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CODEIFAI LIMITED Interim / Quarterly Report 2018
64630_rns_2018-08-30_9aa599a2-e8f2-498e-a7a2-77fc01936d80.pdf
Interim / Quarterly Report
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Significantly reduced loss in H1 2018
- y Normalised post tax operating loss improved 67%
- y Reported post tax loss improved 44%
- y Revenue up 22%
- y Operating costs pre write-offs and fx adjustments down 33%
- y Further improvement expected H2 2018
Anti-counterfeit and customer engagement solutions provider YPB Group Ltd (ASX:YPB) provides a commentary on H1 2018.
H1 2018 saw an improvement in the company's operating results. Revenue rose and costs fell. The normalised post-tax operating loss excluding write-downs improved to \$1.99m from \$5.95m, a 67% improvement.
Reported post tax loss improved 44% to \$4.35m. Non-cash balance sheet write-downs were \$2.36m in 2018 and \$1.78m in 2017.
Net cash used in operating activities in H1 2018 improved 35% to \$3.0m. Cash consumption improved at a slower rate than the P&L loss due to payments from restructuring accrued in a prior period but paid in this period. The improvement of H1 is expected to gather pace with clearly lower cash consumption in H2 2018.
While pleasing to see revenue rise, the quantum was unsatisfactory. Deal closures and contract start-ups continued to lag expectations due to carry-over inertia from previous management prior to the Executive Chairman resuming operational leadership. Despite that fact, a newly dynamic and focused sales ethos has been created in H1 2018 and the probability of much better sales results in H2 2018 is high. There has been significant progress with sales personnel, culture and partners which is expected to become apparent in H2 2018 client wins and revenue growth.
Operating costs in H1 2018 were 33% below pcp. Costs would have fallen further but costs associated with the Token project and extraordinary legal fees related to the capital raise early in H1 2018 were incurred. Consulting and legal and accounting fees are expected to fall in H2 with less project activity and the in-housing of previously outsourced finance functions. Further cost improvement should naturally occur in H2 2018 with no further specific cost action.
Despite this, a new cost review and adjustment plan is well developed and will commence in September 2018 with a focus on salaries. Costs must be productive and expenses not yielding results after sufficient grace are again being thoroughly scrutinised. The Board remains intent on making the company financially self-sufficient as quickly as possible.
The Bracknor loan was reduced by \$1.5m in H1 2018 and the balance of \$0.373m will be repaid prior to year end. Bracknor holds no YPB shares and has had no impact on the share price in H1 2018.
Outlook
H2 2018 should see a clearly improved financial performance over H1 with faster new client flows and revenue growth. Unfortunately, the cultural and operational inertia at the business coalface has taken longer to rectify than expected. That has lead the Board to withdraw its forecast of profitability in 2018. While 2018 profitability is still possible if the largest opportunities in progress close and contribute revenue in H2 2018, it is not probable. The prior forecast was dependent on rapid revenue growth but results have lagged expectations.
The company will also no longer be disclosing potential pipeline values to the market. While current possible deals still have circa +\$100m of potential annual revenues, the company's track record of predicting values, probability and timing of closure is insufficiently strong for the release of pipeline values to be helpful to shareholders.
Despite the above comments, the Board retains a firm goal of achieving profitability and expects that to occur in 2019. The timing and magnitude of any profit is primarily dependent on growing revenues through product sales and/or licensing Motif Micro technology.
H1 2018 results are bitter-sweet: improvement was good but not good enough. Most importantly, however, the financial data give zero insight into the very positive progress made in the business over the half year. The team and its performance have been rebuilt and reset and the level of active engagement with customers and prospects has lifted immeasurably.
The withdrawal of guidance is not reflective of diminished opportunity, rather it is simply acknowledgement of milestones missed. In fact, the company's opportunity set continues to grow significantly with:
-
- Macro
- y The rapid growth of Pan-Asian consumer markets;
- y The greater opportunity that creates for in-country consumer goods and Western manufacturers;
- y The greater opportunity for counterfeiters flowing from technology and market access created by online markets;
- y An increased desire of brands to directly engage with their customers and authenticity undoubtedly triggers engagement; and
- y The eventual spread of serialisation (item level unique identities) right across consumer goods markets.
