to its operating, investing and financing activities; • obtaining funding from a variety of sources; • maintaining a reputable credit profile; and • only investing surplus cash with major financial institutions The table below reflects an undiscounted contractual maturity analysis for financial liabilities. Bank overdrafts have been deducted in the analysis as management does not consider that there is any material risk that the bank will terminate such facilities. The bank does however maintain the right to terminate the facilities without notice and therefore the balances of overdrafts outstanding at year-end could become repayable within 12 months. Financial guarantee liabilities are treated as payable on demand since the Group has no control over the timing of any potential settlement of the liabilities. Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflect the earliest contractual settlement dates and do not reflect management’s expectations that banking facilities will be rolled forward. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 51 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 25: Financial Risk Management (Cont'd) Financial liability and financial asset maturity analysis Consolidated Group 2019 $ 2018 $ 2019 $ 2018 $ 2019 $ 2018 $ 2019 $ 2018 $ Within 1 Year 1 to 5 years Over 5 years Total Financial liabilities due for payment Trade and other payables Amounts payable to related parties Total expected outflows Consolidated Group 1,009,471 929,822 742,905 790,118 1,752,376 1,719,940 - - - Within 1 Year 1 to 5 years 2019 $ 2018 $ 2019 $ 2018 $ Financial Assets - cash flows realisable 414,229 359,888 352,513 159,777 1,415,336 1,421,012 2,182,078 1,940,677 429,702 220,737 - - - - - Cash and cash equivalents Trade, term and loans receivables Amounts receivable from related parties Total anticipated inflows Net (outflow) / inflow on financial instruments c. Market Risk i. Interest rate risk - - - - - - - - - - - Over 5 years 2019 $ 2018 $ - - - - - - - - - - - - - 1,009,471 929,822 742,905 790,118 1,752,376 1,719,940 Total 2019 $ 2018 $ 414,229 359,888 352,513 159,777 1,415,336 1,421,012 2,182,078 1,940,677 429,702 220,737 The Group's exposure to market risk primarily consists of financial risks associated with changes in interest rates as detailed below. As the level of risk is low, the Group does not use any derivatives to hedge its exposure. The Group is not exposed to interest rate risk on its non-current borrowings as the terms of the loan agreement stipulates that no interest is payable. ii. Foreign currency risk Exposure to foreign currency risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. With instruments being held by overseas operations, fluctuations in the SGD Dollar and Malaysia Ringgit may impact on the Group’s financial results unless those exposures are appropriately hedged. The following significant exchange rates were applied during the year. $1 AUD Singapore Malaysia Indonesian Rupiah iii. Sensitivity Analysis 2019 2018 Average Rate Spot Rate Average Rate Spot Rate 0.9483 0.3473 0.0001 0.9438 0.3488 0.0001 0.9916 0.3316 1.0378 0.3423 - - The following table illustrates sensitivities to the Group’s exposures to changes in interest rates, exchange rates and commodity and equity prices. The table indicates the impact of how profit and equity values reported at the end of the reporting period would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 52 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 25: Financial Risk Management (Cont'd) These sensitivities assume that the movement in a particular variable is independent of other variables. Year ended 31 December 2019 +/- 0.75% in interest rates +/- 10% in $A/$SGD +/- 10% in $A/$MYR Year ended 31 December 2018 +/- 0.75% in interest rates +/- 10% in $A/$SGD +/- 10% in $A/$MYR Group Profit $ Equity $ 3,107 246 620 3,107 246 620 Group Profit $ Equity $ 2,699 1,625 25,850 2,699 1,625 25,850 There have been no changes in any of the methods or assumptions used to prepare the above sensitivity analysis from the prior year. Fair Values Fair value estimation The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying amounts as presented in the statement of financial position. Refer to Note 21 for detailed disclosures regarding the fair value measurement of the group’s financial assets and financial liabilities. Differences between fair values and carrying amounts of financial instruments with fixed interest rates are due to the change in discount rates being applied by the market since their initial recognition by the Group. Consolidated Group Financial assets Cash and cash equivalents Trade and other receivables: Other financial assets Total financial assets Financial liabilities at amortised cost Trade and other payables Other financial liabilities Total financial liabilities Note 2019 Carrying Amount $ Fair Value $ Carrying Amount $ 2018 Fair Value $ 8 10 16 17 414,229 352,513 1,415,336 2,182,078 414,229 352,513 1,415,336 2,182,078 359,888 159,777 1,421,012 1,940,677 359,888 159,777 1,421,012 1,940,677 1,009,471 742,905 1,752,376 1,009,471 742,905 1,752,376 929,822 790,118 1,719,940 929,822 790,118 1,719,940 (i) Cash and cash equivalents, trade and other receivables, and trade and other payables are short-term instruments in nature whose carrying amounts are equivalent to their fair values. (ii) Term receivables reprice to market interest rates every three months, ensuring carrying amounts approximate fair value. Note 26 Fair Value Measurements The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition: — financial assets - fair value OCI — investments in subsidiaries The Group does not subsequently measure any liabilities at fair value on a non-recurring basis. (a) Fair value hierarchy AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Level 2 Level 3 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. iCandy Interactive Limited Financial Report for the year ended 31 December 2019 53 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 26: Fair Value Measurements (cont'd) Valuation techniques The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: (cid:404) (cid:404) Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. (cid:404) Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data are not available and therefore are developed using the best information available about such assumptions are considered unobservable. Digital currencies have been value using Level 1 input. Market value has been determined by various platforms, including https://coinmarketcap.com/. Note 27 Reserves a. Foreign currency translation reserve The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary. Balance at the beginning of the period Foreign currency movements during the year b. Premium on assets acquired Group 2019 $ 57,471 (121,854) (64,383) 2018 $ 73,008 (15,537) 57,471 When the Company acquired Appxplore (iCandy) Limited, formerly known as iCandy Ventures Limited, a company incorporated in British Virgin Island and iCandy Digital Pte Ltd, a company incorporated in Singapore, this transaction was assessed as a transaction involved entities under common control. The Company was formed to effect the business combination and consideration was settled via the issue of equity interests. As the Company was incorporated to effect the transactions, it was determined that iCandy Interactive Limited would be the legal acquirer and Appxplore (iCandy) Limited would be the accounting acquirer as it was an entity that was carrying on a business prior to the business combination, In accordance with the accounting policy adopted, all assets and liabilities will be recorded at their book value at the date of acquisition. The remaining difference between the fair value of the consideration paid and the book value of the net assets acquired is allocated to equity. Balance at the beginning of the period c. Option reserve The option reserve records the fair value movement on options. Balance at the beginning of the period Issue of options during the year Expiry of options during the year Total Reserves Foreign currency translation reserve Other components of equity Option reserve Group 2019 $ 20,289,999 20,289,999 2018 $ 20,289,999 20,289,999 Group 2019 $ (457,457) (542,133) - (999,590) 2018 $ (885,980) (457,457) 885,980 (457,457) Group 2019 $ (64,383) 20,289,999 (999,590) 19,226,026 2018 $ 57,471 20,289,999 (457,457) 19,890,013 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 54 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 28 Business Combination PT Joyseed Berbagi Sukses is an award winning mobile game development studio surging admist the expanding Southeast Asia's mobile game market. Based in Jarkata, Indonesia, Joyseed's team is made up of the skilled artists and developers from the region dedicated to planting the seed of joy in the hearts of everyone. On 18 May 2018, the Company signed a term sheet to acquire 70% of PT Joyseed Berbagi Sukses, an Indonesian mobile gaming development studio. On 4 Janaury 2019, all conditions precedent to the Agreement had been fulfilled and acquisition completed. Due to limitations of foreign ownership rules in Indonesia, the Company and Vendors entered into a supplemental agreement to reduce the acquisition from 70% to 67%. There is a contingent liability in relation to the purchase. Refer to Note 29 - Contingent Liabilities for further information. The fair value of the identifiable assets and liabilities of PT Joyseed Berbagi Sukses as at the date of acquisition were: Consideration (including shares and deferred consideration subject to performance milestones that have been adjusted based on probability assessments at transaction date) Value of assets acquired Cash Other assets Less: Other liabilities Non-controlling interest Fair value of net assets acquired Goodwill provisionally accounted for 4 Jan 2019 $ 235,000 191 20,386 20,577 93,505 (24,066) (48,862) 283,862 The contribution of PT Joyseed Berbagi Sukses to the consolidated entity's loss was $117,241. Note 29 Contingent Liabilities During the 2018 financial year, the Company completed its Asset purchase of a Portfolio of Games from Animoca Brands Limited ("AB1"). There are 2 contingent liabilities in relation to the purchase and they are listed below. Performance Payments - If during the second year after the Completion Date, the Games generate an aggregate Net Games Profit of at least AUD $1,000,000, AB1 would be entitled to a performance payment in the number of shares equivalent in value to AUD 1,500,000 to be issued within 15 days of the final determination of the Net Games Profit. Each share would be valued at a price equal to the average closing price of a share during the 15 day trading period immediately preceding the issuance of such Shares to AB1 up to a maximum of 9,375,000. Should the number of Shares to be issued to AB1 exceeds the maximum shares, the remaining balance of performance payment will be paid to AB1 in cash by the Company. Earn Out Payment For a period of 5 years from the Completion Date, AB1 shall be entitled to share in the Net Games Profits from the Games, in accordance with the following conditions: - - During any year in which the Net Games Profit from the Games reaches AUD $1,000,000, AB1 shall receive a cash payment equal to at least 10% of such Net Profit as AB1's profit share payable within 15 days of the final determination of the Net Games Profit. The value of AB1's profit share for any such year shall increase by 10% for each addition AUD $500,000 in Net Games Profit reached by the Games during such