ALEXIUM INTERNATIONAL GROUP LIMITED
ANNUAL REPORT
For The Period Ended 30 June 2018
ABN 91 064 820 408 PRESENTED IN US DOLLARS
1
ALEXIUM INTERNATIONAL GROUP LIMITED TABLE OF CONTENTS
Company Directory
Letter from the Chair
Review of Operations
Corporate Governance Statement
Directors’ Report
Declaration of Independence
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes on the Consolidated Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
3
4
5
6
18
43
44
45
46
48
49
91
92
96
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ALEXIUM INTERNATIONAL GROUP LIMITED COMPANY DIRECTORY
DIRECTORS
Ms Susan Thomas
Brigadier General Stephen Cheney
Mr Craig Metz
Ms Karen Thurman
Ms Claire Poll
Ms Rosheen Garnon
Dr Robert Brookins
COMPANY SECRETARY
Mr Kevin Kye (Resigned 27 February 2018)
Ms Maja McGuire (Appointed 27 February 2018)
REGISTERED OFFICE
AUDITORS
SHARE REGISTRY
BANKERS
SOLICITORS
Level 11, 125 St Georges Terrace
Perth WA 6000
Telephone: +61 8 9384 3160
Grant Thornton Audit Pty Ltd
Level 43 Central Park
152-158 St Georges Terrace
Perth WA 6000
Automic Registry Services
Level 5, 126 Phillip St
Sydney NSW 2000
Telephone: 1300 288 664
Macquarie Bank
235 St Georges Terrace
Perth WA 6000
Steinepreis Paganin
Level 4, The Read Buildings
16 Milligan Street
Perth WA 6000
ABN
DOMICILE AND COUNTRY
OF INCORPORATION
91 064 820 408
Australia
LEGAL FORM OF ENTITY
Listed Public Company
SECURITY EXCHANGE
Australian Securities Exchange (Perth) Limited
ASX Code: AJX
NASDAQ International Designation
Ticker: AXXIY
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ALEXIUM INTERNATIONAL GROUP LIMITED LETTER FROM THE CHAIR
Dear Shareholders,
It is always a pleasure to work with entrepreneurs who are passionate and focussed on commercialising
their technology. When this is combined with exceptional teamwork, a great culture, and innovative
technology, it is truly very exciting.
When I reflect on the first four months of my time as Chair of Alexium, there has been hard work in spades
by the very dedicated, passionate, and focussed staff. My focus is to ensure that we have the right culture
and structure in place to enable these talented people to have the framework to enable success.
Since stepping in as Chair, my focus has been in two key areas.
• We addressed operating expenses and resource management to ensure the cornerstone initiatives are
managed well and that we can reach profitability within our current cash resources; and
• We are focussed on reliable revenue streams and sustainable margins.
Of course, the outstanding strength of Alexium is their suite of innovative products for which there
appears to be a strong market demand.
• The Alexicool® technology has been performing extremely well with our customers launching a
number of new products in CY 2019;
• Progress with Alexiflam FR for the flame retardation of military uniforms is progressing well with key
milestones achieved over the past few months; and
• Alexiflam NF is an exciting proprietary product for which we see multiple opportunities.
Less discussed is the number of talented and dedicated staff who I would like to acknowledge and thank
for their contributions. Alexium has gained a strong reputation as having a responsive team with excellent
technical expertise.
Whilst I cannot make you promises. I am confident that the key indicators of future success, which include:
•
•
the number of new bedding lines which are proposing to include Alexium’s pcm technology; and
the interaction which we have with key clients in both fire retardant and bedding,
mean that I strongly believe that 2H of FY 2019 will be very pleasing.
Beyond 2019, Alexium has a well-defined growth strategy which includes 3 clear levels of priorities for the
next 18 months. The near-term goal is to achieve profitability from the sales of phase change materials to
the bedding industry. As we move forward, two key milestones are:
• getting final agreement for the FR Nyco application to military uniforms; and
• developing the Alexicool products for an expanded range of product types.
I would like to thank my fellow board members for their contribution and support.
I look forward to being able to report to you in future reports on how these strategies have been
progressed and the achievements that we will be able to demonstrate.
Ms Susan Thomas
Chair
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ALEXIUM INTERNATIONAL GROUP LIMITED REVIEW OF OPERATIONS
Dear Shareholders,
When discussing Alexium, I always concentrate on the innovative and proprietary aspects of our
technologies. This has been and continues to be central to the company’s business model. Our focus
is addressing market gaps and opportunities that standard products cannot. That philosophy was first
realised with Alexium’s flame-retardant treatment for military uniforms, and over the past few years it
has expanded into phase-change materials. However, I continue to see that Alexium’s value is much more
than that — an innovative product is just the beginning. Translating that expertise into product design,
production-scale insights, and supply-chain knowledge is just as necessary. At this time, market know-how
is as integral to Alexium’s business model as the groundbreaking products we create.
Actualising this has been one of Alexium’s greatest challenges and greatest successes. The financials for
the past year reflect this as well as the improvement in Alexium’s commercial strategies. As discussed in
recent communications, we are seeing positive results, with our customers launching more than 15 new
retail products in 2019 that are based on Alexicool technology. This outcome indicates that our refined
commercial strategies are proving effective. With this growth, Alexium has a clear path to profitability
simply based on the Alexicool product line. Coupling that with our other cornerstone initiatives, Alexiflam
FR and Alexiflam NF, one can see that Alexium has a robust pipeline for significant growth. I am very
excited about where we are, and the reporting will demonstrate our progress over the next year.
Looking forward, I see two major factors that will drive Alexium’s growth through FY19. First, the recent
technical and commercial successes will have a compounding effect where market expansion and further
evolution of the Alexicool technology will grow the business more easily and quickly. Second, the work on
our flame-retardant products (Alexiflam FR for military applications and Alexiflam NF) is progressing very
well, and these products offer a much broader range of markets for Alexium. Both of these factors reflect
Alexium’s status as a growth company.
Dr. Bob Brookins
Chief Executive Officer
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ALEXIUM INTERNATIONAL GROUP LIMITED
CORPORATE GOVERNANCE STATEMENT 2018
Alexium International Group Limited (Company or Alexium) is committed to best practice corporate
governance and has reviewed all practices in line with ASX Corporate Governance Council’s principles of
good corporate governance and best practice recommendations.
Throughout the financial year ended 30 June 2018, and as at the date of this statement, the Board has
considered the recommendations contained in the ASX corporate governance council’s Corporate
Governance Principles and Recommendations (3rd edition) (Recommendations).
The Board considers and applies the Recommendations taking into account the circumstances of the
Company. Where the Company’s practice departs from a Recommendation, this corporate governance
statement identifies the area of divergence and reasons for it, or the alternative practise adopted by the
Company.
The documents that govern the Company’s corporate governance framework, including its Constitution,
charters and polices are available in the Corporate Governance section on the Company’s website -
http://alexiuminternational.com/about/#corpGov
Recommendation
Current Practice
1.1
A listed entity should disclose:
a. The respective roles and
responsibilities of its board
and management; and
b. Those matters expressly
reserved to the board
and those delegated to
management.
The Company supports a clear segregation of duties between
management and the Board. The Board is responsible for the
strategic direction of the Company with oversight and review
of the management and administration of the Company. The
Board delegates responsibility for the day-to-day operations
and administration of the Company to the Chief Executive
Officer/Managing Director.
The respective roles and responsibilities of the Board, its
Committees and senior executives are set out in the board
and committee charters. These charters are available on the
Company’s website. Details on the number of meetings held
throughout the year and attendance at those meetings can
be found in the Company’s 2018 Annual Report.
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
Recommendation
Current Practice
1.2
A listed entity should:
a. Undertake appropriate
checks before appointing a
person, or putting forward to
security holders a candidate
for election, as a director; and
b. Provide security holders
with all material information
in its possession relevant to a
decision on whether or not to
elect or re-elect a director.
A listed entity should have a
written agreement with each
director and senior executive
setting out the terms of their
appointment.
The company secretary of
a listed entity should be
accountable directly to the
board, through the chair, on
all matters to do with proper
functioning of the board.
A listed entity should:
a. Have a diversity policy;
b. Disclose that policy or a
summary of it;
c. Disclose the measurable
objectives for achieving
gender diversity and the its
progress towards achieving
them; and
d. The respective proportions
of men and women.
1.3
1.4
1.5
The Board has established policies and procedures that apply
to the appointment of new directors, which include checks
as to the person’s character, experience, and appropriate
background checks. At each annual general meeting, the
Company provides shareholders with all material information
in its possession relevant to a decision on whether or not to
elect or re-elect a Director.
Non-Executive Directors are provided a formal letter of
appointment which sets out their duties and responsibilities,
rights and remuneration entitlements. Senior executives are
employed under individual service contracts which set out
their terms of employment including details of their duties,
responsibilities, rights and remuneration entitlements.
The Company Secretary is directly accountable to the
Board, through the Chair, on all matters to do with proper
functioning of the board.
The Company Secretary is accessible to all Directors. The
Board is responsible for the appointment and removal of the
Company Secretary.
The Board has adopted a Diversity Policy which aims to
ensure that the Company’s workforce, including the Board, is
made up of individuals with diverse skills, values, backgrounds
and experience to the benefit of the Company.
The Diversity Policy does not include a requirement for
the Board to establish measurable objectives for achieving
gender diversity. Given the small size of the Company
workforce, the Board has determined that it is not currently
practicable to establish measurable objectives in this area.
The proportion of women employees in the whole
organisation, women in senior executive positions and women
on the Board as at 30 June 2018 are set out in the following
table:
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
Recommendation
Current Practice
1.6
1.7
2.1
A listed entity should:
a. Have and disclose a process
for periodically evaluating the
performance of the board, its
committees and individual
directors; and
b. Disclose whether
performance evaluations were
undertaken.
A listed entity should:
a. Have and disclose a process
for periodically evaluating
the performance of senior
management; and
b. Disclose whether
performance evaluations were
undertaken.
A listed entity should have a
nomination committee which:
- Consists of at least 3
members, a majority of whom
are independent directors;
- Is chaired by an independent
director;
And disclose:
- The charter of the
committee;
- The members of the
committee
- The number of times the
committee met and individual
attendance at those meetings
Whole Organisation
Snr Executive Positions
Non-Executive Directors
Proportion of Women
12 out of 26 (46%)
1 out of 6 (17%)
4 out of 6 (67%)
The Diversity Policy is available on the Company’s website.