-
- Technology
- y Smartphone readability of a high security anti-counterfeit mark (Motif Micro), as announced on 24 August 2018, is extraordinarily important for the company's prospects. It is a world leading breakthrough in taking highly secure anti-counterfeit solutions to the mass market for the first time. Smartphone readability is expected to accelerate both direct sales by YPB and its partners and licensing of Motif Micro technology to third parties.
- y The Connect serialisation and customer engagement platform is performing well after extensive rebuilds over 2017. It is a stable and scalable platform, offering highly costeffective anti-counterfeit and direct-to-customer marketing solutions.
- y The planned blockchain enablement of Connect is generating clear interest from potential channel partners and clients.
-
- Sales and revenue
- y As noted above, the company's sales staff, processes and culture have been rebuilt. Sales activity is high, as too are expectations of accelerated closures. Energy, focus and optimism pervade the sales teams.
- y Partners and channels have expanded and are active. New partners in Namaste, Australian Made and AliHealth and the rekindling of the Orora relationship should all increasingly bear fruit in H2 2018 and beyond.
- y Licensing interest in Motif Micro is high and the smartphone readability breakthrough is expected to bring opportunities forward. The payoff from this work, however, is more likely to be in H1 2019 due to the complexities of negotiations.
-
- Token Issue US\$30m target
- y The probability of a successful Token Issue is high due to the new strategic partnership with a consortium of leading blockchain, crypto currency and crypto exchange experts as announced on 29 August 2018.
- y A successful Token Issue would create significant shareholder value and make the company financially robust.
YPB's Executive Chairman John Houston said: "While I am pleased with the improved result, I am far from satisfied. Nevertheless, I am confident that the business has been transformed internally and that will become apparent externally via significantly improved financial results in the current and subsequent halves. Our opportunities are greater than ever and importantly, after false starts, we finally have the core team, processes and culture to capture them. I look forward to delivering significant success to shareholders in the second half. After years of building to this point, YPB is entering a dynamic new phase driven by accelerating new client wins, our world leading Motif Micro technology breakthrough and the prospect of financial strength from Token Issue success."
For further information please contact:
Mr. John Houston Mr. Gerard Eakin Executive Chairman Director YPB Group Limited YPB Group Limited
E: [email protected] E: [email protected]
About YPB (ASX: YPB)
YPB Group Ltd (ASX:YPB) lives by three words - certainty of authenticity. We deliver on this through our experience in creating revolutionary, patented anti-counterfeit and customer engagement solutions. Solutions that detect and prove certainty of authenticity and connect brands directly to their customers, empowering them to engage one-on-one.
In an evolving marketplace and with the rapid growth of cross border commerce, our expertise presently focuses on the rapidly growing markets of Australia, South East Asia and China.
www.ypbsystems.com
YPB Group Ltd Appendix 4D Half-year report
1. Company details
| Name of entity: | YPB Group Ltd |
|---|---|
| ACN: | 108 649 421 |
| Reporting period: | For the half-year ended 30 June 2018 |
| Previous period: | For the half-year ended 30 June 2017 |
2. Results for announcement to the market
| \$'000 | |||
|---|---|---|---|
| Revenues from ordinary activities | XS | 21.6% to | 1,007 |
| Loss from ordinary activities after income tax expense for the half-year attributable to the owners of YPB Group Ltd |
down | 43.7% to | (4,346) |
| Loss for the half-year attributable to the owners of YPB Group Ltd | down | 43.7% to | (4,346) |
Comments
The loss for the Consolidated Entity, after providing for income tax amounted to \$4,346,000 (30 June 2017: \$7,726,000). The operating loss includes a number of non-cash & significant items (amortisation/fair value adjustments/share-based payments and impairment charges) which leaves an underlying cash out flow from operations of \$3,004,000 (30 June 2017: \$4,620,000). Revenue for the period was \$1,007,000 (30 June 2017: \$828,000) which represents a 21.6% increase on the prior period.
3. Net tangible liabilities
| 30 June 2018 Cents |
30 June 2017 Cents |
|
|---|---|---|
| Net tangible liabilities per ordinary security | (0.32) | (2.28) |
4. Gain and loss of control over entities
Not applicable.
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
Not applicable.
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:
Not applicable.
9. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The consolidated financial statements were subject to a review by the auditors and the review report is attached as part of the Interim Report.
10. Attachments
Details of attachments (if any):
The Interim Report of YPB Group Ltd for the half-year ended 30 June 2018 is attached.
