Live Verdure Ltd ABN 28 614 347 269 Annual Report - 30 June 2023 Live Verdure Ltd Corporate directory 30 June 2023 Directors Mr Gernot Abl (Non-executive Chairman) Mr Ran Vaingold (Non-executive Director) Mr Corey Montry (Non-executive Director) Chief Executive Officer Mr Gernot Abl (Interim Executive role) Company secretary Mr Justin Mouchacca Registered office Level 21 459 Collins Street Melbourne, Victoria 3000 Principal place of business Level 21 459 Collins Street Melbourne, Victoria 3000 Auditor JTP Assurance Level 5, North Tower 485 La Trobe Street Melbourne, Victoria, 3000 Stock exchange listing Live Verdure Ltd shares are listed on the Australian Securities Exchange (ASX code: LV1 and LV1OA) Website www.liveverdure.com.au Corporate Governance Statement The Company's Corporate Governance Statement has been released to ASX on this day and is available on the Company's website at the following link: https://liveverdure.com.au/governance/ 1 Live Verdure Ltd Contents 30 June 2023 Review of operations Directors' report Auditor's independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration Independent auditor's report to the members of Live Verdure Ltd Shareholder information 2 3 5 15 16 17 18 19 20 42 43 46 Live Verdure Ltd Review of operations 30 June 2023 Transformative acquisition of Edible Beauty with successful $2.1m capital raise Live Verdure was proud to announce that it has received binding commitments from a range of existing and new institutional and sophisticated investors to subscribe to an equity placement of $2.1 million at an issue price of A$0.15 per share. The Company also entered into a binding sale and purchase agreement to acquire 100% of the issued shares in The Beauty Apothecary Australia Pty Ltd ("Edible Beauty") for $1 million (consisting of 75% in cash and 25% in shares) on a cash-free and debt-free basis, plus deferred consideration based on future revenue generated by Edible Beauty. Edible Beauty is a naturopathically formulated range providing pure, active, and sustainable skincare and wellness products, targeting healthfocused and environmentally conscious demographics. The acquisition was completed on the 1st of November 2022. About Edible Beauty Launched in 2014 by Sydney-based naturopath and nutritionist Anna Mitsios, Edible Beauty is a naturopathically formulated range providing pure, active, and sustainable skincare and wellness products. The brand offers 100% PETA-certified vegan and cruelty-free formulations, with a high concentration of Australian bio-active native extracts and the highest quality natural botanicals from around the world. Edible Beauty products offer clinically proven, powerful skin-transforming results. Anna developed the range of natural and efficacious products to fill a void for anyone seeking pure, vegan, and sustainable beauty formulas. Anna and her team are on a mission to transform people’s skin holistically. Successful $1.6 Million Placement to Fuel Company Growth In March, the Company completed a $1.6 million placement, with the equity received from existing sophisticated shareholders. Under the terms of the Placement, the Company issued 16,000,000 new fully paid ordinary shares ("New Shares") at an issue price of $0.10 per New Share. This issue price represented a discount of 33% to the Company's closing price of $0.15 on Monday, the 27th of February, 2023. These New Shares were issued alongside a free attaching listed option (LV1OA option) on a 1-for-2 basis, with an exercise price of $0.25, expiring on the 31st of August 2025 ("Placement Options"). These Placement Options are subject to shareholder approval. The Placement comprised of two tranches, the first of which was completed on the 10th of March, 2023. The funds were raised for working capital to deliver against new product development (NPD), fund operating capital requirements for retail partnerships, and accelerate the Company's growth further through investment in a range of sales and marketing initiatives. Additionally, proceeds from the issue enabled the Company to further progress partnership discussions and conduct due diligence on prospective partnership and M&A opportunities. Since the acquisition of Edible Beauty in late 2022, Live Verdure has received an increased number of local and international inquiries regarding companies looking to be acquired by or partner with LV1. These enquiries span various sectors within the health, wellness, and beauty industry, including some that incorporate ground-breaking technology into their offerings. New Product Development Pipeline and Existing Product Improvements. Throughout the year, the Live Verdure technical team was hard at work reformulating existing products to increase efficacy, lower costs, and extend shelf life while simultaneously developing a list of new products for launch. Seven new Edible Beauty products were planned for launch during Q1 and Q2 of 2023, with five already on the market in September. These include a men's skincare range, lip scrub and balm duo, and a highly anticipated stretch mark oil. In response to the high demand from our valued customers and popularity across the global wellness markets, we are currently exploring formulations for gummies. By collaborating