The assessment of the Board, each Board Committee and
each individual Director was undertaken during the year
ended 30 June 2018. An appropriate questionnaire was
completed by all Directors. The results were collated and
discussed by the Board.
The Company conducts performance evaluations of all staff
(including senior management), and these are completed by
the 1st of April on an annual basis. Additionally, the Chair and
CEO performed a performance review of senior management
in June 2018.
Details on management performance incentives and
remuneration are contained in the Remuneration Report of
the Director’s Report, in the Company’s 2018 Annual Report.
Reflecting the current size and composition of the Board and
Company, the Board has elected to carry out the functions
of a nomination committee which includes Board renewal,
succession planning, induction and evaluation.
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
Recommendation
Current Practice
2.1
If it does not have a
nomination committee
disclose that fact and the
process it follows to address
that role.
2.2
A listed entity should have
and disclose a board skills
matrix.
The Board has developed a Board skills matrix setting out
the mix of skills and diversity that the Board currently has or
is looking to achieve. During the year ended 30 June 2018,
the Board reviewed whether the Directors as a group have
the range of expertise, skills, knowledge and operational and
technical expertise relevant to the operation of the Company
required to address existing and emerging business and
governance issues and fulfil their role on the Board and on
the Board Committees.
Strategy
Executive Management
Corporate Governance
Commercial Framework
Development
Skills and Experience of Directors
Strategic planning & execution experience in developing,
implementing, measuring and reporting strategic objectives
that succeed in delivering long term sustainable shareholder
value.
Experience at an executive level including the ability to:
• appoint and evaluate the performance of the CEO and
senior executive managers;
• oversee strategic human resource management
including workforce planning, and employee and
industrial relations; and
• oversee large scale organisational change.
Previous experience as either an executive or non-executive
director that demonstrates sound understanding of
Corporate Governance Principles in an ASX listed Company.
Ability to identify key issues and opportunities for the
Company and develop appropriate policies to define the
parameters within which the organisation should operate.
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
Financial Performance
Risk and Compliance Oversight
Marketing
Innovation and Entrepreneurial
Human Resources
Legal
Supply Chain Management
Skills and Experience of Directors
Qualifications and experience in accounting and/or finance
and the ability to:
• analyse key financial statements;
• critically assess financial viability and performance;
• contribute to strategic financial planning;
• oversee budgets and the efficient use of resources;
• oversee funding arrangements and accountability;
• business unit and corporate finance reporting; and
• capital markets experience in sourcing funding from
either debt or capital markets.
Ability to identify key risks to the organisation in a wide
range of areas including legal and regulatory compliance,
and monitor risk and compliance management
frameworks and systems.
• Marketing and distribution strategies for B2B.
• Marketing experience in key business areas.
• Proven success as an innovator.
• The required entrepreneurial mindset to ensure success
ina fast-moving market environment.
• R & D experience in chemical formulations.
Staff engagement & executive
remuneration experience in staff engagement principles and
executive remuneration packaging, KPI management and
reporting.
• Legal experience in, or awareness of, legal obligations
under the Corporations Act 2001, tax, ASX Listing Rules
and the equivalent US laws.
• Application for and management of patents and other
intellectual property.
Logistics and operational
experience in supply chain
management.
Further details regarding the skills and experience of each Director are included in the Director’s Report
within the 2018 Annual Report.
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
Recommendation
Current Practice
2.3
A listed entity should disclose:
- The names of the directors
considered by the board to
be independent directors and
length of service.
- If a director has an interest /
association / relationship that
meets the factors of assessing
independence.
The independence of Directors was measured during the
reporting period having regard to the defining characteristic
set out in Box 2.3 of the Recommendations.
The following table sets out the Directors of the Company
during the reporting period, including their non-executive and
independent status.
Name
Appointment date Resignation date
Non – executive?
Independent?
Ms Susan Thomas
10 December 2017 N/A
15 April 2015
N/A
Yes
Yes
Brigadier General
Stephen Cheney
Mr Craig Metz
Ms Claire Poll
1 December 2014
14 November 2018 Yes
10 December 2017 N/A
Yes
Ms Karen Thurman
2 March 2017
14 November 2018 Yes
Dr Robert Brookins
13 July 2018
N/A
Ms Rosheen Garnon
19 September 2018 N/A
Mr Gavin Rezos
29 January 2010
9 May 2018
Dr Dirk Van Hyning
13 November 2017
31 May 2018
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
2.4
2.5
2.6
A majority of the board
should be independent
directors.
In accordance with the Board Charter, the majority of
Directors are independent. Only the MD & CEO is not
considered independent, by virtue of him being an Executive
of the Company.
The chair should be an
independent director and
should not be the same
person as the CEO.
Ms Susan Thomas is an independent non-executive Chair.
The roles of the Chair and Chief Executive Officer/Managing
Director are not exercised by the same individual. The Board
Charter sets out distinct responsibilities of each role.
A listed entity should have
a program for inducting
new directors and provide
appropriate professional
development opportunities
for Directors.
New Directors are provided with a formal letter of
appointment and introductory materials.
The Board Charter provides that the Company Secretary is
responsible for arranging an induction program for any new
director.
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
2.6
3.1
4.1
A listed entity should:
- have a code of conduct; and
- disclose the code or a
summary of it.
The board of a listed entity
should have an audit
committee which:
- Has at least three members
all of whom are non-executive
directors and a majority of
independent directors; and
- Is chaired by an independent
chair, who is not chair of the
board.
Disclose:
- The charter of the
committee;
- The relevant member
qualifications;
The number of times the
committee met and individual
attendance at those meetings.
Directors are encouraged and given the opportunity to
broaden their knowledge of the Company by visiting
Alexium’s operational office. During the reporting period,
Directors made a number of visits to the Company’s
operational site.
Directors are encouraged to undertake professional
development opportunities as and when required in order to
further develop and maintain their skills and knowledge.
The Company has established a Code of Conduct which
applies to all Directors, senior executives and staff.
The Code of Conduct is available on the Company’s website.
The Audit & Risk Committee (ARC) comprises of the
following members, all of whom are independent non-
executive Directors:
• Mr Chair Metz (Chair);
• Ms Karen Thurman;
• Ms Susan Thomas; and
• Ms Rosheen Garnon.
In addition to the ARC members, the MD & CEO, CFO,
external auditor and Company Secretary regularly attend
ARC meetings. Members’ qualifications and experience,
together with the number of meetings held throughout
the year and attendance at those meetings is set out in the
Company’s 2018 Annual Report. The ARC Charter which sets
out the Committee’s role and responsibilities, composition,
structure and membership requirements is available on the
Company’s website.
4.2
The board should receive
declarations for CEO &
CFO in accordance with
S.295A of Corporations Act
before approving financial
statements.
Prior to Board approval of the Company’s annual financial
reports, the Chief Executive Officer and Chief Financial
Officer provide the Board with declarations required under
section 295A of the Corporations Act 2001 (Cth) and
Recommendation 4.2.
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
4.3
5.1
6.1
6.2
6.3
A listed entity should ensure
its external auditor attends
its AGM and is available
to answer questions from
security holders relevant to
the audit.
The Company’s external audit function is performed by Grant
Thornton. Representatives of Grant Thornton will attend the
Company’s 2018 Annual General Meeting and will be available
to answer shareholder questions regarding the conduct of
the audit and preparation and conduct of the Independent
Auditor’s Report.
A listed entity should:
- Have a written policy for
complying with its continuous
disclosure obligations under
the Listing Rules; and
- disclosure that policy or a
summary of it.
A listed entity should provide
information about itself and
its governance to investors via
its website.
A listed entity should
design and implement an
investor relations program to
facilitate effective two-way
communication with investors.
A listed entity should disclose
the policies and processes it
has in place to facilitate and
encourage participation at
meetings of security holders.
The Company has adopted a Price Sensitive Information
Policy which sets out the processes and practices that ensure
its compliance with the continuous disclosure requirements
under the ASX Listing Rules and Corporations Act 2001 (Cth).
The Price Sensitive Information Policy is available on the
Company’s website.
The Company’s website http://alexiuminternational.com/
provides detailed information about its business and
operations.
Shareholders can find information about the Company’s
corporate governance practices on the website within the
Corporate Governance section under About. This includes the
Company’s Constitution, Board and Committee Charters and
the Company’s other corporate governance and policies.
The Company has adopted a Shareholder Communication
and Participation Policy which outlines the range of media
used to communicate with shareholders and the types of
information provided. The Company encourages participation
by shareholders at the Company’s general meetings, investor
presentations and via the contact details provided on the
Company’s website.
The Shareholder Communication and Participation Policy is
available on the Company’s website.
The Company views general meetings as an important
forum for reciprocal communication between itself and
shareholders. The Company provides a direct voting facility
to allow security holders to vote ahead of general meetings
without having to attend or appoint a proxy. Shareholders are
encouraged to participate in general meetings and are given
the opportunity to ask questions of the Company and its
auditors at the annual general meeting.
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
The Company provides shareholders with the option of
receiving communications from, and sending communications
to, the Company and Share Registry electronically. The
Company provides a printed copy of the Annual Report only
to those shareholders who have specifically elected to receive
a printed copy. Other shareholders receive the Annual Report
via email and are advised that it is available on the Company’s
website.
Shareholders are encouraged to register on the Company
website to receive email alerts of ASX announcements and
media releases.
The Company’s share register is managed by Automic Pty
Ltd. Shareholders can access their shareholding details
or make enquiries about their shareholding electronically
through the Automic Investor Centre.
The Audit and Risk Committee (ARC) has the responsibility
to establish policies on the system of internal control
and identification and management of material risks in
accordance with the Company’s Risk Management Policy.
A copy of the Risk Management Policy is available on the
Company’s website.
Further details regarding the ARC and its membership are set
out in response to Recommendation 4.1.
6.4
A listed entity should give
security holders the option to
receive communications from,
and send communication to,
the entity and its security
registry electronically.
7.1
The board of a listed entity
should have a committee to
oversee risk, which:
- Has at least three members
all of whom are non-executive
directors and a majority of
independent directors; and
- Is chaired by an independent
chair, who is not chair of the
board.
Disclose:
- The charter of the
committee;
- The members of the
committee; and
- The number of times the
committee met and individual
attendance at those meetings
- If it does not have a risk
committee disclose that fact
and the process it follows to
address that role.
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ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
7.2
The board or a committee of
the board should:
- Review the entity’s risk
management framework at
least annually to satisfy itself
that it continues to be sound;
and
- Disclose whether such a
review has taken place.