year, up to a maximum of 50%. The table below illustrates how the Company and AB1 intend for the profit share scheme to work: Net Games Profit (AUD) 1,000,000 - 1,499,999.99 1,500,000 - 1,999,999.99 2,000,000 - 2,499,999.99 2,500,000 - 2,999,999.99 3,000,000 - 3,499,999.99 3,500,000 Profit Share 10% 20% 30% 40% 50% 50% As announced on 9 July 2019, the Games have not generated an aggregate Net Games Profit of at least AUD $500,000, hence, no deferred consideration shares will be issued to AB1. A dispute has arisen with a third party on an outstanding amount owed by the company for an amount of $357,073 in excess of that recorded by iCandy. The Company is confident with the amounts recorded and reflected within the financial statements is correct and a payment of an amount above that recognised is not probable and the recognition of any additional liability at this stage could not be reliably measured. During the 2019 financial year, the Company completed its purchase of 67% of PT Joyseed Berbagi Sukses, an Indonesian mobile gaming development studio. There is a contingent liablity in relation to the purchase and is listed below: Performance Payments - If within 24 months from the completion date, PT Joyseed Berbagi Sukses achieves a revenue milestone of AUD$350,000, the Company will issue AUD $100,000 worth of the Company's shares to the Vendors within 10 Business days, issued at the Issue Price of $0.09 per iCandy Interactive Limited Financial Report for the year ended 31 December 2019 55 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 712 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Note 30 Company Details The registered office of the company is: iCandy Interactive Limited Level 4, 91 William Street Melbourne Vic 3000 The principal places of business are: iCandy Interactive Limited Level 4, 91 William Street Melbourne Vic 3000 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 56 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 871 72 DIRECTORS' DECLARATION In accordance with a resolution of the directors of iCandy Interactive Limited, the directors of the Company declare that: 1. the financial statements and notes are in accordance with the Corporations Act 2001 and: (a) (b) comply with Australian Accounting Standards applicable to the entity, which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards; and give a true and fair view of the financial position as at 31 December 2019 and of the performance for the year ended on that date of the consolidated group; 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; and the directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer. 2. 3. Director Dated this Mr Kin Wai Lau 31 March 2020 iCandy Interactive Limited Financial Report for the year ended 31 December 2019 57 Independent Auditor's Report To the Members of iCandy Interactive Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of iCandy Interactive Limited (“the Company”) and its subsidiaries (“the Consolidated Entity”), which comprises the consolidated statement of financial position as at 31 December 2019, 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: a. the accompanying financial report of the Consolidated Entity is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2019 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. 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 Consolidated Entity 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. Independent Auditor’s Report To the Members of iCandy Interactive Limited (Continued) Material Uncertainty Related to Going Concern We draw attention to Note 1(w) in the financial report which indicates that the Consolidated Entity incurred a net loss of $2,323,035 during the year ended 31 December 2019. As stated in Note 1(w), these events or conditions, along with other matters as set forth in Note 1(w), indicate that a material uncertainty exists that may cast significant doubt on the Consolidated Entity’s ability to continue as a going concern. Our opinion is not modified in this 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. Key audit matter How our audit addressed the key audit matter Impairment assessment of Cash Generating Units inclusive of intangible assets  As disclosed in note 13, the Consolidated Entity intangible assets of $1,747,035 after has impairment charges of $180,000.  Impairment of intangible assets is considered to be a key audit matter due to the significance of the assets to the Consolidated Entity’s financial position, current year’s performance and due to the judgement involved in determining the key assumptions used in the recoverable amount. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount of the CGU is based on certain key assumptions, such as cash flow projections covering the life of the games. Our procedures amongst others included:  Obtaining an understanding of the value in use model and assumptions used;  Critically evaluating management’s methodologies and their documented basis for key assumptions utilised in the valuation models.  We checked the mathematical accuracy of the cash flow models;  We assessed the reasonableness of historical cashflows to forecasts provided by management;  We performed sensitivity analyses around the discount rate used; and  We assessed the appropriateness of the disclosures included in Note 13 to the financial report. Share based payments Our procedures included, amongst others: (Refer to Note 22) During the year ended 31 December 2019, the Company incurred share based payments totalling $542,133.  