CODEIFAI LIMITED — Annual Report 2022

Feb 27, 2023

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ASX ANNOUNCEMENT ASX:YPB | 28 February 2023

YPB records best annual operating result

• 2022 smallest loss in company’s history

• Loss reduced 13% on prior year

• Cash used in operations reduced 19% on prior year

• Tight cost control key driver with revenues covid impacted

• Focused drive towards profitability in 2023

Authentication and consumer engagement solutions creator YPB Group Limited (ASX: YPB) presents financial highlights for the year to 31 December 2022.

Pleasing further progress toward the critical goal of profitability was made in 2022 with total comprehensive loss 13% lower than that of 2021, and net operating cash consumption 19% lower.

Despite this improvement, the result fell short of board and management ambitions. Covid hurt revenue by reducing normal order flows and hampering new business development.

Nevertheless, there was consolation in strong execution of controllable elements, with significant advances in cost control, product development, and sales and marketing strategy.

This review will discuss the notable elements of the financial result, with a more comprehensive discussion of key achievements across the business to follow in the Annual Report in March 2023.

2022 loss reduced due to cost control despite revenue fall

Operating loss before foreign exchange improved 12% to $4.0m in 2022 down from $4.6m in 2021. Total comprehensive loss was 13% better at $3.7m in 2022, down from $4.3m.

Most importantly, cashflow from operating activities was 19% improved at $2.9m in 2022, down from $3.5m in the prior year.

Tight cost control drove the improvements which were achieved despite lower revenue.

Revenue fell 16% in 2022 to $556k, down from $664k in 2021. This fall was almost entirely due to Covid policies, travel restrictions and “lockdowns” in China curbing demand for YPB’s products. Not only was normal order flow restricted, but anticipated new business was slow to eventuate.

More generally, Covid disruptions severely hampered new business development in all geographies as customers battled to keep their own operations sailing through a range of supply chain and demand gales. This environment eased somewhat later in 2022, although China only started to improve in 2023 and its 're-opening’ has been slow despite the abandonment of zero Covid policies. YPB’s China team will be conducting in-person meetings with key accounts in March for in almost two years to re-invigorate its order book and plan new projects with customers. the first time

investors@ypbsystems.com

YPB Group Limited Level 5, 126 Phillip Street Sydney NSW 2000 Australia

ypbsystems.com

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Despite 2022’s revenue result, tight cost control led to cost falling faster in dollar terms (although lower in percentage terms) than the revenue fall, leading to the reduced loss. Total costs ex share-based payments and foreign exchange impacts fell 11% or $332k from the prior year.

The two largest cost item swings were a fall in staff costs of $415k and a rise in R&D costs of $300k. Most of this change was a reclassification of salaries of R&D personnel from “staff” to “R&D” to present a more accurate picture of the company’s investment in product development. In aggregate, staff and R&D costs fell $115k or 5.4%.

The apparent rise in R&D spend in fact disguised greater R&D investment efficiency, as on a like-forlike basis (removing the reclassification of staff costs) R&D fell 36% due to in-housing of the R&D effort, achieving both lower cost and greater control. Three further important points regarding the R&D investment are:

• Its productivity improved significantly over the year with greater advances in product effectiveness and commerciality per dollar of investment than had been achieved in any prior year.

• There was no revenue benefit in 2022 from the achievement of a deeper, broader and more functional product suite, with payoffs to become apparent in the current year.

• YPB’s R&D accounting policy is very conservative with all incremental investment being expensed as incurred, rather than being capitalised as an asset. In fact, the only intangible asset on the balance sheet is the original acquisition cost of the novel MotifMicro technology, which has been partially written down due to covid-related delays in achieving the anticipated commerciality. Arguably, the book value of MotifMicro has actually increased as YPB’s developments such as smartphone readability driven by artificial intelligence machine learning, the MotifMicro app, and initial marketing successes have all added value to the acquired intellectual property. YPB also has a product suite with a history and future of revenue generation that is carried at zero value on the balance sheet.

On a like for like basis (pre R&D re-classification), staff costs in 2022 were effectively flat on 2021 but were inflated by:

• The payment of entitlements upon departure of the CFO and other higher cost Australian based finance staff mid-year. Without these once-off items, already significantly reduced staff costs would have fallen a further 10%. In 2023, the finance function, now based in Thailand, will operate at lower cost than in 2022.

