Ocean Guardian Holdings Limited (formerly SeaChange Technology Holdings Pty Ltd) (Shark Shield)

Transcription

1 Ocean Guardian Holdings Limited (formerly SeaChange Technology Holdings Pty Ltd) (Shark Shield) Half-Year Financial Report 31 December 2017 ABN: Building 7, 1 Winton Road, Joondalup, Western Australia 6020

2 Contents Directors Report... 3 Auditor s Independence Declaration... 5 Condensed Statement of Profit or Loss... 6 Condensed Statement of Financial Position... 7 Condensed Statement of Changes in Equity... 8 Condensed Statement of Cash Flows... 9 Notes to the Financial Statements Directors Declaration Independent Auditor s Review Report... 17

3 3 Directors Report Your directors present their report on the consolidated entity consisting of Ocean Guardian Holdings Limited (formerly SeaChange Technology Holdings Pty Ltd) and the entities it controlled at the end of, or during, the half-year ended 31 December Throughout the report, the consolidated entity is referred to as the group. Directors The names of the directors in office at any time during the period and until the date of this report are: Alan J Broome AM Lindsay N Lyon James Wakim Amanda L Wilson Directors have been in office since the start of the period to the date of this report unless otherwise stated. Principal activities During the period the principal continuing activities of the group consisted of the design, sale and marketing of the Shark Shield shark deterrent device. There were no significant changes in these activities during the period. Dividends Ocean Guardian Holdings Limited (formerly SeaChange Technology Holdings Pty Ltd) There were no dividends paid or declared during the period. The directors do not recommend the payment of a dividend in respect of the period ended 31 December The company does not have any dividend reinvestment plan in operation. Results The net loss attributable to members of the company for the half-year ended 31 December 2017 amounted to $894,762 (31 December 2016: net profit attributable to members $237,772). Review of operations During the period ended 31 December 2017, the company raised capital from new and existing investors in order to fund product development of a new long-range shark deterrents and invest in improvements in customer service, product reliability and sales & marketing. The half-year results were impacted by the following: The company s FREEDOM7 product was accredited as the only product eligible for the Western Australian government s $200 shark deterrent rebate which resulted in a significant increase in demand for this product in the May/June 2017 period. This increase in forecasted demand resulted in the company being out of FREEDOM7 inventory for the first two months of FY18. In addition, a design modification to the FREEDOM7 initiated prior to the introduction of the WA government rebate and the updated version had a long manufacturing lead time which also resulted in the company running out of stock prior to Christmas. The pre- Christmas orders were delivered post New Year and revenue on those sales has been recognised in January 2018.

4 4 Sales of the company s FREEDOM+Surf product have not reach the level expected as stock sold to our wholesaler Ocean & Earth in the last financial year was still being cleared through retailers during this half-year. Despite having the same technology as the FREEDOM7, the WA government required independent testing of the FREEDOM+Surf before it would be accredited for the $200 rebate. The company commissioned the independent testing and the report is expected to be completed in the second half of FY2018. Having received advice that, it was not tax effective for the CEO to receive equity in lieu of contracted entitlements, the unpaid entitlements were recorded in the accounts during the half-year and will be paid in cash as cash flow permits. A part-time marketing manager was appointed to implement marketing initiatives and commence the re-branding to Ocean Guardian. New customer service and channel sales management roles were also established as part of the company s growth strategy leading towards and IPO in 2H FY18. Significant changes in the state of affairs $140,000 in share capital was contributed during the period by existing shareholders, including $70,000 in directors fees owing that were settled in shares. The company signed a mandate with a corporate adviser to raise seed capital by way of convertible notes with the intention of listing the company on the ASX. $960,000 in convertible notes funding was received as at 31 December 2017 which was used to appoint an operations manager in January to improve stock management and commence new product development. There have been no other significant changes in the state of affairs of the company that occurred during the financial period not otherwise disclosed in this report or the financial statements. Events since the end of the financial period The company has received a further $220,000 in convertible note funding bringing the total raised to $1,180,000. On 29 January 2018, the shareholders resolved to change the company type from proprietary to public and change the company name to Ocean Guardian Holdings Limited which took effect on 6 March The company has appointed an auditor and is proceeding through due diligence in order to file a prospectus with ASIC for an initial public offering and is intending to apply for listing on the ASX. Likely developments and expected results of operations Other than as disclosed elsewhere in this report, there are no likely developments in the operations of the company that were not finalised at the date of this report. Environmental regulation The company is not subject to any significant environmental Commonwealth or State regulations or laws. Lindsay Lyon Alan Broome AM Sydney Managing Director Chairman 20 March 2018