with new manufacturers who offer low MOQ, we can economically address and capitalise on the identified market gap. 3 Live Verdure Ltd Contents 30 June 2023 Local and International Partnerships Grow Partnerships with local and international retail groups and distributors have been identified as reliable ways of expanding product availability, building brand awareness, and establishing trust with new consumers. In January, Edible Beauty began TV coverage with TVSN. TVSN is a long-established TV Sales organisation with a successful sales history in the beauty and skincare category. They create dedicated brand programs that sell to large audiences nationwide while managing all logistics, including order-taking and customer dispatch. The founder of Edible Beauty, Anna Mitsios, completed ten shows in the quarter. TVSN placed four orders and achieved significant product sales. Edible Beauty has been nominated as a finalist in the TVSN Beauty Awards for Best New Brand. Later in the year, Edible Beauty secured a new distributor for Hong Kong, Macau, and China cross-border sales, with a ~$53,000 opening order in June 2023. This figure represents a tripled minimum sales commitment. This international distributor joins tier-1 retailers such as David Jones and Heinemann to grow the wholesale portion of revenue. Subsequent to Year End $1.68 Million Placement to Pursue M&A Opportunities and Expand Partnerships Live Verdure received a $A1.68 million placement from existing sophisticated and professional shareholders in early September 2023 to accelerate growth and pursue M&A opportunities. Under the terms of this Placement, the Company issued 22,400,000 new fully paid ordinary shares ("New Shares") at an issue price of $0.075 per New Share. This issue price represented a discount of 33% to the Company's closing price of $0.092 on Monday, the 4th of September, 2023. The Placement consisted of 13,463,858 New Shares under the Company’s Listing Rule 7.1 capacity and 8,936,124 New Shares under the Company’s Listing Rule 7.1A capacity. The Company completed the allotment of New Shares under the Placement by the 14th of September, 2023. Use of Funds The funds raised will be used for working capital to deliver against new product development (NPD), fund working capital requirements for retail partnerships, and to further accelerate the Company’s growth through investment in a range of sales and marketing initiatives. Additionally, proceeds from the issue will enable the Company to further progress partnership discussions and conduct due diligence on prospective partnership and M&A opportunities. Since the acquisition of Edible Beauty in late 2022, Live Verdure has received an increased number of local and international inquiries regarding companies looking to be acquired by or partner with LV1. These enquiries span a broad range of sectors within the health, wellness, and beauty industry, including some that incorporate ground-breaking technology into their offerings—for example, leveraging artificial intelligence to deliver human resource and digital marketing optimisations among other growth-driving solutions that would substantially boost existing LV1 brands. As Live Verdure looks to the future, staying cognisant of retail trends and global developments, we continue to assess all enquiries for the right opportunity that will complement our existing brands, deliver top-line growth, and raise the profit profile of the Company. Live Verdure looks forward to updating the market in accordance with its continuous disclosure obligations. 4 Live Verdure Ltd Directors' report 30 June 2023 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Live Verdure Ltd (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. Directors The following persons were directors of Live Verdure Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated: Mr Gernot Abl (Non-executive Chairman) Mr Corey Montry (Non-executive Director) Mr Ran Vaingold (Non-executive Director) Principal activities During the financial year the principal continuing activities of the consolidated entity consisted of: ● development of Australian hemp food, beauty and nutraceutical products; and Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the consolidated entity after providing for income tax amounted to $2,834,224 (30 June 2022: $3,964,057). During the financial year the Company progressed the development of new food products whilst controlling its spend on marketing and promotional activities to $1,044,638 (2022: $2,898,683). Financial Performance During the financial year, revenue from ordinary activities increased by 17.4% to $2,215,922 compared to $1,886,901 in the previous corresponding period. The increase in revenue resulted from the acquisition of Edible Beauty in November 2022, an increase in online sales and customer growth numbers. Other income during the financial year increased to $190,385 which primarily resulted from an Export development grant of $36,600 and Research and Development tax incentive grants for FY22 amounting to $152,076. During the financial year, a share based payment expense was booked amounting to $109,155 relating to the issue of options and performance rights to Directors and employees. Financial