• The contracting of Brand-Armor in early 2022 to drive global sales of YPB’s product suite. Unfortunately, this proved a significant expense without return with results below expectations, and the relationship was terminated for non-delivery toward the end of 2022 at no further cost to YPB. If the right authentication industry talent can be found, this cost will be reinvested in 2023 in sales capabilities focused in either USA and/or EAMA.

Other profit and loss items of note were:

• Gross margin (revenue less cost-of-goods sold) steady at 95% between 2022 and 2021. This high gross margin reflects the intellectual property strength of YPB’s products. It is also central to the drive toward profitability with each incremental sales dollar contributing almost entirely to profit.

• Depreciation falling $78k or 77%, with a move to a smaller office seeing surplus fixed assets sold. This was partially offset by a $16k increase in rental expense, with Thailand up due to new premises and no covid rent holiday in 2022, and China down due to government rent subsidies during lockdown.

investors@ypbsystems.com

YPB Group Limited Level 5, 126 Phillip Street Sydney NSW 2000 Australia

ypbsystems.com

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• Investor relations falling $193k or 60% as expensive but ineffective IR programs were discontinued.

• Regulatory fees down $66k or 35% due to lower ASX and ASIC costs.

• Travel costs rising $91k from an artificially low covid-restricted base, as more normal travel resumed. Pleasingly, this spend has proven very effective with attendance at trade shows producing important new business opportunities, and greater staff cohesion and enthusiasm yielding tangible benefits.

• A final P&L item of note was a rise in share-based payments from $8k in 2021 to $377k in 2022. This non-cash remuneration acknowledged the vital contributions of key personnel and is foundational to the protection of shareholder value by keeping key contributors dedicated to the company’s success.

Balance sheet stable, funding support from Executive Chair

The unfortunate fact of YPB being still early in its revenue development, is that the company is cashflow negative and reliant on capital injections to fund operations. Yet the benefit of the cost drive and greater cash efficiency achieved in 2022, is that the company was able to issue $1.5m less in new equity in 2022, totalling $2m, than in the prior year. Being highly conscious of the impact of new equity issuance on shareholder value, the board always strives to minimise equity dilution.

Unfortunately, however, the 2022 tech sector rout and delays in achieving the company’s promise has seen its share price languish. This caused regrettable equity dilution, with a share consolidation recommended by the company’s key capital markets adviser having a particularly dire and opposite-to-predicted impact on the company’s value. The board and management are highly conscious of this loss of value and are dedicated to its restoration.

The company briefly took on $500k of short-term debt in 2022 which was repaid quickly. More significantly, the Executive Chairman personally secured the company’s future in Q4 2022 at a time when capital markets were closed to small, unprofitable tech companies, by providing $1m funding in the form of a convertible note which appears on the balance sheet as “Financial liabilities Borrowings – current”. This funding and its terms were approved by shareholders at general meeting in December 2022.

There were few other movements on the balance sheet other than an increase in trade and other payables of $558k. The majority of the increase was in the “other” category and does not reflect a blowout in trade payables, nor does it infer any increased risk to the company.

Technical and business development achievements significant, particularly enhanced connectivity

As reported through 2022, progress in both authentication and consumer engagement technologies was again excellent in 2022. A range of innovations concluded during the year have expanded the company’s revenue opportunities via a broader product range and application development for new markets. At the same time, the value to customers has increased through greater data richness following integration of all products into the YPB Connect Global Dashboard.

This significance of this latter innovation can’t be over-emphasised. YPB’s entire product suite now has connectivity to YPB Connect, enabling the generation and analysis of original data invaluable to company’s trying to control supply chains and understand end consumers. Authentication scans generate rich, coal-face data in real time, and this integrated authentication and engagement data capability is increasing the commercial appeal of all YPB’s products.

investors@ypbsystems.com

YPB Group Limited Level 5, 126 Phillip Street Sydney NSW 2000 Australia

ypbsystems.com

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In addition to the technical advances, new business development made tremendous progress in outbound marketing skill and the company’s ability to generate potentially lucrative inbound leads, particularly in H2 2022. While commercial progress in 2022 was clearly disappointing due primarily to covid restrictions, the payoff from the upgraded marketing capability should yield tangible benefits in 2023.

The forthcoming Annual Report will detail tech and business development progress more fully.