5 5 AUDITOR S INDEPENDENCE DECLARATION

6 6 Condensed Statement of Profit or Loss For the period ended 31 December 2017 Schedule 1 Revenue from continuing operations 31 December 31 December Note $ $ Sale of goods 535,944 1,240,901 Cost of goods sold (351,718) (763,679) Gross profit 184, ,222 Other income 36, ,135 Less, Operating expenses Staff and consultants (677,769) (273,542) Marketing and selling costs (157,716) (115,029) Premises (20,221) (16,009) Administration (121,600) (72,866) Intangible asset impairment (97,488) - Foreign currency gains / (losses) (5,797) 17,078 Profit / (Loss) before interest, tax, dep n, amort n (860,087) 253,989 Depreciation and amortisation (7,500) (6,000) Profit / (Loss) before interest and tax (867,587) 247,989 Interest and finance costs (27,175) (10,217) Profit / (Loss) before income tax (894,762) 237,772 Income tax expense - - Profit / (Loss) for the period (894,762) 237,772 These financial statements must be read in conjunction with accompanying notes.

7 7 Condensed Statement of Financial Position As at 31 December 2017 Schedule 2 ASSETS 31 December 30 June Note $ $ Current assets Cash and cash equivalents 477,490 84,507 Trade and other receivables 414, ,341 Inventories 366, ,307 Other current assets 211, ,053 Total current assets 1,469, ,208 Non-current assets Property, plant and equipment 106, ,789 Intangible assets 765, ,247 Total non-current assets 871, ,036 TOTAL ASSETS 2,341,190 1,579,244 LIABILITIES Current liabilities Trade and other payables 565, ,519 Borrowings 2 1,358, ,962 Provisions 191,244 13,488 Unearned income 236,334 4,541 Total current liabilities 2,351, ,510 Non-current liabilities Borrowings 2 43,113 49,806 Total non-current liabilities 43,113 49,806 TOTAL LIABILITIES 2,394, ,316 NET ASSETS / (LIABILITIES) (53,469) 686,928 EQUITY Issued capital 3 10,078,684 9,938,684 Reserves 3 14,365 - Accumulated losses (10,146,518) (9,251,756) TOTAL EQUITY / (DEFICIT) (53,469) 686,928 These financial statements must be read in conjunction with accompanying notes.

8 Condensed Statement of Changes in Equity As at 31 December 2017 Schedule 3 Issued Accumulated Prior Period Capital Reserves Losses Total Balance as at 1 July ,604,934 - (9,271,556) 333,378 Profit (loss) for the period , ,772 Total other comprehensive income Total comprehensive profit for the period , ,772 Transaction with owners, directly recorded in equity Issue of ordinary shares 278, ,750 Issue of performance rights & options Total transactions with owners 278, ,750 Balance at 31 December ,883,684 - (9,033,784) 849,900 Issued Accumulated Current Period Capital Reserves Losses Total Balance as at 1 July ,938,684 - (9,251,756) 686,928 Profit (loss) for the period - - (894,762) (894,762) Total other comprehensive income Total comprehensive loss for the period - - (894,762) (894,762) Transaction with owners, directly recorded in equity Issue of ordinary shares 140, ,000 Issue of performance rights & options - 14,365-14,365 Total transactions with owners 140,000 14, ,750 Balance at 31 December ,078,684 14,365 (10,146,518) (53,469) These financial statements must be read in conjunction with accompanying notes.

9 Condensed Statement of Cash Flows For the period ended 31 December 2017 Schedule 4 31 December 31 December $ $ Cash flows from operating activities Receipts from customers (inclusive of GST) 628, ,340 Payments to suppliers and employees (inclusive of GST) (1,135,375) (1,142,001) Other revenue 84, ,135 Interest paid (27,175) (10,217) Net cash used in operating activities (450,150) (142,743) Cash flows from investing activities Payments for property plant and equipment (9,255) (82,780) Payment for development costs, patents, trademarks (50,549) (133,882) Net cash used in investing activities (59,804) (216,662) Cash flows from financing activities Proceeds from issues of shares 70, ,000 Net proceeds / (repayment) of borrowings related parties (131,035) (22,777) Net proceeds / (repayment) of borrowings third parties 1,137, ,224 Net cash inflow from financing activities 1,076, ,447 Net increase in cash 566,083 32,042 Cash at the beginning of the financial period (88,593) (30,756) Cash and cash equivalents at end of period 477,490 1,286 These financial statements must be read in conjunction with accompanying notes.