11. Signed
Signed ______________________________ Date: 31st August 2018
YPB Group Ltd
ACN 108 649 421
Interim Report – 30 June 2018
YPB Group Ltd Directors' report 30 June 2018
The directors present their report and the consolidated financial statements of YPB Group Ltd, (the "Company") and its controlled entities (the "Consolidated Entity") for the half-year ended 30 June 2018.
1. Directors & Secretary
For the period under review and covered by this report, the following persons were directors of the Company. Directors have been in office since the start of the half-year to the date of this report unless otherwise stated.
| Date Appointed | |
|---|---|
| Executive Chairman John Houston |
31 July 2014 |
| Non-Executive Director | |
| Su (George) Su | 31 July 2014 |
| Gerard Eakin | 4 March 2016 |
Mr Robert Whitton remains as the Group Company Secretary for the half-year under review.
2. Principal activities
The principal activity of the Company during the half-year was as a sales, marketing and developer of anti-counterfeiting, product authentication and consumer engagement solutions to brands owners globally.
3. Review of operations
The consolidated loss of the Consolidated Entity after providing for income tax amounted to \$4,346,000 (30 June 2017: \$7,726,000). The operating loss includes a number of significant non-cash items, including amortisation and impairment charges, fair value adjustments and share based payments, which leaves an underlying cash out flow from operations of \$3,004,000 (30 June 2017: \$4,620,000). Revenue for the period was \$1,007,000 (30 June 2017: \$828,000) which represents a 21.6% increase over the comparative period.
On 8 January 2018, Adrian Tan was appointed as the Group Chief Financial Officer.
On 22 March 2018, a contract with Alibaba Health (Hong Kong) Technology Company Limited ('AliHealth'), a subsidiary of Alibaba Group, was signed whereby YPB Group Ltd has been appointed as an Independent Software Vendor (ISV) of the AliHealth supply chain traceability platform for the China market.
On 26 March 2018, the Group signed a MOU with the Australian Made Campaign to offer its full product suite to Australian Made licensees.
On 27 June 2018, the Group signed a three-year Master Supply Agreement with global legal cannabis e-commerce leader, Namaste Technologies Inc ('Namaste') to introduce YPB's solutions across its whole network of manufacturers and supply chain. Namaste also invested US\$ 100,000 in new YPB shares at \$0.035 and were granted a one year option to invest a further US\$ 100,000 exercisable at \$0.035.
During the half-year, the Group has made repayment of \$1,528,000 (US\$ 1,191,000) to Bracknor Investment Group. The final remaining repayment tranche of \$373,000 (US\$ 275,000) is to be repaid prior to the end of 2018.
4. Events subsequent to balance date
On 23 July 2018, the Company announced that Pakistan's leading supplier of edible oils, Dalda Foods Limited will utilise YPB's connect platform to connect with its consumers.
On 26 July 2018, the Company announced its intention to proceed with a token issue to raise up to US\$ 30 million. The funds will be used for the development of an end to end blockchain project including Motif Micro.
On 30 July 2018, the Company announced the signing of its first client, China-based vaporiser manufacturer Kingtons under its partnership with Namaste.
On 10 August 2018, the Company announced the signing of its second client, Colorado-based vaporiser manufacturer Elev8 Distribution under its partnership with Namaste.
On 27 August 2018, the Group entered into a trading halt, and on 29 August 2018, the Group resumed trading subsequent to a successful additional capital raise of \$1.62m, and also engaged with strategic investors to secure \$1.5m in convertible notes (subject to shareholder approval).
Other than the above, no other matters or circumstances have arisen since 30 June 2018 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.
5. Rounding of amounts
The Company is an entity to which ASIC Corporations (Rounding in Financial / Directors' Reports) Instrument 2016/191 applies and, accordingly, amounts in the consolidated financial statements and directors' report have been rounded to the nearest thousand dollars.
6. Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.
This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act 2001.