7.3
A listed entity should disclose:
If it has an internal audit
•
function, how the function
is structured and what
role it performs;
If it does not have an
internal audit function,
disclose that fact and
the process it follows to
address that function.
•
The Audit and Risk Committee (ARC) is responsible for
reviewing the Company’s risk management framework to
ensure the Company’s governance processes and practices
continue to be sound and that Alexium manages risk within
the Board approved risk appetite.
The ARC conducted its review during the reporting period
and concluded that controls over risk management processes
were considered adequate and effective.
In addition to meetings of the ARC, the Board is updated on
material business and financial risks on an on-going basis.
The Company currently does not retain a dedicated internal
audit position. Management and the Board consider this
is appropriate, taking into consideration the stage of the
Company’s life cycle, the scale and relative simplicity of
its current operations, and size of its finance function. The
internal audit function is performed by senior management
and reviewed by the board. Currently this function comprises:
•
regular review and testing of the adequacy of controls for
risks identified as presenting the highest overall exposure;
• management’s periodic confirmation that the assessment
•
•
of these identified risks and their controls remain
appropriate;
identification and review of any newly identified risks that
may develop resulting from changes to the business; and
regular and recurring review of any deficiencies identified
as part of an external audit and the subsequent actions
taken to mitigate these risks.
Where considered appropriate, external guidance may be
sought on specific risks or controls. The Audit and Risk
Committee regularly discusses the appropriateness of
controls with the external auditor and if considered
necessary would initiate an audit of a particular function.
15
ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
7.4
The entity should disclose
whether it has any material
exposure to economic,
environmental and social
sustainability risks, and if it
does, how it manages those
risks.
Economic Sustainability
Managing economic sustainability is central to the Company’s
operation and ongoing viability. The most significant
risk currently being managed is cash resources, and the
Company’s ability to secure additional revenue streams.
The Company ensures its organisational structure includes
appropriate resources to manage these risks. A key focus of
senior executives is on securing sustaining financial resources
and optimising existing cash resources and, where required,
external advisors will be engaged to assist senior executives.
Environmental Sustainability
A key focus of Alexium’s product portfolio is the
environmentally friendly nature of these. With this, Alexium
can ensure that the environmental impact by its customers
products are minimal and acceptable. Additionally, Alexium’s
manufacturing partners are selected in part based on their
adherence to established environmental standards as well as
compliance with manufacturing standards such as ISO 9001.
Social Sustainability
Social sustainability is an important aspect of Alexium’s
culture. Alexium values diversity in the workplace and has
worked to have a diverse staff based on social, economic,
and ethnic backgrounds. The staff’s compensation and
promotion structure is designed to encourage long-term
careers. Alexium also strives to work with suppliers and
consultants in our local community. For our markets as a
whole, Alexium is actively engaged in key organisations for
our suppliers and customers.
8.1
The board of a listed entity
should:
- have a remuneration
committee which has at least
three members all of whom
are non-executive directors
and a majority of independent
directors; and
- Is chaired by an independent
director; and
The Remuneration Committee comprises of the following
members, all of whom are independent non-executive
Directors:
• Brigadier General Stephen Cheney (Chair);
• Ms Claire Poll; and
• Ms Susan Thomas.
In addition to the Remuneration Committee members,
the MD & CEO and Company Secretary regularly attend
Remuneration Committee meetings.
Members’ qualifications and experience, together with
the number of meetings held throughout the year and
attendance at those meetings is set out in the Company’s
2018 Annual Report.
16
ALEXIUM INTERNATIONAL GROUP LIMITED CORPORATE GOVERNANCE STATEMENT 2018
8.1
8.2
8.3
Disclose:
- The charter of the
committee;
- The members of the
committee; and
- The number of times the
committee met and individual
attendance at those meetings
If it does not have a
remuneration committee
disclose that fact and the
process it follows to address
that role.
A listed entity should
separately disclose its policies
and practices regarding
the remuneration of non-
executive directors and the
remuneration of executive
directors and other senior
executives.
The Remuneration Committee Charter which sets out the
Committee’s role and responsibilities, composition, structure
and membership requirements is available on the Company’s
website.
Non-executive Directors are paid fees from an aggregate
sum approved by shareholders of the Company. Non-
executive Directors are remunerated at a fixed fee for their
time and responsibilities and their remuneration is not linked
to the operating performance of the Company. There are no
termination or retirement benefits for non-executive Directors
other than superannuation.
Remuneration of the Chief Executive Officer/Managing
Director and senior executives consist of a base salary, fringe
benefits (including medical insurance) and performance
incentives.
Details of remuneration are contained in the Remuneration
Report, which forms part of the Directors’ Report in the
Company’s 2018 Annual Report.
A listed entity which has an
equity-based remuneration
scheme should:
- Have a policy on whether
participants are permitted to
enter into transactions which
limit the economic risk of
participating in the scheme;
- Disclose that policy or a
summary of it.
The Company’s Securities Dealing Policy prohibits Directors
and key management personnel from entering into
transactions in associated products which operate to limit the
economic risk of holding securities in the Company. Further,
any Director or key management personnel of the Company
who enters into margin lending arrangements or otherwise
encumbers their securities of the Company is required to
provide details of those security arrangements which may
be subject to prohibitions on dealing as contained in the
Securities Dealing Policy.
17
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
Your Directors present their report on Alexium International Group Limited (“the Company” or “Alexium”)
and the consolidated entity (referred to hereafter as “the Group”) for the period ended 30 June 2018.
The Company recently announced a change to Alexium’s presentation currency from the Australian
Dollar to the US Dollar. With the Company’s operations, employees, suppliers and customers being almost
entirely in the United States, this change helps provide a clearer picture of financial results and reduces
almost all volatility related to foreign exchange. This financial report, the comparative period within, and all
future financial reports, will therefore be presented in US Dollars.
DIRECTORS
The Directors of the Company in office during the period ended 30 June 2018 and until the date of this
report are as follows. Directors were in office for the entire period unless otherwise stated.
• Ms Susan Thomas (Appointed 11 December 2017)
• General Stephen Cheney
• Mr Craig Metz
• Ms Claire Poll (Appointed 11 December 2017)
• Ms Karen Thurman
• Dr Robert Brookins (Appointed 13 July 2018)
• Mr Gavin Rezos (Resigned 9 May 2018)
• Dr Dirk Van Hyning (Appointed 13 November 2017; Resigned 31 May 2018)
• Mr Nicholas Clark (Resigned 1 August 2017)
PRINCIPAL ACTIVITIES
The development of specialty chemicals where there is a market opportunity for commercialisation.
During the period activities included:
• Research and development in consultation with end clients;
• Obtaining patents in relation to new products developed; and
• Commercialisation and sales of the products.
DIVIDENDS
No dividend was paid during the period and the Board has not recommended the payment of a dividend.
SHARE CAPITAL
345,443,598 ordinary shares and 2,400,000 unlisted options were on issue as at 30 June 2018.
18
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW
Operations and Technology Review
The Group maintains its operating headquarters in Greer, South Carolina, USA. The research, development,
sales, and administration are all conducted out of a new custom-designed facility completed during
2017. With this facility, the Group is positioned to focus its resources on technology development and
commercialisation and to continue to leverage a non-capital-intensive manufacturing model for the
production of its products. As outlined in the Appendix 4C for the period ended 30 June 2018, the Group’s
strategy and efforts to date have focused on the development and commercialisation of high-performance
products for phase change materials (PCMs) and flame retardants applications. The Group’s current focus
revolves around three cornerstone initiatives:
1. Expansion of Alexicool® products in Phase Change Material (PCM) markets;
2. Application of flame retardant nylon cotton blends (FR NyCo) for military uniforms; and
3. Commercialisation of Alexiflam®NF.
Over this past year, Alexium has significantly progressed these initiatives. Some of the key achievements
for FY 2018 are as follows:
Expansion of Alexicool products into new market segments: Building on the successful launch of
Alexicool into the bedding market, the Group has introduced this cost-effective and durable phase
change material (PCM) finish into broader segments of the bedding market. Additionally, advances
in the Alexicool product line have enabled the Group to expand its offerings to more components
in the mattress.
Introduction of an analytical method for PCM-treated textiles: Due to a lack of established
analytical methods for assessing the performance of PCM-treated textiles, the Group developed
an analytical method for this purpose. This technique has been well received within the bedding
market and has helped the Group establish a reputation as a supplier of quality PCM products.
Development of novel FR NyCo technology: In response to new market opportunities, the Group
has developed a novel FR NyCo technology to provide a measure of flame retardant protection for
a broader segment of military uniforms. This effort represents a significant increase in the value of
the FR NyCo technology to the Company.
Commercialisation of Alexiflam NF: Over the past few years, the Group has developed a proprietary
flame-retardant treatment for cotton rich fabrics. Completion of key milestones has advanced this
product’s commercial efforts across diverse market opportunities.
The advances in the three cornerstone initiatives have positioned the Group for a broader range of
revenue streams, a more diverse customer base, and improved gross margins.
During the reporting period the Group has taken significant measures to reduce operating expenses,
review pricing, and better position Alexium to achieve profitability.
19
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
Financial Result Overview
The Group’s net loss attributable to members of the Group for the financial year ended 30 June 2018 was
$3,961,119 (2017: 9,136,923). This represents a 57% decrease in net loss over the prior period. The primary
drivers behind this improvement in net loss are described below.
Revenues from ordinary operating activities were $11,911,816 (2017: $17,929,361). This decrease in revenue
was offset by an increase in gross profit of $2,114,067 during the period. Gross profit for the period was
$2,354,942 (2017: $240,875) representing an average gross margin percentage across all lines of business
of 20% (2017: 1%). This is a result of the Group’s shift to an improved business model.
Operating costs decreased to $6,584,616 from $8,286,959 in the prior period primarily due to decreases
in administrative and employee benefits expense and the capitalisation of $662,717 of R&D activities into
intangible assets in the PCM, FR cotton, and military markets.
In December 2017, the Company raised $10.1m through the issuance of securities. This included a
placement of 34.3m new shares issued at AU $0.35 to provide US $8.9m in capital and a share purchase
plan offering which raised an additional US $1.2m. These funds are being used for fundamental balance
sheet strength ahead of anticipated customer production ramp-up, expansion in additional analytical
equipment, product testing, and IP protection.