10 10 Notes to the Financial Statements For the period ended 31 December 2017 Schedule 5 NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Ocean Guardian Holdings Limited (formerly SeaChange Technology Holdings Pty Ltd) is an unlisted public company incorporated and domiciled in Australia. The financial statements of the company are as at and for the period ended 31 December A description of the nature of the company s activities is included in the Directors Report which does not form part of this financial report. (a) Basis of preparation The half-year financial statements are general purpose financial statements prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting, other authoritative pronouncements of the Australian Accounting Standards Board ( AASB ), including Australian interpretations, and the Corporations Act It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June The accounting policies have been consistently applied by the consolidated entity and are consistent with those applied in the previous financial year and those of the corresponding interim reporting period. The half-year financial report does not include full disclosures of the type normally included in an annual financial report. For the purposes of preparing the half-year condensed financial statements, the half-year had been treated as a discrete reporting period. The company has adopted all of the measurement and recognition requirements of the new and revised Standards and Interpretations issued by the AASB that are relevant to the operations and effective for the current reporting period. The adoption of the new and revised Standards and Interpretations has not resulted in any changes to the company s accounting policies and has no effect on the amounts reported in the current or prior periods. The financial statements have been prepared on an accruals basis and are based on historical costs modified by the revaluation of selected non-current assets and financial instruments for which the fair value basis of accounting has been applied. Ocean Guardian Holdings Limited (formerly SeaChange Technology Holdings Pty Ltd) is a company limited by shares. The financial report is presented in Australian currency. The company is a forprofit entity. Going Concern The interim condensed financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and the settlement of liabilities in the normal course of business.

11 1 Notes to the Financial Statements For the period ended 31 December 2017 Schedule 5 The company incurred a net loss after tax for the half-year ended 31 December 2017 of $894,762 and a net cash outflow from operating and investing activities of $509,954. Net assets of the company as at 31 December 2017 were a deficiency of $(53,469) (30 June 2017 $686,928). The company s ability to continue as a going concern and pay its debts as and when they fall due is dependent on the company raising additional capital via any means available to it in a timely manner in order to fund the company s ongoing activities. The company is in the process of preparing a prospectus in order to raise $5,000,000 through an initial public offering. The directors have reviewed the business outlook and the cash flow forecasts after taking into account the above matters and are of the opinion that the use of the going concern basis of accounting is appropriate as the directors believe that the company will achieve the capital raising set out above and be able to pay its debts as and when they fall due. Should the Company be unable to raise capital as required to fund the company s operating ongoing activities there would be conditions that may cause significant doubt on the company s ability to continue as a going concern. The accounts do not include any adjustments to the classification nor carrying value of recorded assets and liabilities. The interim condensed financial statements are therefore prepared on the assumption that the company is a going concern and will continue its operations for the foreseeable future.

12 2 Notes to the Financial Statements For the period ended 31 December 2017 Schedule 5 31 December 30 June $ $ NOTE 2. BORROWINGS Secured (current): Bank overdraft - 173,100 Trade finance bills of exchange 366, ,855 Business loan 21,000 21,000 Total secured borrowings 387, ,955 Unsecured (current): Credit cards - 8,257 Loans from related parties - 131,035 Convertible notes 960,000 - Other loans 10,634 58,715 Total unsecured borrowings 970, ,007 1,358, ,962 Secured (non-current) Business loan 43,113 49,806 The company has a finance facility with the Commonwealth Bank of Australia that includes a trade finance facility of $700,000 (including overdraft) and a business loan of $80,000 repayable over 5 years. The facility is secured by way of: a first ranking charge over all present and after acquired property of the company and its Australian subsidiary and personal guarantees from Lindsay Lyon and Amanda Wilson. Convertible notes During the period, the company issued 192 convertible notes for $5,000 at 10% interest per annum with a maturity date being 24 months from the date of issue. The notes are convertible into ordinary shares of the company, at the option of the holder or the company, or on the occurrence of another conversion event. The conversion price of each share depends on the type of conversion event but in most cases will be the prevailing value of the shares or the issue price of new shares in the event of an initial public offering less 25%. Interest has been accrued and is payable quarterly.