On behalf of the directors
______________________________
John Houston Executive Chairman
Dated: 31st August 2018
Contents
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4
YPB Group Ltd Consolidated statement of profit or loss and other comprehensive income (loss) For the half-year ended 30 June 2018
| Note | 30 June 2018 \$'000 |
30 June 2017 \$'000 |
|
|---|---|---|---|
| Revenue | 4 | 1,007 | 828 |
| Expenses | |||
| Consulting fees | (868) | (675) | |
| Depreciation and amortisation expense | (123) | (577) | |
| Directors' fees | (40) | (98) | |
| Employee benefits expense Finance costs |
(1,352) (61) |
(2075) (98) |
|
| Production costs | (312) | (502) | |
| Rental expenses | (152) | (190) | |
| Research and development costs | (232) | (938) | |
| Marketing costs | (50) | (118) | |
| Traveling expense | (225) | (307) | |
| Share-based payments | (47) | (103) | |
| Regulatory expenses | (78) | (29) | |
| Professional fees | (219) | (185) | |
| Diminution in fair value of financial assets | - | (1,775) | |
| Inventories written-off | (50) | - | |
| Impairment of intangible assets | (2,356) | - | |
| Other expenses Exchange gain/(loss) |
(458) 937 |
(474) (414) |
|
| Loss before income tax benefit | (4,679) | (7,730) | |
| Income tax benefit | 333 | 4 | |
| Loss after income tax benefit for the half-year attributable to the owners of YBP Group Ltd |
(4,346) | (7,726) | |
| Other comprehensive income (loss) | |||
| Items that may be reclassified subsequently to profit or loss | |||
| Exchange differences on translation of foreign operations | (426) | (82) | |
| Other comprehensive income (loss) for the half-year, net of tax | (426) | (82) | |
| Total comprehensive loss for the half-year attributable to the owners of YBP | |||
| Group Ltd | (4,772) | (7,808) | |
| Cents | Cents | ||
| Basic and diluted earnings per share | 10 | (0.73) | (3.72) |
YPB Group Ltd Consolidated statement of financial position As at 30 June 2018
| Note | 30 June 2018 \$'000 |
31 December 2017 \$'000 |
|
|---|---|---|---|
| Assets | |||
| Current assets | |||
| Cash and cash equivalents | 369 | 845 | |
| Trade and other receivables | 519 | 508 | |
| Inventories | 316 | 333 | |
| Total current assets | 1,204 | 1,686 | |
| Non-current assets | |||
| Plant and equipment | 206 | 197 | |
| Intangibles | 5 | 8,063 | 9,115 |
| Total non-current assets | 8,269 | 9,312 | |
| Total assets | 9,473 | 10,998 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 2,465 | 6,782 | |
| Borrowings | 502 | 1,002 | |
| Deferred revenue | 199 | 240 | |
| Financial liabilities – convertible notes | 6 | 373 | 1,836 |
| Total current liabilities | 3,539 | 9,860 | |
| Total liabilities | 3,539 | 9,860 | |
| Net assets | 5,934 | 1,138 | |
| Equity | |||
| Issued capital | 7 | 58,645 | 49,124 |
| Reserves | 3,356 | 3,740 | |
| Accumulated losses | (56,067) | (51,726) | |
| Total equity | 5,934 | 1,138 |
YPB Group Ltd Consolidated statement of changes in equity For the half-year ended 30 June 2018
| Consolidated | Issued capital \$'000 |
Issued options reserve \$'000 |
Foreign currency translation reserve \$'000 |
Accumulated losses \$'000 |
Warrant options reserve \$'000 |
Share based payment reserve \$'000 |
Total equity \$'000 |
|---|---|---|---|---|---|---|---|
| Balance at 1 January 2017 |
41,317 | 695 | 2,341 | (31,859) | - | 1,015 | 13,509 |
| Loss after income tax expense for the half-year Other comprehensive income for the half-year, net of tax |
- - |
- - |
- (82) |
(7,726) - |
- - |
- - |
(7,726) (82) |
| Total comprehensive loss for the half-year |
- | - | (82) | (7,726) | - | - | (7,808) |
| Transactions with owners, in their capacity as owners: Shares issued in accordance with convertible notes |
103 | - | - | - | - | - | 103 |
| arrangement Warrants options issued |
- | - | - | - | 256 | - | 256 |
| Balance at 30 June 2017 | 41,420 | 695 | 2,259 | (39,585) | 256 | 1,015 | 6,060 |
| Issued capital |
Issued options reserve |
Foreign currency translation |
Accumulated losses |
Warrant options reserve |
Share based payment |
Total equity |
|
| Consolidated | \$'000 | \$'000 | reserve \$'000 |
\$'000 | \$'000 | reserve \$'000 |
\$'000 |
| Balance at 1 January 2018 |
49,124 | 302 | 2,091 | (51,726) | 256 | 1,091 | 1,138 |
| Loss after income tax expense for the half-year |
- | - | - | (4,346) | - | - | (4,346) |
| Other comprehensive income for the half-year, net of tax |
- | - | (426) | - | - | - | (426) |
| Total comprehensive loss for the half-year |
- | - | (426) | (4,346) | - | - | (4,772) |
| Transactions with owners, in their capacity as owners: Share issued, net of transactions costs |
9,521 | - | - | - | - | - | 9,521 |
| Options lapsed during the period |
- | (5) | - | 5 | - | - | - |