In September 2017, the Company entered into a secured debt facility with US based GPB Debt Holdings
II LLC (the Note). The Note provided $10m to fund key operational and strategic projects focused on
profitability and growth. As part of the Note, Alexium agreed to issue GPB warrants for the issue of
4,255,319 ordinary shares with a five-year term at an exercise price of AU $0.47 per share. The exercise
price of the warrants was adjusted to AU $0.35c (the price of the December 2017 placement).
As at 30 June 2018 the cash position was $10,641,763 (2017: $2,620,759) and the Group had 345,443,598
ordinary shares on issue (2017: 303,827,998).
During the reporting period, the composition of the board changed with the retirement of former
Executive Director Nick Clark on 19 July 2017, retirement of former Chairperson Gavin Rezos on 9 May
2018, and retirement of Dirk Van Hyning as CEO and MD on 31 May 2018. Additionally, the Group welcomed
new Board appointments with the addition of Claire Poll and Susan Thomas on 11 December 2017; this was
followed by the appointment of Ms. Thomas as Chairperson on 9 May 2018.
20
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
Material Business Risks
The Group has identified the below specific risks which could impact upon its prospects:
Competition in key markets: The Group has worked diligently on its PCM-based products to ensure
that market competition is well understood and that the Group’s product portfolio adequately
responds to these competitors. This response includes:
• Effective pricing strategies and product innovation;
• Analytical tools that provide an objective means of demonstrating the value of the Group’s
products over competitive products;
Identification of market gaps where current commercial technologies are not effective; and
•
• Protection of Alexium’s position in the market place by protecting intellectual property.
Sufficient capital for achieving profitability: The Group monitors and manages its resources to
ensure there is sufficient capital for achieving profitability. Based on the Group’s revenue forecasts
and budget, the Board is confident that the Company is sufficiently capitalised. Periodic reviews
are conducted to evaluate this on an ongoing basis.
Commercial risks due to market dynamics: Beyond threats from competitors, the Group identifies
changes in the markets themselves as potential risks, and they are working to mitigate these risks
through diversification of its product portfolio, customer driven product innovation, and building a
broader customer base.
Maintaining strong intellectual property position: Product innovation is key to the Group’s business
model, thus maintaining a strong intellectual property position is critical. To ensure this, the Group
is attentive to developing next-generation products that are not only well-differentiated in the
market but are also inventive and meet market needs. Maintaining a well-educated and highly
experienced technical staff will continue to be a focus for the Group.
Critical roles of key staff members: Due to the Group’s staff count, an inevitable position is to
have key staff members who play critical roles for the Group. To mitigate this risk, these key staff
members are competitively incentivised. The Company has a development program to ensure
succession.
Likely Developments
During the reporting period, the Group continued to capitalise on the work and developments over the
past several years which have positioned Alexium well in terms of its three cornerstone initiatives.
21
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
In FY2019, Alexium is committed to:
• Expansion of Alexicool products in PCM markets for bedding;
• Application of flame retardant nylon cotton blends for military uniforms;
• Commercialisation of Alexiflam NF;
• Further growth of Alexium’s technology;
• Ensuring a financially strong and stable business through detailed planning, responsible management
and transparency of strategy and outcomes; and
• Significant growth of the group’s revenue with reinvigorated sales teams.
The Group’s business strategies to achieve the above goals include:
• Strengthening and maintaining key relationships supporting the group’s cornerstone initiatives;
• Applying a disciplined and conservative approach to expenditure relative to sales growth;
• Focusing on three cornerstone initiatives to produce near term revenue and contribute to growth; and
• Leveraging the success of Alexicool products with sophisticated marketing strategies for increased
market adoption.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Contributed equity increased by $8,534,382 (from $45,833,450 to $54,367,832) as a result of a share
capital issued totalling $10,106,575 less $468,358 in issuance costs, options converted to shares of
$338,244, shares issued in lieu of salary and services of $52,728 and negative foreign currency translation
impact of $1,494,807. Further details can be found in the Consolidated Statement of Changes in Equity
and Note 16 provided in the financial report below.
The Group refinanced it’s $5m credit facility with a $10m convertible note, extending the maturity to three
years and securing additional funds to support working capital. The group also raised $10.1m to provide
sufficient capital to fund growth efforts in the military and bedding markets through the issuance of 34.3m
shares via institutional placement and 4.7m shares via share purchase plan.
Dr Robert Brookins was appointed as interim CEO during the period (see “Events Since the End of
the Financial Period” for further details related to Dr Brookins’ appointment) and Susan Thomas was
appointed as Non-Executive Chair.
The Company recently announced a change to Alexium’s presentation currency from the Australian Dollar
to the US Dollar. This financial report, the comparative period within, and future financial reports, will be
presented in US Dollars.
EVENTS SINCE THE END OF THE FINANCIAL PERIOD
Other than the items listed below, there has not arisen any item, transaction or event of a material and
unusual nature ; which in the opinion of the Directors of the Company, is likely to significantly affect the
operations of the Group, the results of those operations, or the state of affairs of the Group, in future
financial years.
• Dr Brookins was appointed as CEO and Managing Director as of 17 July 2018.
22
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
ENVIRONMENTAL REGULATIONS
The Group’s operations are currently located solely in the United States, and as such are not regulated by
any significant environmental regulation under a law of the Commonwealth or of a State or Territory in
Australia. The Directors have considered compliance with the National Greenhouse and Energy Reporting
Act 2007 which requires entities to report annual greenhouse gas emissions and energy use.
US Laws concerning the environment that affect or could affect our operations include, among others, the
Clean Water Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the National Environmental Policy Act, the Toxic Substances Control Act, regulations promogulated under
these Acts, and any other federal, state or local laws or regulations governing environmental matters. We
believe that we are in compliance with these laws and that future compliance will not materially affect our
earnings or competitive position.
A key focus of the Group’s product portfolio is the environmentally friendly nature of its products. With
this, the Group can ensure that the environmental impact by its customers products are minimal and
acceptable. Additionally, the Group’s manufacturing partners are selected in part based on their adherence
to established environmental standards as well as compliance with manufacturing standards such as ISO
9001.
For the period ended 30 June 2018, the Board is not aware of any breach of applicable environmental
regulations by the Company.
INFORMATION ON DIRECTORS
The names of the Directors holding office during the period ended 30 June 2018 are set out below,
together with details of Directors’ experience, qualifications, special responsibilities and other listed
company directorships during the past three financial years.
Ms Susan Thomas
Ms Thomas has been an independent Non-Executive Director of the Company since 11 December 2017. She
was appointed Chair of the Board of Directors on 9 May 2018.
Ms Thomas is a member of the Remuneration Committee and the Audit and Risk Committee.
Experience
Ms Susan Thomas has had a distinguished career in law, corporate finance and IT.
Ms Thomas began her career as a corporate lawyer with Freehill, Hollingdale & Page in Sydney. During
the 1990s, Ms Thomas established and grew FlexiPlan Australia, a successful investment administration
platform sold later to MLC. Sourcing strategic partners, growing administered funds to $1.7billion, as well
as overseeing over 140 staff, Ms Thomas’ achievements saw her acknowledged as an industry leader by
the financial planning community.
Ms Thomas is also a Senior Executive Coach at Foresight Global Coaching, working with c-suite executives.
23
ALEXIUM INTERNATIONAL GROUP LIMITED
DIRECTORS’ REPORT
Qualifications: LLB B.Com.
Other listed directorships during the past 3 financial years:
Company
Temple and Webster Limited
Commenced
February 2016
Fitzroy River Holdings Limited
November 2012
Royalco Resources Limited
March 2017
Ceased
Current
Current
Current
Residence:
Ms Thomas is an Australian resident and resides in Perth, Western Australia
Brigadier General Stephen Cheney
General Cheney has been an independent Non-Executive Director of the Company since 15 April 2015. He
was appointed Deputy Chair of the Board of Directors on 11 April 2018.
General Cheney is the Chair of the Remuneration Committee.
Experience:
General Cheney is the former Inspector General of the Marine Corps and Commanding General of Parris
Island Marine Base. He is also the former Deputy Executive Secretary to US Defense Secretary Dick
Cheney under President George H.W. Bush. General Cheney sat on Secretary of State John Kerry’s Foreign
Affairs Policy Board and is CEO of the Washington D.C. based policy group, American Security Project.
Qualifications: USMC (ret)
Other listed directorships during the past 3 financial years: N/A
Residence: Washington DC, USA
Mr Craig Metz
Mr Metz has been an independent Non-Executive Director of the Company since 1 December 2014.
Mr Metz is the Chair of the Audit and Risk Committee.
Experience:
Mr. Metz is a Partner in the Washington, DC Office of Nelson Mullins Riley and Scarborough LLP, an AM
LAW 100 Firm. He has more than 30 years of experience in Federal Legislative and Regulatory Affairs,
with a background in Defense and Information Technology, as well as in the representation of a variety of
corporate clients.
Mr. Metz served as the Chief of Staff to the Late Congressman Floyd Spence during his six-year
Chairmanship of the United States House of Representatives Armed Services Committee and he was
a Counsel to the United States Senate Labor and Human Resources Committee. He has also been
appointed to positions in the Executive Branch of the Federal Government, including, serving in the Senior
Executive Service.
24
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
Prior to entering private practice, Mr. Metz represented the Federal Government Relations interests of the
EMC Corporation, which was acquired by Dell in 2016, and is now Dell EMC. A native of South Carolina,
Mr. Metz is a member of the Bars of South Carolina and the District of Columbia. He is the recipient of
the Order of the Palmetto, the highest civilian honor of the State of South Carolina, as well as a number
of other recognitions from the South Carolina Military Department. Mr. Metz is a member of the Board of
Directors of the South Carolina Business Council, as well as a member of the National Defense Industrial
Association, the Washington International Trade Association, and the National Association of Corporate
Directors.
Qualifications: J.D. (Juris Doctor)
Other listed directorships during the past 3 financial years: N/A
Residence: Washington DC, USA
Ms Claire Poll
Ms Poll has been an independent Non-Executive Director of the Company since 11 December 2017.
Ms Poll is a member of the Remuneration Committee.
Experience:
Ms Claire Poll is an experienced corporate director having led, over the past 20 years, strategy and
corporate development for start-up technology companies through to large multi-billion dollar companies
in Australia, the United Kingdom (UK) and more recently the United States (US).
Ms Poll, who originally qualified as a solicitor in Western Australia, has worked as a non-executive director,
corporate executive and general counsel in private and public listed companies in the US, UK and
Australia in the areas of venture capital, mobile satellite communications, information technology and
biopharmaceuticals.