YPB Executive Chairman and Group CEO John Houston said: “While 2022 undoubtedly had its frustrations and disappointments in not achieving the planned significant new business uplift, the team delivered a credible result by tightly controlling costs and creatively servicing clients in difficult circumstances.

The progress made in the key facets of the business under our control was excellent, far better than any prior year, particularly given the abnormal external challenges.

In a hopefully more benign business environment, our goal for 2023 is to capitalise on 2022’s product upgrades and greater sales effectiveness to drive revenues well above costs. Our whole team is galvanised to restore and grow shareholder wealth.

This announcement has been authorised by the Board of YPB Group Limited.

Ends.

For further information please contact:

YPB investor enquiries Ben Jarvis investors@ypbsystems.com 0413 150 448 Ben.jarvis@sdir.com.au Six Degrees Investor Relations

About YPB Group

YPB Group Limited (ASX: YPB) is listed on the Australian Stock Exchange and has developed and sells of a suite of physical, digital, and AI-based authentication technologies with a vast range of applications. Our solutions can easily authenticate a myriad of items, such as FMCG (fast-moving consumer goods) products, official identification documents, pharmaceuticals, nutraceuticals, dairy products, tax stamps, transactions - and even people.

Our solutions trigger engagement with consumers in a consented, cost-effective, and direct manner. Our proprietary technologies utilize Bluetooth and/or smartphones to capture and analyse invaluable authentication data in our Connect™ global intelligence platform, providing real-time, first-party, and worldwide market intelligence data. This actionable data enables brands to establish digital and direct marketing channels with their customers.

The markets YPB is targeting comprise many billions of items, and this number is growing rapidly, providing YPB with significant growth opportunities for its authentication and consumer engagement. To learn more please visit: ypbsystems.com

investors@ypbsystems.com

YPB Group Limited Level 5, 126 Phillip Street Sydney NSW 2000 Australia

ypbsystems.com

1. Company details

Name of entity: YPB Group Ltd ACN: 108 649 421 Reporting period: For the year ended 31 December 2022 Previous period: For the year ended 31 December 2021

2. Results for announcement to the market

					2022	2021
		$	%		$	$
Revenues from ordinary
activities	down	107,807	16%	to	555,941	663,748
Loss from ordinary activities
after tax for the year
attributable to the owners of
YPB Group Ltd	down	211,656	6%	to	(3,301,603)	(3,513,259)
Loss for the year attributable
to the owners of YPB Group
Ltd	down	211,656	6%	to	(3,301,603)	(3,513,259)

Comments

The loss for YPB Group Ltd ('the Consolidated Entity'), after providing for income tax amounted to $3,301,603 (2021: $3,513,259). Revenue for the year was $555,941 (2021: $663,748) which represents a 16% decrease from the prior year.

3. Net tangible assets/(liabilities)

. Net tangible assets/(liabilities)
	2022	2021
	Cents	Cents
Net tangible assets/(liabilities) per ordinary security	(0.365)	(0.001)

The net tangible assets/(liabilities) backing per ordinary security of (0.365) cents.

Net tangible assets are showing a negative value for the reporting and comparative period due to the majority of recorded assets being intangible.

4. Gain and loss of control over entities

On 16 January 2022, the Consolidated Entity lost control of nTouch Agency Pty Ltd, one non-operating dormant entity domiciled in Australia, as it was deregistered with ASIC as of that date.

1

Further details are contained in Note 15 to the financial statements.

5. Dividends

Current period

There were no dividends paid, recommended or declared during the current financial period.

Previous period

There were no dividends paid, recommended or declared during the previous financial period.

6. Dividend reinvestment plans

There are no dividend reinvestment plans for the year ended 31 December 2022 (2021: Nil).

7. Details of associates and joint venture entities

No changes since the previous annual report was released.

8. Foreign entities

Details of origin of accounting standards used in compiling the report:

There has been no change in foreign-owned subsidiaries to those reported for the year ended 31 December 2022. All group entities comply with International Financial Reporting Standards (‘IFRS’).

9. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The financial statements for the year ended 31 December 2022 are in the process of being audited.

10. Attachments

Details of attachment (if any):

Not applicable.