| Share based payments | - | - | - | - | - | 47 | 47 |
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes 7
YPB Group Ltd Consolidated statement of cash flows For the half-year ended 30 June 2018
| 30 June 2018 \$'000 |
30 June 2017 \$'000 |
|
|---|---|---|
| Cash flows used in operating activities | ||
| Receipts from customers Payments to suppliers and employees |
1,278 (4,288) |
1,318 (5,844) |
| Interest received | 15 | 4 |
| Finance costs | (9) | (98) |
| Net cash used in operating activities | (3,004) | (4,620) |
| Cash flows used in investing activities | ||
| Payment for plant and equipment | (39) | (27) |
| Payment for intangibles | (1,444) | - |
| Net cash used in investing activities | (1,483) | (27) |
| Cash flows from financing activities | ||
| Settlement of deferred share consideration | - | 475 |
| Proceeds from issue of shares (net of costs) | 5,539 | - |
| Proceeds from issue of convertible notes Repayment of borrowings |
- (1,528) |
2,016 - |
| Net cash from financing activities | 4,011 | 2,491 |
| Net decrease in cash and cash equivalents | (476) | (2,156) |
| Cash and cash equivalents at the beginning of the financial half-year | 845 | 2,715 |
| Cash and cash equivalents at the end of the financial half-year | 369 | 559 |
Note 1. General information
These consolidated financial statements and notes to the consolidated financial statements cover YPB Group Ltd and the entities it controlled at the end of, or during, the half-year (the "consolidated entity" or "group". The separate financial statements of the parent entity, YBP Group Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. The consolidated financial statements are presented in Australian dollars, which is YPB Group Ltd's functional and presentation currency.
The company is a listed public company incorporated and domiciled in Australia. Its registered office in Australia is Level 29, 66 Goulburn Street, Sydney NSW 2000.
The consolidated financial statements were authorised for issue, in accordance with a resolution of directors, on 31st August 2018.
Note 2. Significant accounting policies
These general purpose consolidated financial statements for the half-year ended 30 June 2018 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001, as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'.
These general purpose consolidated financial statements do not include all the notes of the type normally included in annual consolidated financial statements. Accordingly, these consolidated financial statements are to be read in conjunction with the annual report for the year ended 31 December 2017 and any public announcements made by the company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.
The principal accounting policies adopted are consistent with those of the previous financial year, unless otherwise stated.
The Group has considered the impact of the adoption of AASB 15 and AASB 9 and determined that their application was not material.
New, revised or amending Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity.
The following new and amended Accounting Standards and Interpretations have not been early adopted:
Ɣ AASB 16 Leases - applicable for annual reporting periods commencing on or after 1 January 2019
The above new and amended Accounting Standards and Interpretations are currently being evaluated by management in order to assess their possible impact on the company.
Note 2. Significant accounting policies (continued)
Going concern
The financial statements have been prepared on a going concern basis.
The Directors note that the Group has continued to incur operating losses as it establishes its business model throughout the various markets, perform internal restructuring, and to improve the conversion rate of its order pipeline.
The group incurred an operating loss after tax for the half-year of \$4,346,000, had net cash outflows from operating activities of \$3,004,000 and a deficiency of current assets over current liabilities of \$2,335,000. As at 30 June 2018 the Group has cash and cash equivalents of \$369,000.
Notwithstanding this, the Group believes there are reasonable grounds that it will be able to pay its debts as and when they fall due, and on that basis the preparation of the consolidated financial statements on a going concern basis is appropriate, considering that:
- The Directors have completed a reforecast of the cash flow for the remainder of the year, supported by both the existing sales contracts as well as reflecting revenue growth expected from sales pipeline.
- The Group is proceeding with a token issue to raise up to US\$ 30 million by October 2018.
- The Group is to fully settle the remaining payable on the Bracknor facility that was due by 31 July 2018.