Ms Poll started her corporate career with Burns Philp & Company Limited, the diversified global company
involved in food manufacturing, shipping and general trading. Ms Poll is a founding executive of Nasdaq
and AIM listed Verona Pharma plc (AIM: VRP; Nasdaq: VRNA) and a non-executive director of Landgate.
Qualifications: BA B.JURIS. LLB ASIA
Ms Poll received a Bachelor of Law from the University of Western Australia and holds a post graduate
diploma in Applied Corporate Finance, M&A and Advanced Industrial Equity Analysis.
Other listed directorships in the past 3 financial years:
Company
Verona Pharma plc
Commenced
September 2006
Ceased
September 2016
Residence: Ms Poll is an Australian resident and resides in Perth, Western Australia.
25
ALEXIUM INTERNATIONAL GROUP LIMITED
DIRECTORS’ REPORT
Fmr Congresswoman Karen Thurman
Fmr Congresswoman Karen Thurman has been an independent Non-Executive Director of the Company
since 2 March 2017.
Ms Thurman is a member of the Audit and Risk Committee.
Experience:
Ms Thurman was elected to the US House of Representatives in 1992 and consecutively re-elected four
additional terms. Ms Thurman is an expert on healthcare, veteran’s affairs, and tax reform. Ms Thurman
served on the House Ways and Means Committee, where she fought for affordable prescription drugs,
increased access to health insurance, and tax relief. Congresswoman Thurman has also served on both
the House Agriculture Committee and the Committee on Government Reform & Oversight. Ms Thurman
continues to advocate on issues in D.C. and is well regarded on both sides of the House.
Qualifications: BA, Post Baccalaureate
Other listed directorships in the past 3 financial years: N/A
Residence: Washington DC, USA
Dr Robert Brookins
Dr Brookins was appointed as the Company’s Interim Chief Executive Officer on 31 May 2018 and was later
appointed as the Chief Executive Officer and Managing Director on July 13, 2018.
Experience:
Dr Brookins has more than 15 years of experience in organic synthesis and materials chemistry. He received
his Ph.D. from the University of Florida in the areas of synthesis and characterisation of conjugated poly-
electrolytes and polymers with an emphasis on developing new polymerisation methods. Upon completion
of his Ph.D., he worked at the US Air Force Research Laboratory at Tyndall AFB, FL where he developed
decontamination methods for chemical and biological threats and developed novel synthetic routes for
reactive and functional surfaces. In 2010, Dr Brookins joined Alexium where he and his team pioneered
new classes of flame retardants for key textile markets. Additionally, his research focuses on phase change
materials, particularly novel application methods and analytical tools.
Dr Brookins has been instrumental in the research and development of the Company’s innovative
technologies. Dr Brookins led the development and commercialisation of Alexium’s phase change material
(PCM) platform technologies and the Alexicool® product line, which is the foundation of the Company’s
recent success in sales to the bedding and top-of-bed markets.
Dr Brookins has, during his 8 years with the Company, been involved in multiple facets of the business,
including working with customers on product design and marketing, analysing markets to assess
opportunities, and planning for logistics and supply-chain management. In addition, Dr Brookins co-
invented Alexium’s flame retardant (FR) technologies for military uniforms and formaldehyde-free, flame
retardant products for cotton-based materials. Dr Brookins has been immersed in the operations and
strategy of the business and has gained significant experience working within the senior leadership team
of the Company.
26
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
Qualifications: Ph.D., M.A.E. B.A. B.Sc
Other listed directorships in the past 3 financial years: N/A
Residence: Greer, South Carolina, USA
Other Directors in office during the reporting period
Director
Office Held
Commenced
Ceased
Mr Gavin Rezos
Non-Executive Chair
2010
Dr Dirk Van Hyning
Mr Nicholas Clark
CEO & MD
CEO & MD
13 November 2017
18 March 2013
1 August 2017
9 May 2018
31 May 2018
Mr Gavin Rezos
Mr Rezos has extensive Australian and international investment banking experience and is a former
Investment Banking Director of HSBC Group with regional roles during his HSBC career based in London,
Sydney and Dubai. Mr Rezos has held Chief Executive Officer positions and executive directorships of
companies in the technology sector in Australia, the United Kingdom, the US and Singapore and was
formerly a Non-Executive Director of Iluka Resources Limited, a then ASX top 50 company, and of Rowing
Australia, the peak Olympic sports body for rowing in Australia from 2009 until 2014.
Dr Dirk Van Hyning
Before joining Alexium, Dr Van Hyning was with Milliken Research Corporation, a global innovation
company, where he began as a Research Engineer in 1999 and earned subsequent promotions to Project
Management Leader and Senior Development Engineer-Military and Protective Businesses. Dr Van
Hyning received his Ph.D. and M.S. in Chemical Engineering from the University of Illinois at Urbana-
Champagne and his B.S. in Chemical Engineering from North Carolina State University. Dr Van Hyning
has received several honours and awards, including the Hans Kuhn Award for Outstanding Technology
Commercialisation and holds four patents.
Mr Nicholas Clark
Mr Clark was appointed to the board on 18 March 2013. Mr Clark originally commenced with Alexium
International as the Group’s CFO and Company Secretary until March 2013. Mr Clark has extensive
experience in executive management, mergers and acquisitions globally. He has held roles such as Deputy
Head, Mergers and Acquisitions, Head of Foreign Investments, and Head of Commercial and Contract
Services, in particular with CITIC, one of China’s largest resource groups.
COMPANY SECRETARY
Ms Maja McGuire was appointed Company Secretary on 27 February 2018, replacing Mr Kevin Kye. Mrs
McGuire combines her company secretarial duties with her role as General Counsel and brings to the role
10 years’ experience in the provision of corporate and compliance advice, including working with listed
companies as general counsel, company secretary and in top tier private practice. She holds a BComm
and LLB from the University of Western Australia.
27
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors and of each Board committee held during
the reporting period ended 30 June 2018, and the number of meetings attended and number of meetings
applicable based on appointment date for each Director were:
Directors
Board of Directors
Audit &
Risk Committee
Remuneration
Committee
Ms Susan Thomas
Brigadier General
Stephen Cheney
Ms Claire Poll
Mr Craig Metz
Ms Karen Thurman
Mr Gavin Rezos
Dr Dirk Van Hyning
Mr Nicholas Clark
7/7
10/10
7/7
10/10
10/10
7/7
4/5
1/1
3/3
4/4
2/2
5/5
5/5
n/a
n/a
n/a
0/0
2/2
0/0
2/2
2/2
n/a
n/a
n/a
The Board and committees meet regularly on an informal basis in addition to the above meetings.
28
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT - REMUNERATION REPORT
REMUNERATION REPORT - AUDITED
The remuneration report is set out under the following main headings:
A. Key Management Personnel
B. Remuneration Policy
C. Remuneration Governance
D. Details of Remuneration
E. Service Agreements
F. Share-based Compensation
G. Additional Disclosures Relating to Key Management Personnel
H. Loans to Key Management Personnel
The information provided in this Remuneration Report has been audited as required under section
308(3C) of the Corporations Act (Cth).
A. Key Management Personnel
For the purposes of this report personnel deemed Key Management Personnel (“KMP”) at any time during
the reporting period ended 30 June 2018 are:
Name
Position
Ms Susan Thomas
Non-Executive Chair – appointed 9 May 2018
Non-Executive Director – appointed 11 December 2017
Brigadier General
Stephen Cheney
Non-Executive Director
Mr Craig Metz
Non-Executive Director
Ms Karen Thurman
Non-Executive Director
Ms Claire Poll
Non-Executive Director – appointed 11 December 2017
Dr Robert Brookins
Interim Chief Executive Officer – appointed Chief Executive Officer and
Mr Aaron Krech
Chief Financial Officer
Managing Director on 13 July 2018
Dr Dirk Van Hyning
Former Chief Executive Officer and Managing Director – resigned 31 May 2018
Mr Gavin Rezos
Former Non-Executive Chairman – resigned 9 May 2018
Mr Nicholas Clark
Former Executive Director – resigned 1 August 2017
29
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT - REMUNERATION REPORT
B. Remuneration Policy
The objective of the Company’s remuneration framework is to ensure reward for performance is
competitive and appropriate for the results delivered and set to attract and retain suitably qualified and
experienced candidates. The Company is in the process of conducting a review of the remuneration
framework with a goal of ensuring that remuneration is aligned with performance and the creation of
value for shareholders. The Group’s remuneration framework aims to ensure that:
• Rewards reflect the competitive global market in which the group operates;
•
Incentive remuneration is linked to KPI’s, which are designed to encourage behaviours that will lead to
short, medium, and long-term success.
• Rewards to executives are linked to the creation of value to shareholders;
• Executives are rewarded for both financial and non-financial performance; and
• Remuneration arrangements ensure equity between executives and facilitate the deployment of
human resources.
The Board seeks independent advice on remuneration policies and practices. In accordance with best
practice corporate governance, the structure of Non-Executive and Executive remuneration is separate
and distinct. Remuneration Committee responsibilities are carried out by General Stephen Cheney, Ms
Claire Poll and Ms Susan Thomas.
Non-Executive Director Remuneration Policy
Fees and payments to the Non-Executive Directors reflect the demands which are made on and the
responsibilities of the Directors. The Non-Executive Director’s fees and payments are reviewed by the
remuneration committee to ensure they are appropriate and in line with the market. Non-Executive
Directors receive a fixed fee for service.
The Non-Executive Directors’ fees are determined within an aggregate director’s’ fee pool limit, which is
periodically recommended for approval by shareholders. The maximum currently stands at USD375,000
per annum and was approved by shareholders at the 2016 Annual General Meeting.
No retirement benefits are provided other than compulsory superannuation.
Executive Remuneration Policy
The Company’s Executive Director and other Executives remuneration packages contain the following key
elements:
• Primary benefits – base salary, short-term incentives, superannuation or pension contributions and in
the case of US based executives a health benefit plan.
• Equity – performance rights and shares under the Company’s Performance Rights Plan and Incentive
Share Plan (as approved by shareholders at the 2016 Annual General Meeting).
The combination of these components comprises the Executive Directors’ and Executive’s total
remuneration.
External remuneration information provides benchmark information to ensure remuneration is set to
reflect the market for a comparable role. Base fees are reviewed annually to ensure the level is competitive
with the market. There is no guaranteed salary increase included.