Signed

John Houston Date: 28 February 2023

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YPB Group Ltd ACN: 108 649 421

Full Year Preliminary Report 31 December 2022

3

YPB Group Ltd Contents For the year-ended 31 December 2022

Contents

ontents
Consolidated statement of profit or loss and other comprehensive	5
income
Consolidated statement of financial position	6
Consolidated statement of changes in equity	7
Consolidated statement of cash flows	9
Notes to the consolidated financial statements	10

4

YPB Group Ltd Consolidated statement of profit or loss and other comprehensive income For the year ended 31 December 2022

Note Revenue 2 Expenses Consulting Depreciation and amortisation expense Directors’ fees Employee benefits expense Finance costs 3 Impairment of goodwill and other intangible assets Marketing costs Investor relations Production costs Professional fees Rental expenses Research and development costs Regulatory expenses Share-based payments Travelling expenses Other expenses Gain/(loss) on extinguishment of financial liabilities via equity settlement Foreign exchange profit Loss before income tax 4 Income tax (expense)/benefit Loss after income tax from continuing operations for the year attributable to the owners of YPB Group Ltd Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations Other comprehensive income for the full-year, net of tax Total comprehensive loss for the year period attributable to the owners of YPB Group Ltd Basic and diluted earnings per share 17	2022 2021 $ $ 555,941 663,748 (786,354) (702,036) (22,920) (101,393) (80,000) (80,000) (1,251,619) (1,667,256) (74,631) (227,009) - (502,982) (49,711) (43,390) (128,780) (321,713) (26,824) (32,440) (211,362) (184,486) (99,260) (84,517) (683,828) (384,094) (121,071) (186,773) (377,416) (8,078) (129,572) (38,501) (549,206) (748,713) - 44,657 735,010 1,091,717
	(3,301,603) (3,513,259) - -
	(3,301,603) (3,513,259) (415,180) (749,194)
	(415,180) (749,194)
	(3,716,783) (4,262,453)
	Cents Cents (1.02) (0.07)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

5

YPB Group Ltd Consolidated statement of financial position As at 31 December 2022

Note Assets Current assets Cash and cash equivalents 5 Trade and other receivables 6 Other assets 7 Inventories 8 Non-current assets Plant and equipment 9 Right-of-use assets 9 Intangibles 10 Total assets Liabilities Current liabilities Trade and other payables 11 Financial liabilities 12 Total liabilities Net assets Equity Issued capital 13 Reserves 14 Accumulated losses Total equity	2022 2021 $ $ 641,408 531,477 328,987 321,403 374,685 329,695 193,464 209,277
	1,538,544 1,391,852
	31,821 50,106 - - 5,804,800 5,419,929
	5,836,621 5,470,035
	7,375,165 6,861,887 2,033,793 1,476,033 1,021,085 -
	3,054,878 1,476,033
	3,054,878 1,476,033
	4,320,287 **5,385,854 **
	83,877,039 81,773,800 2,406,357 3,040,859 (81,963,109) (79,428,805)
	4,320,287 5,385,854

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

6

YPB Group Ltd Consolidated statement of changes in equity For the year ended 31 December 2022

Consolidated Balance at 1 January 2022 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Shares issued, net of transaction costs Performance rights exercised during the year Performance rights issued during the year Options granted during the year Options lapsed during the year Balance at 31 December 2022	Issued capital Foreign currency translation reserve Issued options reserve Share- based payment reserve Accumulated losses Total equity $ $ $ $ $ $ 81,773,800 2,192,710 767,344 80,805 (79,428,805) 5,385,854 - - - - (3,301,648) (3,301,648) - (415,180) - - - (415,180)
	- (415,180) - - (3,301,648) (3,716,828) 2,103,239 - - - - 2,103,239 - - - (80,805) - (80,805) - - - 418,827 - 418,827 - - 210,000 - - 210,000 - - (767,344) - 767,344 -
	83,877,039 1,777,530 210,000 418,827 (81,963,109) 4,320,287