- Reliance on further capital raising activities, of which \$1.62m has been raised post half year end and also engaged with strategic investors to secure \$1.5m in convertible notes (subject to shareholder approval).
Note 3. Operating segments
Identification of 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 period ended 30 June 2018, 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 represent by one business segment apart from a specialised counterfeit printing operation and anti-theft solutions.
The bundled "complete solution offering" encompasses a range of products and services which are available to customers, including:
- y 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.
- y Forensic laboratory services for the examination of counterfeit products.
- y Security consulting services provided to governments, corporations and intellectual property owners for the deterrence of counterfeiting, grey markets, product diversions and fraud.
- y Retail anti-theft and labelling solutions effective for mainstream retailers, boutiques and exporters to protect against theft.
Note 3. Operating segments
The specialised printing operation provided its customers with a dedicated product range, however this segment ceased in late 2017 with no further activities in 2018.
| Consolidated – 30 June 2018 | Print Solutions \$'000 |
Other segments \$'000 |
Total \$'000 |
|---|---|---|---|
| Revenue | |||
| Sales to external customers | - | 992 | 992 |
| Interest revenue | - | 15 | 15 |
| Total revenue | - | 1,007 | 1,007 |
| EBITDA | - | (2,089) | (2,089) |
| Depreciation and amortisation | - | (123) | (123) |
| Write-off of inventory | - | (50) | (50) |
| Impairment of intangible assets | - | (2,356) | (2,356) |
| Interest expense | - | (61) | (61) |
| Loss before income tax benefit | - | (4,679) | (4,679) |
| Income tax benefit | 333 | ||
| Loss after income tax benefit | (4,346) | ||
| Assets | |||
| Segment assets | 1 | 9,472 | 9,473 |
| Total assets | 9,473 | ||
| Liabilities | |||
| Segment liabilities | - | 3,539 | 3,539 |
| Total liabilities | 3,539 | ||
| Print Solutions |
Other segments |
Total | |
| Consolidated – 30 June 2017 | \$'000 | \$'000 | \$'000 |
| Revenue | |||
| Sales to external customers | 223 | 600 | 823 |
| Sales to external customers | 223 | 600 | 823 |
|---|---|---|---|
| Interest revenue | - | 5 | 5 |
| Total revenue | 223 | 605 | 828 |
| EBITDA Depreciation and amortisation Write-off of assets Interest expense Loss before income tax benefit Income tax benefit Loss after income tax benefit |
(252) - - - (252) |
(5,028) (577) (1,775) (98) (7,478) |
(5,280) (577) (1,775) (98) (7,730) 4 (7,726) |
|---|---|---|---|
| Assets Segment assets Total assets |
52 | 12,897 | 12,949 12,949 |
|---|---|---|---|
| Liabilities | |||
| Segment liabilities | 92 | 6,797 | 6,889 |
| Total liabilities | 6,889 |
Note 3. Operating segments
Geographical segment information as follows:
| Sales to external customers | Geographical assets | |||
|---|---|---|---|---|
| 30 June 2018 \$'000 |
30 June 2017 \$'000 |
30 June 2018 \$'000 |
30 June 2017 \$'000 |
|
| Australia | 470 | 367 | 314 | 830 |
| Peoples Republic of China and HK | 53 | 25 | 617 | 11,155 |
| Thailand | 176 | 83 | 367 | 434 |
| United States of America & Mexico | 308 | 353 | 8,175 | 530 |
| 1,007 | 828 | 9,473 | 12,949 |
Note 4. Revenue
| 30 June 2018 \$'000 |
30 June 2017 \$'000 |
|
|---|---|---|
| Revenue - Sale of goods - Rendering of services |
685 307 |
684 139 |
| Other revenue Interest income |
15 | 5 |
| Total revenue | 1,007 | 828 |
Note 5. Intangibles
| 30 June 2018 \$'000 |
31 December 2017 \$'000 |
|
|---|---|---|
| Goodwill - at cost | 3,089 | 3,089 |
| Less: Accumulated impairment losses | (3,089) | (3,089) |
| - | - | |
| Intellectual property - at cost | 15,493 | 13,052 |
| Less: Accumulated amortisation | (4,638) | (2,614) |
| Less: Accumulated impairment losses | (10,855) | (8,104) |
| - | 2,334 | |
| Customer relationships - at cost | 206 | 206 |
| Less: Accumulated impairment | (28) | (28) |
| Less: Accumulated amortisation losses | (178) | (178) |
| - | - | |
| Patent licence rights – at cost | 8,063 | 6,781 |
| 8,063 | 6,781 | |
| 8,063 | 9,115 |
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
| Consolidated Balance at 31 December 2017 |
Goodwill \$'000 - |
Intellectual property \$'000 2,334 |
Customer relationships \$'000 - |
Patent licence rights \$'000 6,781 |
Total \$'000 9,115 |
|---|---|---|---|---|---|
| Balance at 1 January 2018 | - | 2,334 | - | 6,781 | 9,115 |
| Additions | - | - | - | 851 | 851 |
| Exchange differences | - | 107 | - | 431 | 538 |
| Impairment charge | - | (2,356) | - | - | (2,356) |
| Amortisation expense | - | (85) | - | - | (85) |
| Balance at 30 June 2018 | - | - | - | 8,063 | 8,063 |
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 statement of profit and loss and other comprehensive income.