Analysing contractual agreements to identify the key terms and conditions of share based payments issued and relevant vesting conditions in accordance with AASB 2 Share Based Payments; Independent Auditor’s Report To the Members of iCandy Interactive Limited (Continued) Key audit matter How our audit addressed the key audit matter Share based payments are considered to be a key audit matter due to  Evaluating Black-Scholes Valuation Models and assessing the assumptions management’s  the value of the transactions; and inputs used;  the complexities involved in recognition and measurement of these instruments;  the judgement involved in determining the inputs used in the valuation for the model; and  the judgement involved in valuing the settlement shares. Management used the Black-Scholes option valuation model to determine the fair value of the options granted. This process involved significant estimation and judgement required to determine the fair value of the equity instruments granted. Recoverability of other financial assets The Consolidated entity has provided loans to multiple entities including related parties and to external parties, totalling $1,415,336, as disclosed in Note 10.  Assessing the amount recognised during the period against the vesting conditions of the options;  Assessing the adequacy of the disclosures included in the financial report; Our procedures amongst others included:  Obtaining loan confirmations;  Discussions held with management over the Due to the quantum of the loans, the recoverability of recoverability of the loans; the loans were considered a key audit matter.  Assessment of the counterparty’s capacity to repay the loan; and We assessed the appropriateness of the disclosures included in Notes 10 and 24 to the financial report. Other Information The directors are responsible for the other information. The other information comprises the information included in the Consolidated Entity’s annual report for the year ended 31 December 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Independent Auditor’s Report To the Members of iCandy Interactive Limited (Continued) 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 Note 1, the directors also state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. In preparing the financial report, the directors are responsible for assessing the Consolidated Entity’s ability 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 Consolidated Entity or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional 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 Consolidated Entity’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 Consolidated Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Consolidated Entity to cease to continue as a going concern. Independent Auditor’s Report To the Members of iCandy Interactive Limited (Continued) Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Consolidated Entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Consolidated Entity audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 31 December 2019. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with s 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. Auditor’s Opinion In our opinion, the Remuneration Report of the Company, for the year ended 31 December 2019, complies with section 300A of the Corporations Act 2001. BENTLEYS Chartered Accountants MARK DELAURENTIS CA Partner Dated at Perth this 31st day of March 2020 ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 604 871 712 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES The following information is current as at 25 March 2020: 1. a. b. c. Shareholding Distribution of Shareholders No. of Holders No. of Ordinary Shares Category (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over 70 46 177 353 140 786 4,160 166,343 1,617,935 14,733,113 320,995,482 337,517,033 The number of shareholdings held in less than marketable parcels is 507 (2018: 154). The names of the substantial shareholders listed in the holding company’s register are: Shareholder Fatfish Internet Pte Ltd Animoca Brands Limited d. Voting Rights Number No. of Fully Paid Ordinary Shares % Held of Issued Ordinary Capital 187,500,001 26,650,000 55.55% 7.89% The voting rights attached to each class of equity security are as follows: Ordinary shares – Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. e. 20 Largest Shareholders — Ordinary Shares Name Fatfish Internet Pte Ltd Animoca Brands Limited HSBC Custody Nominees (Australia) Limited RHB Securities Singapore Pte Ltd Esports.Com Group AG Fatfish Medialab Pte Ltd Lead Nation Holdings Limited Incubate Fund 1-G Limited Partnership Citicorp Nominees Pty Limited BNP Paribas Noms Pty Ltd Blue Boat Group Limited 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Mr Jason Jon Boyer 13. 14. 15. Lead Nation Holdings Limited Tan Choon Huat Ms Nicole Gallin & Mr Kyle Haynes Harford Vantage (Australia) Pty Ltd 16. 17. Mr Zhenlong Liang 18. 19. 20. Kie Seik Phai Roland Quek Seow Kee Hoo Jia Ling Number of Ordinary Fully Paid Shares Held 187,500,001 26,650,000 12,357,158 7,759,117 6,815,091 5,000,000 4,163,477 4,140,056 3,776,789 3,192,238 2,757,283 2,710,697 2,580,000 2,535,371 2,500,000 2,191,464 1,594,059 1,594,059 1,463,642 1,425,971 282,706,473 % Held of Issued Ordinary Capital 55.55% 7.89% 3.66% 2.30% 2.02% 1.48% 1.23% 1.23% 1.12% 0.95% 0.82% 0.80% 0.76% 0.75% 0.74% 0.65% 0.47% 0.47% 0.43% 0.42% 83.74% ICANDY INTERACTIVE LIMITED AND CONTROLLED ENTITIES ABN: 87 604 604 871 712 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES 2. 3. 4. 5. The name of the company secretary is Mr Andrew Draffin and Ms Jiahui Lan. The address of the principal registered office in Australia is Level 4, 91 William Street, Melbourne Victoria 3000. Registers of securities are held at the following addresses Link Market Services Limited Level 4, 152 St Georges Terrace Perth WA 6000 Stock Exchange Listing Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited. 

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