Position The net assets increased during the financial year from a positive $362,117 at 30 June 2022 to a positive $922,977. The cash reserves of the Company decreased to $168,561 as at 30 June 2023. Matters subsequent to the end of the financial year On 18 July 2023 the Company, as part of the placement conducted on 2 March 2023 issued a further 5,000,000 shares at 10 cents ($0.10 cents) to raise a further $500,000 as part of a tranche 2. As part of the capital raisings, broker options valued at $209,520 were issued after year end. Of the $500,000, $300,000 cash was received in June 2023, with the remaining $200,000 received post year-end. The company also issued a further 16,000,000 options along side the new shares as a free attaching option (1 for 2 basis) with an exercise price of $0.25, expiring 31 August 2025. On 15 September 2023, the Company issued 22,400,000 shares at $0.075 cents, raising $1,680,000 before transaction costs. On 8 September 2023, the CEO, Mr Mark Tucker ceased his position as CEO. The current chair, Mr Gernot Abl has assumed an Interim Executive role. Likely developments and expected results of operations The future developments and expected results of operations of the Company will be dependent on the continued efforts on direct to consumer sales, advertising of the Company's products in a growing industry and also conducting research and development of new hemp food and nutraceutical and skin products. 5 Live Verdure Ltd Directors' report 30 June 2023 Business risk management The Company is committed to the effective management of risk to reduce uncertainty in the Company’s business outcomes and to protect and enhance shareholder value. There are various risks that could have a material impact on the achievement of the Company’s strategic objectives and future prospects. Key risks and mitigation activities associated with the Company's objectives are set out below: Competition risks The Company currently competes with other companies offering health, wellness and skincare products and there can be no assurance that the Company can compete effectively with these other companies. Additionally, existing competitors and new competitors to the market may replicate a business model similar to that of the Company, which could result in a loss of market share or a decrease in profitability. Furthermore, the Company's products could be rendered uneconomical by the emergence of new competitors and products, substitute products, technological advances affecting the cost of production, marketing, or pricing actions by one or more of the Company's competitors. The Company's business, financial condition or results of operations could be materially adversely affected by any one or more of such developments. The Company aims to mitigate the risks associated with competition risks by implementing new and innovative products to market. Future funding risk As at the date of this report, the Company is currently loss making and is not cash flow positive, meaning it is reliant on raising funds from investors to continue to fund its operations and product development. Although the Directors consider that the Company will, following completion of the recent capital raising subsequent to the end of the financial year, have sufficient working capital to carry out its stated objectives and to satisfy the anticipated current working capital and other capital requirements, there can be no assurance that such objectives can continue to be met in the future without securing further funding. The future capital requirements of the Company will depend on many factors, including the pace and magnitude of the development of its business and sales, and the Company may need to raise additional funds from time to time to finance the ongoing development and commercialisation of its products and to meet its other longer-term objectives. Should the Company require additional funding, there can be no assurance that additional financing will be available on acceptable terms or at all. Any inability to obtain additional financing, if required, would have a material adverse effect on the Company's business, financial condition and results of operations. As noted above, subsequent to the end of the financial year, the Company has raised approximately $2.1 million to fund an acquisition and for additional working capital which will mitigate the current funding requirements of the Company. Products liability risk The Company supplies hemp-based food, skin care and nutraceutical products. As with all food, skin care and nutraceutical products, there is a risk that the products sold by Live Verdure could cause serious or unexpected side effects, including injury to consumers. Should any of the Company's products be associated with safety risks such as misuse or abuse, mislabelling, tampering or product contamination or spoilage, a number of materially adverse outcomes could occur, including: (i) litigation or claims by the parties affected; (ii) regulatory authorities may revoke any approvals granted, impose more onerous regulatory requirements under any licence or approval, or force Live Verdure to conduct a product recall; (iii) regulatory action or being sued by the regulatory authority and being held liable for any harm caused to customers; or (iv) Live Verdure's brand and reputation being damaged. Additionally, material risks to the health and safety of customers may force the Company to voluntarily suspend or terminate sales and/or operations. Regardless of insurance and quality standards applied by the Company, as in any manufacturing concern, there remains a risk of defective products. These defects or problems could result in the loss or delay in revenue, or a material cost to the Company. The Company continues to test new products before they are placed into the market place in order to ensure that there are no product liability risks which may arise in the future. 