30
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT - REMUNERATION REPORT
C. Remuneration Governance
The Remuneration Committee is a committee of the Board. It is primarily responsible for:
• Reviewing and approving the executive remuneration policy to enable the Company to attract and
retain Executives and Directors who will create value for shareholders;
• Ensuring that the executive remuneration policy demonstrates a clear relationship between key
executive performance and remuneration;
• Recommending to the Board the remuneration of Executive and Non-Executive Directors;
• Fairly and responsibly rewarding Executives having regard to the performance of the group, the
performance of the Executive and the prevailing remuneration expectations in the market;
• Reviewing the Company’s recruitment, retention and termination policies and procedures for senior
management;
• Reviewing and approving the remuneration of direct reports to the Chief Executive Officer/Managing
Director, and as appropriate other senior executives; and
• Reviewing and approving any equity-based plans and other incentive schemes.
The Corporate Governance Statement provides further information on this Committee.
31
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT - REMUNERATION REPORT
D. Details of Remuneration
Details of the remuneration of the KMP of the Group is set out below:
Short-term Benefits
Other Benefits
2018
Non-Executive
Directors
Salary and
Fees
Medical
benefits
Other
Post
employment
super-
annuation
Share-based
Payments
Performance
Rights
Short Term
Incentive
Plan
Long Term
Incentive
Plan
Total
Ms Susan Thomas
33,599
- 60,301 (5)
Mr C Metz
Brig. Gen. S Cheney
Ms K Thurman
Ms Claire Poll
Mr G Rezos (1)
Total
Non-Executive
Directors
Executive Directors
57,259
53,718
54,228
27,542
-
-
-
-
135,726
11,436
-
-
-
-
-
362,072
11,436
60,301
Mr N Clark(2)
15,000
2,403
-
-
15,000
2,403
377,072
13,839
60,301
Total Executive
Directors
Total Directors
Executives
Dr R Brookins
186,672
9,064
12,388 (4)
Mr A Krech
184,167
4,630
1,676 (4)
Dr D Van Hyning (3)
278,771
14,918 23,333 (3)
Total Executives
649,610
28,612
37,397
Total Directors and
Executives
1,026,682
42,451
97,698
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,799
7,813
-
20,612
20,612
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93,900
57,259
53,718
54,228
27,542
147,162
433,809
17,403
17,403
451,212
220,923
198,286
317,022
736,231
1,187,443
(1) Mr Rezos served as Executive Chair in the period ended 30 June 2017 and transitioned to Non-Executive Chair on 1 July 2017.
(2) Resigned 1 August 2017.
(3) During the year Dr Van Hyning was a director from 13 November 2017 until resignation on 31 May 2018. He is to be paid seven months’ severance which will cease on 31
December 2018.
(4) Paid leave benefit earned in the period ended 30 June 2018.
(5) Executive remuneration as permitted under section 13.9 of the Constitution was payable to Susan Thomas for services performed in addition to her role as Non-Executive
Chair on behalf of the Company. This work was required during this transition of the Company in relation to business plans, review of the Company’s skills matrix, and
development of new financial models. These fees are in line with market comparable rates and due to the short-term nature of this work, the Board were of the view that it was
more appropriate to manage through additional fees rather than create an Executive Chair position.
32
ALEXIUM INTERNATIONAL GROUP LIMITED
DIRECTORS’ REPORT - REMUNERATION REPORT
DIRECTOR’S REPORT
Short-term benefits
Other Benefits
2017
Non-Executive
Directors
Salary and
fees
Medical
benefits
Other
Post
employment
super-
annuation
Share-based
payments
Performance
rights
Short Term
Incentive
Plan
Long
Term
Incentive
Plan
Total
Mr G Rezos(1)
300,000
10,757
Mr C Metz
61,000
Brig. Gen. S Cheney
56,000
Ms K Thurman
20,333
Mr C Smith Gander(3)
37,907(3)
-
-
-
-
-
-
-
-
3,588(3)
-
-
-
-
-
-
131,167(4) Waived
Nil
441,924
-
-
-
-
-
-
-
-
-
61,000
56,000
20,333
41,495
-
-
-
-
-
475,240
10,757
3,588
131,167
620,752
Mr N Clark (2)
447,917
14,658
144,100(6)
197,987(5) Waived
Nil
804,662
447,917
14,658
144,100
197,987
923,157
25,415
144,100
3,588
329,154
-
-
Total
Non-Executive
Directors
Executive Directors
Total Executive
Directors
Total Directors
Executives
Dr D V Hyning
207,500
13,968
7,843(9)
Mr R Brookins
153,733
8,412
5,512(9)
Mr A Krech
150,000
4,674
8,402(9)
Total Executives
511,233
27,054
21,757
-
-
-
-
-
-
-
-
Total Directors and
Executives
1,434,390
52,469
165,857
3,588
329,154
-
-
-
-
-
-
-
-
-
-
-
-
-
-
804,662
1,425,414
229,311
167,657
163,076
560,044
1,985,458
(1) Mr Rezos served as Executive Chair in the 2017 financial year and transitioned to Non-Executive Chair on 1 July 2017.
(2) Resigned 1 August 2017.
(3) Resigned 13 February 2017; all benefits paid are through the date of resignation.
(4) On 21 November 2016, shareholders approved the issue of 285,713 shares to Mr Gavin Rezos in lieu of salary.
(5) On 21 November 2016, shareholders approved the issue of 431,264 shares to Mr Nicholas Clark in lieu of salary; At 30 June 2017, these shares have not yet been issued and
were subsequently forfeited.
(6) Includes legal, motor vehicle allowance and relocation expenses reimbursement in accordance with the executive services contract executed in 2014.
(7) Board agreed to waive any STI award in full, given the negative TSR for the year.
(8) Minimum starting 50% threshold was not achieved, and no award was made.
(9) Paid leave benefit earned in the current period.
33
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT - REMUNERATION REPORT
E. Service Agreements
On appointment, the Non-Executive Directors enter into an agreement with the Company in the form of a
letter of appointment. The letter outlines the Board’s policies and terms, including remuneration relevant
to the office of director.
The Company has also entered into service agreements with other executives as noted below, which
contain standard terms and conditions for agreements of this nature, including confidentiality restraint
on competition and intellectual property provisions. These agreements may be terminated by notice by
either party, or earlier in the event of certain breaches of the terms and conditions. Specific terms and
conditions of the service agreements of the Key Management Personnel at the end of the financial period
are summarised below:
Dr Robert Brookins, Interim Chief Executive Office
– Term: the initial term of the Service Agreement is 12 months commencing on 1 August 2011 and
thereafter on 6 months’ notice from either party.
– Place of Work: South Carolina, United States of America for the term of employment.
– Salary: A base salary of US$286,000 year, to be reviewed annually.
– Incentive: Potential short-term and long-term incentive opportunities as determined by the Board of
Directors.
– Termination: Mr Brookins may terminate the Service Agreement without cause upon giving 6 months
written notice to the Company. The Company may at its sole discretion terminate the employment
without cause by giving 6 months written notice to Mr Brookins or make a payment of 6 months’ salary
in lieu of notice.
Aaron Krech, Chief Financial Officer
– Term: Mr Krech’s service commenced on 8 December 2014.
– Place of Work: South Carolina, United States of America for the term of employment.
– Salary: A base salary of US$190,000 per year, to be reviewed annually.
–
Incentive: Potential short-term and long-term incentive opportunities as determined by the Board of
Directors.
– Termination: Mr Krech and the Company may, at their sole discretion, terminate the Service
Agreement without cause.
34
ALEXIUM INTERNATIONAL GROUP LIMITED
DIRECTORS’ REPORT - REMUNERATION REPORT
F. Performance Rights
The Directors and other KMPs of the Company were issued or are entitled to the following share-based
remuneration during the reporting period for the year:
(1) Performance Rights
113,887 Performance Rights were granted (2017: Nil) with a value of $113,887 (2017: $Nil); 99,284
performance rights with a value of $93,275 were forfeited during the period due to service
commitments not being met
Performance rights
The valuation of performance rights granted and vested as remuneration of the Key Management
Personnel of the Group during the reporting periods is detailed below:
2018 US$
2017 US$
Name
Granted during the
year
Value of performance
rights exercised in
year
Forfeited in year
Granted
during the
year
Value of
performance
rights
exercised in
year
Forfeited in year
Non-Executive
Directors
Ms S Thomas
Mr Craig Metz
Brig. Gen. Stephen
Cheney
Ms K Thurman
Ms C Poll
Mr G Rezos
Mr C Smith-Gander
Total
Non-Executive
Directors
Non-Executive
Directors
Mr N Clark
Total Executive
Directors
Total Directors
Executives
Dr R Brookins
Mr A Krech
Dr D Van Hyning
TOTAL
-
-
-
-
-
-
-
-
-
-
-
-
12,799 (1)
7,813 (1)
93,275 (2)
113,887
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(93,275)
(93,275)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Performance rights issued have a performance period ending 31 December 2018.
(2) 99,284 performance rights ($93,275) forfeited during the period due to service term requirements not being met.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(117,019)
-
(117,019)
(187,231)
(187,231)
(304,250)
-
-
-
(304,250)
35
ALEXIUM INTERNATIONAL GROUP LIMITED
DIRECTORS’ REPORT - REMUNERATION REPORT
The number of performance rights in the Company held during the financial year by each KMP, including
their personally related parties, is set out below. 113,887 performance rights were granted to Executives
during the reporting year as compensation (2017: Nil).
2018- Number of Performance Rights
Name
Balance at start
of year
Performance
Rights
Granted during
year as
remuneration
Vested and
Converted to
Shares during
year
Forfeited during
year
Performance
Rights
Balance at end of year
Performance Rights
Number
Number
Number
Number
Number
Non-Executive
Directors
Ms S Thomas
Mr Craig Metz
Brig. Gen. Stephen
Cheney
Ms K Thurman
Ms C Poll
Mr G Rezos
Total
Non-Executive
Directors
Executive Directors
Mr N Clark
Total Executive
Directors
Total Directors
Executives
Dr R Brookins
Mr A Krech
Dr D Van Hyning
Total Executives
Total Directors and
Executives
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41,164(1)
25,128(1)
99,284(2)
165,576
165,576
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
99,284
99,284
99,284
(1) Performance rights issued have a performance period ending 31 December 2018.