13 3 Notes to the Financial Statements For the period ended 31 December 2017 Schedule 5 NOTE 3. CAPITAL AND RESERVES 31-Dec Jun-17 Share capital Shares Shares 31 December 30 June $ $ Ordinary shares 179, ,734 10,078,684 9,938,684 Movements in ordinary share capital Number of shares $ Opening balance 1 July ,734 9,938,684 Directors fees owing settled in $20 per share 2,625 52,500 Directors fees owing settled in $30 per share ,500 Share $50 per share 1,400 70,000 Balance at 31 December ,342 10,078,684 Ordinary shares entitle the holder to participate in dividends and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person, or by proxy, is entitled to one vote and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. During the period, 845 Performance Rights were issued under the company s Employee Share Scheme for Nil cost to eligible participants so that the participant will be able to acquire ordinary shares in the company at no cost if the Performance Hurdle is met. The Performance Hurdle is for the company to have a liquidity event enabling all shareholders to exit the company. A Change of Control event, as defined in the Plan Rules, will also result in Unvested Performance Rights becoming Vested Performance Rights. The value per Performance Right was determined by the directors to be $17 per Performance Right and a Share Based Payment Reserve of $14,365 $17) has been recorded in the accounts as at 31 December Reserve share based payments 14,365 -

14 4 Notes to the Financial Statements For the period ended 31 December 2017 Schedule 5 NOTE 3. CAPITAL AND RESERVES (continued) Events occurring after the reporting period At the extraordinary general meeting of shareholders held on 29 January 2018, a resolution was passed to convert the company s issued shares and Performance Rights into are larger number through a 1:250 share split. A resolution was also passed at the EGM to change the company type from proprietary to public. Under the Performance Rights Plan Rules, this was a Change of Control Event which resulted in the Unvested Performance Rights becoming Vested Performance Rights. The company notified the participants in the Performance Rights Plan and all participants exercised their Performance Rights to apply for ordinary shares in the company. On 27 February 2018, the directors resolved to issue 211,250 (845 pre-1:250 share split) ordinary shares to the Performance rights participants. The effect of the above events on the number of shares and Performance Rights is as follows: Pre-Split Numbers Post-Split Numbers Ordinary shares 179,342 45,046,750 Performance Rights TOTAL 180,187 45,046,750 The impact of the events occurring after the reporting period on issued capital and reserves is as follows: 31 December Date of this 2017 Report $ $ Issued capital 10,078,684 10,093,049 Reserves: equity-based payments 14,365 - TOTAL 10,093,049 10,093,049

15 5 Notes to the Financial Statements For the period ended 31 December 2017 Schedule 5 NOTE 4. CONTINGENT ASSETS AND CONTINGENT LIABILITIES The company has no contingent assets or liabilities. NOTE 5. DIVIDENDS There have been no dividends declared or recommended and no distributions made to shareholders or other persons during the period. NOTE 6. SEGMENT INFORMATION Management has determined the operating segments based on reports reviewed by the board of directors for making strategic decisions. The current board of directors monitors the business based on operational and geographical factors and has determined there is only one relevant business segment. The company operates in one industry being consumer technology. NOTE 7. EVENTS OCCURING AFTER THE REPORTING PERIOD The company has received a further $220,000 in convertible note funding subsequent to 31 December On 29 January 2018, the shareholders resolved to change the company type from proprietary to public and change the company name to Ocean Guardian Holdings Limited which took effect on 6 March Apart from the events discussed above, no other matters or circumstances have arisen since the end of the period which significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the group in subsequent financial years.

16 6 Directors Declaration For the period ended 31 December 2017 Schedule 6 The directors of the company declare that: (a) the financial statements comprising the condensed statement of profit or loss and other comprehensive income, condensed statement of financial position, condensed statement of changes in equity, condensed statement of cash flows and accompanying notes are in accordance with the Corporations Act 2001 and: i. comply with Accounting Standard AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and ii. give a true and fair view of the company s financial position as at 31 December 2017 and its performance for the half-year ended on that date (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors. Lindsay Lyon Managing Director Alan Broome AM Chairman Sydney 20 March 2018

17 7 Independent Auditor s Review Report

18 8