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

7

YPB Group Ltd

Consolidated statement of changes in equity For the year ended 31 December 2022

PB Group Ltd onsolidated statement of changes in equity or the year ended 31 December 2022
Consolidated Balance at 1 January 2021 Prior period adjustment1 Adjusted balance at 1 January 2021 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Shares issued, net of transaction costs Performance rights issued during the year Options granted during the year Options exercised during the year Options lapsed during the year Share-based payments Balance at 31 December 2021		Issued capital Foreign currency translation reserve Issued options reserve Share- based payment reserve Accumulated losses Total equity $ $ $ $ $ $ 77,664,696 2,941,904 2,040,000 - (77,983,762) 4,662,838 - - - - 28,216 28,216
		77,664,696 2,941,904 2,040,000 - (77,955,546) 4,691,054 - - - - (3,513,259) (3,513,259) - (749,194) - - - (749,194)
		- (749,194) - - (3,513,259) (4,262,453) 2,985,259 - - - - 2,985,259 - - - 80,805 - 80,805 - - 767,344 - - 767,344 750,000 - (1,275,000) - 1,275,000 750,000 - - (765,000) - 765,000 - 373,845 - - - - 373,845
		81,773,800 2,192,710 767,344 80,805 (79,428,805) 5,385,854

Note 1: The prior period adjustment arose from YPB Limited (“YPB HK”), a wholly-owned subsidiary of the Consolidated Entity, resulting from the audit of its financial statements for periods 1 April 2020 to 31 December 2020 completed during 2021.

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

8

YPB Group Ltd Consolidated statement of cash flows For the year ended 31 December 2022

Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Finance costs Net cash used in operating activities 16 Cash flows from investing activities Payments for plant and equipment Proceeds from disposal of plant and equipment Funds on deposit in escrow Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares (net of costs) Proceeds from exercise of options Proceeds from borrowings Repayment of borrowings Payment of lease liabilities Net cash from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effect of movements in exchange rates on cash held Cash and cash equivalents at the end of the financial year 5	2022 2021 $ $ 500,981 669,109 (3,300,679) (4,006,904) 2,385 1,657 (53,546) (196,628)
	(2,850,859) (3,532,766)
	(3,842) (12,000) 235 14,000 - (70,000)
	(3,607) (68,000)
	2,030,384 3,518,448 - 750,000 1,500,000 - (500,000) (1,614,992) - (69,246)
	3,030,384 2,584,210
	175,918 (1,016,556) 531,477 1,558,429 (65,987) (10,396)
	641,408 531,477

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

9

YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

Note 1. Operating segments

The Consolidated Entity is organised into operating segments as outlined below.

Management determines operating segments based on the internal reports that are reviewed and used by the Board of Directors, who are identified as the Chief Operating Decision Makers ('CODM'), in assessing performance and in determining the allocation of resources.

The CODM reviews EBITDA (earnings before interest, tax, depreciation, and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the consolidated financial statements.

Types of products and services

For the year ended 31 December 2022, management considers the company to offer its client base a complete end-to-end service and product offering, hence considering its main operations to be represented by one business segment.

The bundled “complete solution offering” encompasses a range of products and services which are available to customers, including:

• Digital engagement platform that provides brand engagement with end consumers to promote product authenticity;

• Covert forensic products which are invisible particles (‘tracers’) fused into a product or packaging during or after the manufacturing process and are detectable using YPB’s proprietary scanner or smartphone mobile devices;

• Forensic laboratory services for the examination of counterfeit products; and

• Security consulting services provided to governments, corporations and intellectual property owners for the deterrence of counterfeiting, grey markets, product diversions and fraud.

(a) Geographical information

2022 In $ External revenue Interest income Other income Total revenue	Reportable segments Australia People’s Republic of China Thailand United States of America Total 296,464 254,690 - - 551,154 2,372 - 13 - 2,385 175 2,227 - - 2,402
	299,011 256,917 13 - 555,941

10

YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

2021 In $ External revenue Interest income Other income Total revenue b) Assets 2022 In $ Current assets Non-current assets Total assets 2021 In $ Current assets Non-current assets Total assets	Reportable segments Australia People’s Republic of China Thailand United States of America Total 317,130 321,599 - - 638,729 1,435 - - 222 1,657 - 6,187 17,175 - 23,362
	318,565 327,786 17,175 222 663,748
	Reportable segments Australia People’s Republic of China Thailand United States of America Total 1,050,142 307,769 180,187 446 1,538,544 - 10,783 16,927 5,808,911 5,836,621
	1,050,142 318,552 197,114 5,809,357 7,375,165
	Reportable segments Australia People’s Republic of China Thailand United States of America Total 755,426 307,210 328,800 416 1,391,852 - 11,920 29,585 5,428,530 5,470,035
	755,426 319,130 358,385 5,428,946 6,861,887