Patent Licence Rights
Effective in December 2017, the Group acquired Motif Micro'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.
In February 2018, a specific milestone under the agreement was successfully achieved with Motif Micro. The patent licence right was increased and a corresponding payable was recognised which will be settled via the issue of ordinary shares by the end of 2018.
As the technology is still in the development phase and not available for use, the patent licence rights have not been amortised. Accordingly, the carrying value has been assessed based on fair value less costs to sell.
Intellectual Property
In reviewing the recoverable amounts of the intellectual property, as at 30 June 2018, the directors have applied the 'value in use' methodology for each cash-generating unit, as defined previously at 31 December 2017. The half-year impairment assessment was based on a reforecast of the annual operating plan ('AOP') and the accompanying five-year outlook.
The financial under-performance of the half year period ended 30 June 2018 against the original AOP was largely due to delays in the pipeline conversion, but it is the board and management teams' absolute focus on realisation of the revised conversion targets set within the AOP.
As a result of the review, it was determined that the intellectual property required further impairments because of overhauls on our core products and key focus on commercialising our latest technologies.
The key assumptions and results arising from the value in use methodology, based on the revised AOP, relating to the unimpaired YPB business units include:
-
Revenue growth from conversion of sales pipeline revised to \$6.3m for FY2018 with an annual long-term growth rate range between 2% and 5%;
-
EBITDA revised to a loss of \$4.17m to be achieved within FY18;
-
Discounted cash flow modelling based on remaining life of intellectual property of 15 years with no terminal value;
- Mid-point WACC of 17.9% assuming a long-term debt/equity ratio of 10 / 90; and
- The group securing sufficient funding to continue as a going concern.
No further sensitivity analysis was conducted as the impairment assessment resulted in a complete write-down of the carrying value of the Intellectual Property intangibles to nil.
Note 6. Financial liabilities
| 30 June 2018 \$'000 |
31 December 2017 \$'000 |
|
|---|---|---|
| Current Liabilities – Convertible Notes (Bracknor facility) |
373 | 1,836 |
| 373 | 1,836 |
During the half year, the Group made repayments totalling \$1,528,000 (US\$ 1,191,000) with a remaining final repayment tranche of \$373,000 (US\$ 275,000) that was payable by 31 July 2018. Upon the final repayment inclusive of interest prior to the end of 2018, the Group will be released and discharged of any further obligations including the warrants outstanding.
Note 7. Equity - issued capital
| 30 June | 31 December | 30 June | 31 December | |
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| Shares | Shares | \$'000 | \$'000 | |
| Ordinary shares - fully paid | 658,463,636 | 399,463,400 | 58,645 | 49,124 |
Movements in ordinary share capital
| Details | Date | Shares | \$'000 |
|---|---|---|---|
| Opening balance | 1 January 2018 | 399,463,400 | 49,124 |
| Issued as part of asset purchase | 10 January 2018 | 72,392,660 | 3,402 |
| Share placement | 22 January 2018 | 73,005,799 | 3,325 |
| Conversion of debt to equity | 22 January 2018 | 10,972,131 | 500 |
| Share placement | 31 January 2018 | 2,689,851 | 122 |
| Issuance as payment to service provider | 15 February 2018 | 500,066 | 18 |
| Share placement | 5 March 2018 | 64,356,622 | 1,221 |
| Issuance as payment to service provider | 5 March 2018 | 1,428,571 | 50 |
| Share placement | 27 March 2018 | 31,342,857 | 1,097 |
| Issuance as payment to service provider | 12 April 2018 | 357,077 | 12 |
| Issued under share-based payments | 30 June 2018 | 1,955,142 | - |
| Less: Transaction costs on share issued, net of tax | (226) | ||
| Closing balance | 30 June 2018 | 658,463,636 | 58,645 |
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.