(2) 300,000 (99,284 probability weighted at the date of issue) performance rights ($93,275) forfeited during the period due to service term requirements not being met.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36
ALEXIUM INTERNATIONAL GROUP LIMITED
DIRECTORS’ REPORT - REMUNERATION REPORT
Performance rights details
Number of per-
formance rights
granted during
2018
Grant date
Vesting date
Expiry date
Fair value per right at
grant date
AUD$
Name
Executives
Dr R Brookins
146,000
16/11/2017
31/12/2018
16/11/2020
Mr A Krech
155,000
16/11/2017
31/12/2018
16/11/2020
Dr D Van Hyning
300,000
16/11/2017
31/12/2018
16/11/2020
0.42
0.42
0.42
The performance rights had vesting criteria based on the following performance and market conditions:
• Share price appreciation
• Top line revenue increase over CY2017
• Bottom line EBITDA improvement over
CY2017
• Returns as a percentage of items sold
• New products developed in CY2018
• Partnerships formed in CY2018 (license,
distributorship, etc.)
• Percentage of new products launched on
schedule
• Number of new products developed
• Number of new patent applications filed
• Adherence to budget
• Cash flow management
• United States quotation
The company is in the process of evaluating key performance indicators for key management personnel to
reallocate rights to KMP with the goal to reallocate performance rights incentives that reflect the strategic
direction of the Group.
G. Share-based Compensation
The Directors and other KMPs of the Company were issued or are entitled to the following share-based
remuneration during the reporting period:
(1) Options
Nil Options (2017: Nil) with a value of $Nil (2017: $Nil).
(2) Shares
Nil shares (2017: 716,977) with a value of $Nil in lieu of salary (2017: $329,154).
37
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT - REMUNERATION REPORT
Options
No options were granted to directors during the 2018 or 2017 financial years. The movement in the number
of options held by the Key Management Personnel, including their personally related parties, are set out
below:
2018
Name
Balance at
start of
year
Granted
during year
as
remuneration
Exercised
during year
Other
changes
during year
Balance at
end of year
Options
Vested and
exercisable
at end of year
Number
Number
Number
Number
Number
Number
Non-Executive
Directors
Ms S Thomas
Mr Craig Metz
Brig. Gen. Stephen
Cheney
Ms K Thurman
Ms C Poll
Mr G Rezos
Total
Non-Executive
Directors
Executive Directors
Mr N Clark
Total Executive
Directors
-
750,000
750,000
-
-
-
1,500,000
-
-
Total Directors
1,500,000
Executives
Dr R Brookins
Mr A Krech
Dr D Van Hyning
Total Executives
-
-
-
-
Total Directors and
Executives
1,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
750,000
750,000
-
-
-
-
750,000
750,000
-
-
-
1,500,000
1,500,000
-
-
-
-
1,500,000
1,500,000
-
-
-
-
-
-
-
-
1,500,000
1,500,000
38
ALEXIUM INTERNATIONAL GROUP LIMITED
DIRECTORS’ REPORT - REMUNERATION REPORT
Shares
The value of shares issued or agreed to be issued during the year was $Nil (2017: $329,154) which was
calculated based on issue price of AUD$0.612 and was approved at the 2016 Annual General Meeting on 21
November 2016. The issue price represents volume weighted average closing price of shares on ASX in the
five trading days to 5 October 2016, prior to 2016 Notice of Annual General Meeting.
The movement in the number of shares held by the Key Management Personnel, including their personally
related parties, are set out below:
2018
Name
Balance at
start of
year
Ordinary
Shares
Granted
During the
Year as
Remuneration
in lieu of
salary
Received
during year
on
conversion
of
performance
rights
Received
during year
on exercise
of options
Other
changes
during year
Ordinary
Shares
Balance at
end of year
Ordinary
Shares
Number
Number
Number
Number
Number
Number
Non-Executive
Directors
Ms S Thomas
Mr Craig Metz
-
-
Brig. Gen. Stephen
Cheney
43,000
Ms K Thurman
Ms C Poll
-
-
Mr G Rezos
26,100,000
Total
Non-Executive
Directors
Executive Directors
26,143,000
Mr N Clark
9,060,070
Total Executive
Directors
9,060,070
Total Directors
35,203,070
Executives
Dr R Brookins
2,774,500
Mr A Krech
Dr D Van Hyning
80,000
790,000
Total Executives
3,644,500
Total Directors and
Executives
38,847,570
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
285,715(1)
28,572(1)
28,572(1)
14,286(1)
28,572(1)
285,715
28,572
71,572
14,286
28,572
585,715(1)
26,685,715(2)
971,432
27,114,432
(5,880,070)
3,180,000(3)
(5,880,070)
(4,908,638)
3,180,000
30,294,432
387,740(4)
-
14,286(1)
402,026
3,162,240
80,000
804,286(2)
4,046,526
(4,506,612)
34,340,958
(1) Director’s were allotted shares in December 2017 at AU$0.35 per share. This placement to Directors was approved by shareholders in May 2018.
(2) As at resignation date.
(3) As at 30 June 2018.
(4) 581,240 shares were transferred to Dr Brookins and related parties and 193,500 shares were sold on market during the reporting period.
39
ALEXIUM INTERNATIONAL GROUP LIMITED
DIRECTORS’ REPORT - REMUNERATION REPORT
H. Additional Disclosures Relating to Key Management Personnel
The interests of the Directors and other KMP of the Group in the shares and options of Alexium
International Group Limited is set out below.
Name
No. of ordinary shares
No. of performance
rights
No. of options over
ordinary shares
Ms Susan Thomas
Mr Craig Metz
Brig. Gen. Stephen Cheney
Ms Karen Thurman
Ms Claire Poll
Dr Robert Brookins
Mr Aaron Krech
285,715
28,572
71,572
14,286
28,575
3,162,240
80,000
I. Loans to Key Management Personnel
-
-
-
-
-
146,000
155,000
-
750,000
750,000
-
-
-
-
No loans have currently been provided to KMP of the Group.
THIS IS THE END OF THE AUDITED REMUNERATION REPORT
40
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
SHARES UNDER OPTION/WARRANT
As at the date of this report there were 2,400,000 unissued ordinary shares under option
(2017:13,491,626). Details of these options are as follows:
Date Options Granted
Expiry Date
1 October 2015
4 November 2016
4 November 2016
4 November 2016
30 September 2020
4 November 2019
4 November 2019
4 November 2019
Excercise price of
shares
No. under options
$0.75
$0.75
$1.25
$1.75
1,500,000
300,000
300,000
300,000
2,400,000
During the reporting period, 4,255,319 warrants were agreed to be issued but have not yet been issued to
GPB Debt Holdings II, LLC. These warrants have an exercise price of the lower of AU$0.35 or any price at
which Alexium issues securities to the public. These warrants have an expiry date of 28 March 2023. GPB
has the option for a cashless exercise.
No option/warrant holder has any right under the options/warrants to participate in any other share issue
of the Company or any other entity. The options/warrants are exercisable at any time after vesting and on
or before the expiry date.
Refer to Note 16 for details of the movements of the options during the year and ASX announcements for
options exercised subsequent to the year end and to the date of this report.
The group has 1,324,000 performance rights on issue (2017: Nil). These rights have been allocated to staff
based on the rules set forth in the performance rights plan.
INSURANCE OF OFFICERS
During the reporting period, the Group paid a premium in respect of a contract insuring the Directors and
Officers of the Company against a liability incurred as a Director or Officer to the extent permitted by the
Corporations Act 2001 (Cth). Due to a confidentiality clause in the policy, the amount of the premium has
not been disclosed.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that
may be brought against the officers in their capacity as officers of the Company, and any other payments
arising from liabilities incurred by the officers in connection with such proceedings, other than where such
liabilities arise out of conduct involving a willful breach of duty by the officers or the improper use by the
officers of their position or of information to gain advantage for themselves or someone else or to cause
detriment to the Company. It is not possible to apportion the premium between amounts relating to the
insurance against legal costs and those relating to other liabilities.
41
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ REPORT
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 (Cth) for leave
to bring proceedings on behalf of the economic entity, or to intervene in any proceedings to which the
entity is a party, for the purpose of taking responsibility on behalf of the entity for all or part of those
proceedings.
No proceedings have been brought or intervened in or on behalf of the entity with leave of the Court
under section 237 of the Corporations Act 2001 (Cth).
ROUNDING OFF AMOUNTS
Amounts in the financial statements and Directors’ report are presented in US dollars and all values are
rounded to the nearest dollar, unless otherwise stated.
INDEMNITY OF AUDITORS
The Company has agreed to indemnify their auditors, Grant Thornton Audit Pty Ltd, to the extent
permitted by law, against any claim by a third party arising from the Company’s breach of their agreement.
The indemnity stipulates that Alexium will meet the full amount of any such liabilities including a
reasonable amount of legal costs.
NON-AUDIT SERVICES
During the period, no non-audit services were provided by the Company’s auditor, Grant Thornton Audit
Pty Ltd.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 (Cth) is attached.
This report is made in accordance with a resolution of the Directors.
Susan Thomas
Chair
Dated 31 August 2018
42
ALEXIUM INTERNATIONAL GROUP LIMITED
DECLARATION OF INDEPENDENCE
Central Park, Level 43
152-158 St Georges Terrace
Perth WA 6000
Correspondence to:
PO Box 7757
Cloisters Square
Perth WA 6850
T +61 8 9480 2000
F +61 8 9322 7787
E info.wa@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Alexium International Group Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Alexium
International Group Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there
have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
M J Hillgrove
Partner – Audit & Assurance
Perth, 31 August 2018
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
43
ALEXIUM INTERNATIONAL GROUP LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEAR ENDED 30 JUNE 2018
Revenue
Cost of sales
Gross Profit
Other income
Administrative expenses
Sales and marketing expenses
Research and development costs
Occupancy expenses
Other expenses
Loss before finance costs
Interest expense
Gain on debt extinguishment
Gain/(Loss) on embedded derivative
Interest received
Total finance costs
Loss before tax
Tax expense
Loss for the year after tax
Note
3
3
4
15
15
3
7
Consolidated
2018
US$
2017
US$
11,911,816
17,929,361
(9,556,874)
(17,688,486)
2,354,942
240,875
-
159,000
(3,171,158)
(5,022,655)
(1,237,986)
(942,052)
(724,727)
(1,415,970)
(453,126)
(1,218,141)
(439,598)
(1,134,183)
(4,450,196)
(8,554,583)
(2,297,626)
(449,342)
396,591
2,369,993
20,119
-
(142,073)
9,075
489,077
(582,340)
(3,961,119)
(9,136,923)
-
(3,961,119)
-
(9,136,923)
Other comprehensive income- Exchange differences on
translation of foreign operations which will not be reclassified
subsequently to profit or loss
Total comprehensive loss for the year
694,044
(82,195)
(3,267,075)
(9,219,118)
Loss for the year attributable to members of the group
(3,961,119)
(9,136,923)
Total comprehensive loss for the year attributable to
members of the group
(3,267,075)
(9,219,118)
Basic loss per share (cents)
Diluted loss per share (cents)
8
8
(1.22)
(1.22)
(3.03)
(3.03)
This consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes to the financial statements.