(b) Assets

Note 2. Revenue

Revenue Sale of goods and services - Digital engagement platform - Covert forensic products - Brand protection labelling solutions Other revenue Interest Other income	2022 2021 $ $ 119,076 295,229 406,451 334,924 25,627 8,576
	551,154 638,729 2,385 1,657 2,402 23,362
	555,941 663,748

11

YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

Note 3. Finance cost

Note Interest and finance charges paid/payable for lease liabilities and financial liabilities not at fair value through profit or loss 4	Consolidated 2022 2021 $ $ 74,631 227,009
	74,631 227,009

Note 4. Loss for the year

The loss for the year includes the following expenses:

Note Finance costs 3 Research and development costs Depreciation and amortisation Inventories written off Impairment of intangible assets Rental expense on operating leases – minimum lease payments Loss/(gain) on extinguishment of financial liabilities via equity settlement	Consolidated 2022 2021 $ $ 74,631 227,009 683,828 384,094 22,920 101,393 - (2,069) - 502,982 99,260 84,517 - (44,657)
	880,639 1,253,269

Note 5. Cash and cash equivalents

Cash on hand Cash at bank	Consolidated 2022 2021 $ $ 1,318 1,739 640,090 529,738
	641,408 531,477

Note 6. Trade and other receivables

Trade receivables Less: allowance for doubtful debts	Consolidated 2022 2021 $ $ 215,437 130,433 (73,243) (69,840)
	142,194 60,593

12

YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022 GST/VAT receivables Other receivables	89,355 166,588 97,438 94,222
	328,987 321,403

Note 7. Other assets

ote 7. Other assets
Escrow account – (i) Rental deposits Prepaid rent Prepayments	Consolidated 2022 2021 $ $ 200,929 200,929 34,485 34,138 10,492 4,421 128,779 90,207
	374,685 329,695

(i): No additional deposit during the year (2021: $70,000) into an escrow account for the purpose of a commercial dispute against an external party. The monies are placed in an interest-bearing account for a period of twelve months from the date of deposit. Refer to Note 18 for and update on this matter.

Note 8. Inventories

Finished goods – at cost Less: provision for slow-moving stock	Consolidated 2022 2021 $ $ 193,464 209,277 - -
	193,464 209,277

Note 9. Plant and equipment & Right-of-use assets

Plant and equipment – at cost Less: accumulated depreciation Right-of-use asset – at cost Less: accumulated depreciation	Consolidated 2022 2021 $ $ 213,241 206,217 (181,420) (156,111)
	31,821 50,106
	- 380,567 - (380,567)
	- -

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial years are set out below:

13

YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

Consolidated Balance at 1 January 2022 Additions Disposals Depreciation expense Exchange differences Balance at 31 December 2022 Balance at 1 January 2021 Additions Disposals Depreciation expense Exchange differences Balance at 31 December 2021	Right-of-use assets Plant and equipment Total $ $ $ - 50,106 50,106 - 3,842 3,842 - (247) (247) - (22,927) (22,927) - 1,047 1,047
	- 31,821 31,821
	78,365 60,757 139,122 - 12,000 12,000 - (18,017) (18,017) (75,235) (25,404) (100,639) (3,130) 20,770 17,640
	- 50,106 50,106

Note 10. Intangibles

Goodwill – at cost Less: Accumulated impairment losses Intellectual property – at cost Less: Accumulated amortisation Less: Accumulated impairment losses Customer relationships – at cost Less: Accumulated amortisation Less: Accumulated impairment losses Patent licence rights – at cost Less: Accumulated impairment losses	Consolidated 2022 2021 $ $ 3,089,466 3,089,466 (3,089,466) (3,089,466)
	- -
	16,250,550 16,250,550 (4,942,153) (4,942,153) (11,308,397) (11,308,397)
	- -
	206,000 206,000 (28,000) (28,000) (178,000) (178,000)
	- -
	8,797,048 8,213,892 (2,992,248) (2,793,963)
	5,804,800 5,419,929

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial years are set out below:

Consolidated

Patent
licence rights	Total
$		$

14

YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022
Balance at 31 December 2021 Balance at 1 January 2022 Impairment loss Effect of movement in exchange rates Balance at 31 December 2022	5,419,929 5,419,929
	5,419,929 5,419,929 - - 384,871 384,871
	5,804,800 5,804,800

Intangible assets, other than goodwill, have finite useful lives. The current period amortisation charge for intangible assets is included under the depreciation and amortisation expense in the consolidated statement of profit or loss and other comprehensive income.