Movements in options on issue
| Details | Date | Options | \$'000 |
|---|---|---|---|
| Opening balance Options lapsed |
1 January 2018 27 April 2018 |
72,534,000 (228,000) |
302 (5) |
| Closing balance | 30 June 2018 | 72,306,000 | 297 |
| Movements in share based payments | |||
| Details | Date | \$'000 | |
| Opening balance Issued under share based payments |
1 January 2018 30 June 2018 |
1,091 47 |
|
| Closing balance | 30 June 2018 | 1,138 |
Note 7. Equity – reserves
| 30 June 2018 \$'000 |
31 December 2017 \$'000 |
|
|---|---|---|
| Foreign currency reserve | 1,665 | 2,091 |
| Options reserve | 297 | 302 |
| Warrant options reserve | 256 | 256 |
| Share-based payments reserve | 1,138 | 1,091 |
| 3,356 | 3,740 |
Foreign currency translation reserve
The foreign currency translation reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign controlled subsidiaries to Australian dollars.
Issued Options reserve
The option reserve records items recognised as expenses on valuation of share options issued.
Warrant options reserve
The warrant options reserve has been used to recognise the warrants issued as part of the Bracknor facility – refer to note 6.
Share-based payments 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.
Note 8. Dividends
There were no dividends paid, recommended or declared during the current or previous financial half-year.
Note 9. Events after the reporting period
On 23 July 2018, the Company announced that Pakistan's leading supplier of edible oils, Dalda Foods Limited will utilise YPB's connect platform to connect with its consumers.
On 26 July 2018, the Company announced its intention to proceed with a token issue to realise up to US\$ 30 million. The funds will be used for the development of an end to end blockchain project including Motif Micro.
On 30 July 2018, the Company announced the signing of its first client, China-based vaporiser manufacturer Kingtons under its partnership with Namaste Technologies.
On 10 August 2018, the Company announced the signing of its second client, Colorado-based vaporiser manufacturer Elev8 Distribution under its partnership with Namaste Technologies.
On 27 August 2018, the Group entered into a trading halt, and on 29 August 2018, the Group resumed trading subsequent to a successful additional capital raise of \$1.62m, and also engaged with strategic investors to secure \$1.5m in convertible notes (subject to shareholder approval).
Other than the above, no matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.
Note 10. Earnings per share
| 30 June 2018 \$'000 |
30 June 2017 \$'000 |
|
|---|---|---|
| Loss after income tax attributable to the owners of YPB Group Ltd | (4,346) | (7,726) |
| Number | Number | |
| Weighted average number of ordinary shares used in calculating basic earnings per share | 598,425,033 | 207,578,933 |
| Weighted average number of ordinary shares used in calculating diluted earnings per share |
598,425,033 | 207,578,933 |
Note 11. Related party transactions
Loan from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
| 30 June 2018 \$'000 |
31 December 2017 \$'000 |
|
|---|---|---|
| Loans from other key management personnel related entity | ||
| Beginning of the period | 1,002 | 3,024 |
| Loans advanced | - | 1,002 |
| Interest charged | - | 378 |
| Loan converted to equity | (500) | (2,784) |
| Loan repayment | - | (420) |
| Exchange differences | - | (198) |
| End of period | 502 | 1,002 |
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 12. Contingent liabilities
Since the last annual reporting period, the contingent liability as at 31 December 2017 has been recognised as a liability by the Group upon the successful achievement of a specific milestone in February 2018 under the agreement with Motif Micro (refer to note 5).
YPB Group Ltd Directors' declaration For the half-year ended 30 June 2018
In the directors' opinion:
- Ɣ the attached consolidated financial statements and notes comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements;
- Ɣ the attached consolidated financial statements and notes give a true and fair view of the consolidated entity's consolidated financial position as at 30 June 2018 and of its performance for the financial half-year ended on that date; and
- Ɣ there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
Signed in accordance with a resolution of directors made pursuant to section 303(5)(a) of the Corporations Act 2001.
On behalf of the directors
______________________________
John Houston Executive Chairman
Dated: 31st August 2018