6 Live Verdure Ltd Directors' report 30 June 2023 Environmental regulation The Company is subject to environmental regulation under Australian and State law with respect to its Hemp food manufacturing licence. Information on directors Name: Title: Experience and expertise: Mr Gernot Abl Non-executive Chairman Mr Abl’s background is in Law, Corporate Finance and Strategic Consulting and has over 18 years of entrepreneurial, business strategy, and investment experience gained as a management consultant with Deloitte Consulting and Deloitte Corporate Finance. Mr Abl has had significant success in the online gaming industry and currently serves as a director of several private start-up technology companies. Mr Abl also currently serves as an Executive Directors of Lithium Universe Limited (ASX:LU7). Other current directorships: Lithium Universe Limited (ASX:LU7) (formerly Esports Mogul Limited (ASX: ESH)) Former directorships (last 3 years): None Interests in shares: 5,915,296 fully paid ordinary shares Interests in options: 6,165,981 unlisted options Interests in rights: 1,250,000 Class B Performance rights Name: Title: Experience and expertise: Mr Ran Vaingold Non-executive Director Mr Ran Vaingold holds a Master of Business Administration from Melbourne Business School (Melbourne University) and a Bachelor of Business (Professional Accountancy) from RMIT University. He is an experienced corporate strategy professional having previously founded the Melbourne office of a $400m asset manager, advising fast growth companies on mergers, acquisitions, capital raisings and strategy. Prior to that, Mr Vaingold was an Executive at a mid-market M&A firm where he focused on transactions in the food and agriculture space, advising clients like Bega Cheese and Select Harvests. Other current directorships: None Former directorships (last 3 years): None Interests in shares: 5,852,796 fully paid ordinary shares Interests in options: 6,134,731 unlisted options Interests in rights: 1,250,000 Class B Performance rights Name: Title: Experience and expertise: Mr Corey Montry Non-executive Director Mr Montry is currently Chief Financial Officer for Energy Power Systems Australia and is a former General Motors (GM) Executive with over 20 years of commercial finance and accounting senior leadership experience working in U.S. multinational organisations as a U.S./Australia dual citizen. He has executive experience across diverse and complex Australian sectors & businesses including FMCG (Group Financial Controller, Metcash - CFO, IRexchange - GM Finance, Marlin Brands), Defence (Leidos) and Health (Finance Director, Melbourne Health). Mr Montry relocated with his young family to Australia in 2010 as Corporate Controller and Chief Accounting Officer of GM Holden before leading Holden's commercial finance organisation as Director of Revenue and Future Product Programs. He is a Certified Public Accountant in the U.S. and holds a Bachelor’s Degree in Business Administration (Accounting) and a Master’s Degree in Business Administration (Finance). Other current directorships: None Former directorships (last 3 years): None Interests in shares: Nil Interests in options: 1,000,000 unlisted options Interests in rights: Nil 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 7 Live Verdure Ltd Directors' report 30 June 2023 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Mr Justin Mouchacca CA, FGIA Mr Mouchacca is a qualified Chartered Accountant with over 16 years’ experience in public company responsibilities including statutory, corporate governance and financial reporting requirements. He graduated from RMIT University in 2008 with a Bachelor of Business majoring in Accounting. Mr Mouchacca completed the Chartered Accountants Program in 2011 and has been appointed Company Secretary and Financial Officer for a number of entities listed on the ASX and unlisted public companies. He specialises in the preparation of listing companies on stock exchanges, Corporations Act legislation, corporate governance policies, statutory report writing requirements, shareholder meeting requirements and assistance in the preparation of prospectuses, information memorandums and other disclosure documents. Meetings of directors The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2023, and the number of meetings attended by each director were: Full Board Attended Held Mr Gernot Abl Mr Ran Vaingold Mr Corey Montry 7 7 7 7 7 7 Held: represents the number of meetings held during the time the director held office. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: ● Principles used to determine the nature and amount of remuneration ● Details of remuneration ● Service agreements ● Share-based compensation ● Additional information ● Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: ● competitiveness and reasonableness ● acceptability to shareholders ● performance linkage / alignment of executive compensation ● transparency The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the company depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. The Board has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the company. 8 Live Verdure Ltd Directors' report 30 June 2023 The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it should seek to enhance shareholders' interests by: ● having economic profit as a core component of plan design ● focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value ● attracting and retaining high calibre executives Additionally, the reward framework should seek to enhance executives' interests by: ● rewarding capability and experience ● reflecting competitive reward for contribution to growth in shareholder wealth ● providing a clear structure for earning rewards In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. Non-executive directors remuneration The Constitution of the company and the ASX Listing Rules establish an aggregate or maximum level of remuneration available to non-executive directors, to be divided amongst the directors as agreed. The aggregate amount approved by shareholders to be available for remuneration of non-executive directors is $250,000 per annum. Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by the Board. The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration. Executive remuneration The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components: ● base pay and non-monetary benefits ● short-term performance incentives ● share-based payments ● other remuneration such as superannuation and long service leave The combination of these comprises the executive's total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Board based on individual and business unit performance, the overall performance of the company and comparable market remunerations. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive. The short-term incentives ('STI') program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators ('KPI's') being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product management. The long-term incentives ('LTI') include long service leave and share-based payments. Shares are awarded to executives over a period of three years based on long-term incentive measures. These include increase in shareholders value relative to the entire market and the increase compared to the company's direct competitors. Consolidated entity performance and link to remuneration Remuneration for certain individuals is directly linked to the performance of the consolidated entity. A portion of cash bonus and incentive payments are dependent on defined targets being met. The remaining portion of the cash bonus and incentive payments are at the discretion of the Board. Refer to the section below for details of the earnings and total shareholders return for the last five years. 9 Live Verdure Ltd Directors' report 30 June 2023 The Board is of the opinion that the continued improved results can be attributed in part to the adoption of performance based compensation and is satisfied that this improvement will continue to increase shareholder wealth if maintained over the coming years. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity consisted of the following directors of Live Verdure Ltd: ● Mr Gernot Abl (Non-executive Chairman) ● Mr Ran Vaingold (Non-executive Director) ● Mr Corey Montry (Non-executive Director) And the following person: ● Mr Justin Mouchacca (Chief financial officer and Company Secretary) - resigned as Chief financial officer on 27 July 2021 Short-term benefits 2023 Non-Executive Directors: Gernot Abl Corey Montry Ran Vaingold Other Key Management Personnel: Mark Tucker Cash salary and fees $ Cash bonus $ Nonmonetary $ Non-Executive Directors: Gernot Abl Corey Montry* Executive Directors: Ran Vaingold * Sharebased payments Long service leave $ Equitysettled $ Superannuation $ Total $ 90,000 36,000 87,558 - - 9,450 3,780 9,194 - - 99,450 39,780 96,752 216,026 429,584 - - 22,683 45,107 - - 238,709 474,691 Postemployment Long-term benefits benefits Sharebased payments Long service leave $ Equitysettled $ Total $ Short-term benefits 2022 Postemployment Long-term benefits benefits Cash salary and fees $ Cash bonus $ Nonmonetary $ Superannuation $ 90,000 36,000 - - 9,000 3,600 - 128,090 99,000 167,690 185,000 311,000 - - 18,500 31,100 - 128,090 203,500 470,190 Equity settled amounts relate to the share based payment value of unlisted options and performance rights issued during the financial year. These amounts are non cash and being accounted for in accordance with AASB 2 – Share Based Payments. 10 Live Verdure Ltd Directors' report 30 June 2023 The proportion of remuneration linked to performance and the fixed proportion are as follows: Fixed remuneration 2023 2022 Name At risk - STI 2023 2022 At risk - LTI 20