Patent Licence Rights

Effective in December 2017, the Group acquired MotifMicro’s patented licence rights to develop and commercialise its secure smartphone readable authentication technology. The non-replicable invisible micro-barcode technology works whereby the smartphone becomes the authentication device for uncopiable, invisible and indestructible physical marking technology.

The Group owns MotifMicro’s patented licence rights to develop and commercialise its secure smartphone readable authentication technology. The non-replicable invisible micro-barcode technology works whereby the smartphone becomes the authentication device for uncopiable, invisible and indestructible physical marking technology.

As the technology is still in the development phase and under commercial trials during the period ended 31 December 2022, the patent licence rights have not commenced amortisation, however impairment adjustments have been recorded in prior years to its carrying amount. MotifMicro’s development in 2022 was advanced through a number of technological achievements together with customers that signed firstadopter agreements to expedite its commercialisation in the market. The company is pursuing further opportunities to commercially release MotifMicro in the near future.

Impairment testing indicated that the recoverable amount of the patent licence rights exceeds the carrying amount and therefore no impairment is considered necessary as at 31 December 2022. The valuation methodology (‘value in use’ or ‘VIU’) model reflects updated forecasts and progress made on the MotifMicro technology.

The following key assumptions and results arising from the VIU methodology applied are as follows:

• Revenue growth from conversion of sales pipeline of $271,040 for FY2023 with an annual long-term growth rate of 12.5% until 2027 that follows the industry growth rate with a long-term annual growth rate of 2% thereafter;

• Discounted cash flow modelling to 2034 (the expiry date of the patent licence) with no terminal value;

• A WACC of 26.81% (post-tax) assuming a long-term debt/equity ratio of nil; and

• The group securing sufficient funding in future periods to continue as a going concern.

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YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

Note 11. Trade and other payables

ote 11. Trade and other payables
Trade payables Other payables and accruals	Consolidated 2022 2021 $ $ 982,221 658,490 1,051,572 817,543
	2,033,793 1,476,033

Note 12. Financial liabilities

Related party loans - (i)	Consolidated 2022 2021 $ $ 1,021,085 -
	1,021,085 -

(i): During the year, the Consolidated Entity obtained a total of $1,000,000 (2021: Nil) of short-term borrowings from a related party, repayable within 12 months from the commencement date, and at an interest of 16.73% per annum (or part thereof).

Note 13. Equity – Issued capital

Consolidated Ordinary shares – fully paid	2022 2021 2022 2021 Shares Shares $ $ 406,546,153 6,117,833,701 83,877,039 81,773,800

Movements in ordinary share capital

Details Date Balance 1 January 2022 Consolidation 25:1 30 May 2022 Balance 30 May 2022 Conversion of options 30 May 2022 Share placements 5 July 2022 Balance 31 December 2022	Shares $ 6,117,833,701 81,773,800 244,713,348 81,773,800
	244,713,348 81,773,800 1,454,922 72,727 160,377,883 2,030,512
	406,546,153 83,877,039

Ordinary shares

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YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Note 14. Equity – Reserves

Note Issued options reserve (a) Share-based payment reserve (b) Foreign currency translation reserve (c)	Consolidated 2022 2021 $ $ 210,000 767,344 418,827 80,805 1,777,530 2,192,710
	2,406,357 3,040,859

(a) Issued options reserve

The option reserve records items recognised as expenses on valuation of share options issued.

Details Date Balance 1 January 2022 Options expired 23 February 2022 Balance 23 February 2022 Consolidated 25:1 30 May 2022 Options granted to investors of capital raises 5 July 2022 Balance 31 December 2022	Options $ 3,464,336,576 767,344 (3,400,336,576) (767,344)
	64,000,000 - 2,560,000 - 140,000,000 210,000
	142,560,000 210,000

(b) Share-based payment reserve

The share-based payment reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services rendered.

Details Date Balance 1 January 2022 Performance Rights reversed 29 April 2022 Performance Rights issued under share-based payments 29 April 2022 Performance Rights converted to shares 30 May 2022 Performance Rights issued under share-based payments 30 May 2022 Balance 31 December 2022	$ 80,805 (8,078) 338,827 (72,727) 80,000
	418,827

(c) Foreign currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Monetary items receivable from or payable to foreign operations whereby settlements to these

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YPB Group Ltd

Notes to the consolidated financial statements For the year ended 31 December 2022

receivables and payables are not planned nor likely to occur in the foreseeable future are classified as net investment in foreign operations. Exchange differences arising from monetary items that forms part of the Group’s net investment in foreign operations are recognised as foreign currency translation reserve in equity.

Note 15. Interests in subsidiaries

The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries:

		Ownership	Ownership
		Interest
	Principal Place of Business	2022	2021
Name	/ Country of Incorporation	%	%
YPB Limited	Hong Kong	100	100
YPB Technology (Beijing) Ltd	People’s Republic of China	100	100
Product ID & Quality Systems (Beijing) Ltd	People’s Republic of China	100	100
YPB Group (USA) Inc.	USA	100	100
YPB Intellectual Product Protection Inc.	USA	100	100
YPB Group International Co., Ltd	Thailand	100	100
YPB Group Co., Ltd	Thailand	100	100
nTouch Pty Ltd	Australia	100	100
YPB Product Development Pty Ltd	Australia	100	100

During the year, the Consolidated Entity restructured the legal entity organisation structure, and the following subsidiary was deregistered as a result:

			Ownership
			Interest
	Date of	Principal Place of Business	2022 2021
Name	Deregistration	/ Country of Incorporation	% %
nTouch Agency Pty Ltd	16 January 2022	Australia	- 100

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YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

Note 16. Reconciliation of loss after income tax to net cash used in operating activities

Note 16. Reconciliation of loss after income tax to net cash	used in operating activities
Loss after income tax benefit for the year Adjustments for: Foreign exchange differences Depreciation and amortisation expense Impairment of intangible assets Assets written off Share-based payments Finance costs Equity-settled transactions Net (gain)/loss on settlement of debts Provision for slow-moving stocks Change in operating assets and liabilities, net of the effects of purchase and disposals of subsidiaries: (Increase)/decrease in trade and other receivables (Increase)/decrease in other assets Decrease/(increase) in inventories Increase/(decrease) in trade and other payables Net cash used in operating activities Note 17. Earnings per share	Consolidated 2022 2021 $ $ (3,301,603) (3,513,259) (735,258) (902,646) 22,920 101,393 - 502,982 247 - 377,416 8,078 21,084 30,380 243,334 616,948 - (44,657) - (2,068) (7,584) (9,124) (44,990) 54,493 15,814 8,440 557,761 (383,726)
	(2,850,859) (3,532,766)

ote 17. Earnings per share
Loss after income tax attributable to the owners of YPB Group Limited Weighted average number of ordinary shares used in calculating basic/diluted earnings per share	2022 2021 $ $ (3,301,603) (3,513,259)
	Number Number 324,221,583 5,069,846,859 Cents Cents

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YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022 Basic/Diluted earnings per share

(1.02) (0.07)

There are 142,560,000 in share options issued but not included in diluted earnings per share as these would have an antidilutive effect on earnings per share. These potential ordinary shares are anti-dilutive as their conversion to ordinary shares would decrease loss per share. If these share options were included in the calculation of diluted earnings per share, the weighted average number of shares used in the denominator would be 475,958,118.

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YPB Group Ltd Notes to the consolidated financial statements For the year ended 31 December 2022

Note 18. Subsequent events

The following events have occurred since 31 December 2022:

• On 20 January 2023, 200,000,000 unlisted options exercisable at $0.005 were issued as consideration for the receipt of funds for convertible notes of $1m. The unlisted options were provided to a related party (J F Houston Holdings Pty Ltd), who received the convertible notes. The options expire on 16 January 2026, and the convertible debt securities attract interest at 9% per annum. The issue of the convertible notes are pursuant to a subscription agreement entered into in October 2022 and were approved by shareholders at a general meeting of YPB held on 23 December 2022.

• On 27 February 2023, ALDUS PTY LTD and FMA HOLDINGS PTY LTD (Defendants) agreed to settle all matters between YPB Group Co Ltd (Plaintiff). Defendants paid the Plaintiff $250,000. Additionally deposits totalling $200,000 which had been placed into an escrow account to facilitate the proceedings were returned with accrued interest.

Other than the above, no matter or circumstance has arisen since 31 December 2022 that has significantly affected, or may significantly affect the Consolidated Entity's operations, the results of those operations, or the Consolidated Entity's state of affairs in future financial years.

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