44
ALEXIUM INTERNATIONAL GROUP LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018
Consolidated
2018
2017
2016
Restated to
Restated to
Note
US$
US$
US$
Current Assets
Cash and cash equivalents
20(a)
Trade and other receivables
Inventories
Other current assets
Total Current Assets
Non-Current Assets
Other financial assets
Property, plant and equipment
Intangible assets
Total Current Assets
Total Assets
Current Liabilities
Trade and other payables
Deferred income
Borrowings
Other liabilities
Total Current Liabilities
Non-Current Liabilities
Trade and other payables
Deferred income
Total Non-Current Liabilities
Total Liabilities
Net Assets / Liabilities
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
9
10
11
12
13
14
15
15
15
16
18
19
10,641,763
513,800
1,516,548
69,876
12,741,987
20,788
1,955,519
761,150
2,737,457
15,479,444
438,793
-
243,667
-
682,460
7,180,965
630,983
7,811,948
2,620,759
1,097,489
1,607,164
77,727
5,403,139
27,310
1,876,857
110,102
2,014,269
7,417,408
1,406,563
24,947
4,499,674
202,735
6,133,919
302,888
811,951
1,114,839
8,494,408
7,248,758
8,347,728
142,690
1,232,727
67,616
9,790,761
27,599
607,732
110,457
745,788
10,536,549
2,096,257
13,665
28,667
-
2,138,589
13,802
-
13,802
2,152,391
6,985,036
168,650
8,384,158
54,367,832
6,423,821
45,833,450
4,188,853
43,657,181
5,443,707
(53,806,617)
(49,853,653)
(40,716,730)
6,985,036
168,650
8,384,158
This consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes to the financial statements.
45
ALEXIUM INTERNATIONAL GROUP LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
30 JUNE 2018
Contributed
equity
US$
Options
Reserve
US$
Performance
Rights
Reserve
US$
Foreign
Currency
Reserves
US$
Accumulated
losses
US$
Total
US$
45,833,450
5,856,738
619,640
(2,287,525)
(49,853,653)
168,650
-
-
-
-
(3,961,119)
(3,961,119)
(1,494,807)
(221,770)
(21,489)
2,423,955
8,15
694,044
(1,494,807)
(221,770)
(21,489)
2,423,955
(3,952,964)
(3,267,075)
Balance at 1 July
2017
Loss for the year
Foreign currency
transition
Total
comprehensive
loss for the year
Transactions with
owners
in their capacity as
owners:
Issued capital
10,106,575
Capital raising cost
(468,358)
Options exercised
338,244
Share-based
payment in
lieu of salary
52,728
Performance rights
-
-
-
-
-
-
-
-
-
-
54,272
-
-
-
-
-
-
-
-
-
-
10,106,575
(468,358)
338,244
52,728
54,272
Balance at 30 June
2018
54,367,832
5,634,968
652,423
136,430
(53,806,617)
6,985,036
This consolidated statement of changes in equity should be read in conjunction
with the accompanying notes to the financial statements.
46
ALEXIUM INTERNATIONAL GROUP LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
30 JUNE 2018
Contributed
equity
US$
Options
Reserve
US$
Performance
Rights
Reserve
US$
Foreign
Currency
Reserves
US$
Accumulated
losses
US$
Total
US$
43,657,181
5,590,802
601,036
(748,131)
(40,716,730)
8,384,158
-
-
-
-
(9,136,923)
(9,136,923)
1,265,046
173,549
18,604 (1,539,394)
-
(82,195)
1,265,046
173,549
18,604 (1,539,394)
(9,136,923)
(9,219,118)
Balance at 1 July
2016
Loss for the year
Foreign currency
transition
Total
comprehensive
loss for the year
Transactions with
owners
in their capacity as
owners:
Issued capital
Options exercised
509,607
-
Share-based
payment
-
92,387
Shares issued in lieu
of salary
401,616
-
-
-
-
-
-
-
-
-
-
509,607
92,387
401,616
Balance at 30 June
2018
45,833,450
5,856,738
619,640 (2,287,525)
(49,853,653)
168,650
This consolidated statement of changes in equity should be read in conjunction
with the accompanying notes to the financial statements.
47
ALEXIUM INTERNATIONAL GROUP LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
30 JUNE 2018
Cash flow from operating activities
Receipts from customers and other income
Payments to suppliers and employees
Interest received
Interest and other costs of finance paid
Goods & services tax received from ATO
Consolidated
Note
2018
US$
2017
US$
12,437,167
17,060,440
(16,881,341)
(26,568,123)
3
20,119
9,075
(1,231,830)
(386,472)
97,195
86,156
Net cash flows (used in) operating activities
20(b)
(5,558,690)
(9,798,924)
Cash flows from investing activities
Purchase of property, plant and equipment
(41,797)
(1,204,410)
Purchase of other non-current assets
Proceeds from disposal of property, plant and equipment
Payments for development costs
-
1,500
(662,653)
(16,227)
410
-
Net cash flows (used in) investing activities
(702,950)
(1,220,227)
Cash flows provided by financing activities
Proceeds from borrowings
Transaction cost related to loans and borrowings
Repayment of borrowings
Proceeds from exercise of options
Proceeds from issue of ordinary shares
Transaction costs related to issue of shares
9,600,000
5,000,000
(453,979)
(5,178,869)
360,677
10,520,333
(521,978)
(94,450)
(126,411)
498,993
-
-
Net cash flows provided by financing activities
14,326,184
5,278,132
Net increase / (decrease) in cash and cash equivalents
8,064,544
(5,741,019)
Cash and cash equivalents at beginning of year
Effect of exchange rate changes on cash and cash equivalents
2,620,759
(43,540)
8,347,728
14,050
Cash and cash equivalents at end of year
20(a)
10,641,763
2,620,759
This consolidated statement of cash flows should be read in conjunction with the
accompanying notes to the financial statement.
48
ALEXIUM INTERNATIONAL GROUP LIMITED
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
1. CORPORATE INFORMATION
The consolidated financial statements of Alexium International Group Limited and its subsidiaries
(collectively, the Group) for the year ended 30 June 2018 were authorised for issue in accordance with a
resolution of the directors on 31 August 2018. Alexium International Group Limited (the Company or the
Parent) is a company limited by shares incorporated and domiciled in Australia, whose shares are publicly
traded on the Australian Securities Exchange and NASDAQ International. These financial statements
include the consolidated financial statements and notes of Alexium International Group Limited and
controlled entities (‘Group’) and are presented in United States Dollars.
These financial statements and notes represent a change in presentation currency from the Australian
Dollar to the US Dollar. This change aligns the company’s financial reporting with the nature of the
business operations which primarily occur in the United States. This financial report, the comparative
period within, and all future financial reports, will therefore be presented in US Dollars.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
These financial statements are general purpose financial statements that have been prepared in
accordance with Accounting Standards, Australian Accounting Interpretations, other authoritative
pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 (Cth).
The Group is a for-profit entity for the purpose of preparing the financial statements.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in
financial statements containing relevant and reliable information about transactions, events and conditions
to which they apply. Compliance with Australian Accounting Standards ensures that the financial
statements and notes also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board. Material accounting policies adopted in the preparation of the
financial statements are presented below. They have been consistently applied unless otherwise stated.
The financial statements have been prepared on an accruals basis and are based on historical costs
modified, where applicable by the measurement at fair value of selected non-current assets, financial
assets and financial liabilities. The presentation is United States Dollars to correspond with the primary
currency that influences sales price of goods, labour, materials, costs of providing goods for sale, and
interest expense paid on the Company’s debt.
Separate financial statements for the Company as an individual entity are no longer presented as the
consequence of a change to the Corporations Act 2001 (Cth), however, required financial information for
the Company as an individual entity is included in Note 22.
These financial statements and notes represent a change in presentation currency from the Australian
Dollar to the US Dollar and as such is considered a change in accounting policy applied retrospectively.
This change aligns the company’s financial reporting with the nature of the business operations which
primarily occur in the United States. This financial report, the comparative period within, and all future
financial reports, will therefore be presented in US Dollars.
49
ALEXIUM INTERNATIONAL GROUP LIMITED
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(b) New and amended standards adopted by the Group in this financial report
There have been no new and revised Standards and Interpretations issued by the Australia Accounting
Standards Board (AASB) adopted by the Group that are relevant to its operations and effective for the
current reporting period.
(c) Impact of standards issued but not yet applied by the Group
New and revised accounting standards and amendments that are currently issued for future reporting
periods that are relevant to the Group include:
AASB 9 Financial Instruments
AASB 9 introduces new requirements for the classification and measurement of financial assets and
liabilities and includes a forward-looking ‘expected loss’ impairment model on credit losses. These
requirements improve and simplify the approach for classification and measurement of financial assets
compared with the requirements of AASB 139. The effective date is for annual reporting periods beginning
on or after 1 January 2018.
The standard is required to be applied retrospectively to comparative periods in accordance with AASB
108. Subsequent to initial recognition, financial assets and liabilities are measured at:
• Amortised cost
• Fair value through other comprehensive income (FVOCI)
• Fair value through profit or loss (FVPL)
Further, AASB 9 introduces a new impairment model based on expected credit losses. This model makes
use of more forward-looking information and applies to all financial instruments that are subject to
impairment accounting.
The company has undertaken a detailed assessment of the standard and determined that when this
standard is first adopted for the year ending 30 June 2019, there will be no material impact on the
transactions and balances recognised in the financial statements.
AASB 15 Revenue from Contracts with Customers
AASB 15 replaces AASB 118: Revenue, AASB 111 Construction Contracts and some revenue-related
Interpretations. The introduction of AASB 15 is intended to replace existing accounting guidance and
introduce a comprehensive revenue recognition model aimed at enhancing comparability of revenue
recognition practices across entities, industries, jurisdictions and capital markets. In summary, AASB 15:
• establishes a new revenue recognition model;
• changes the basis for deciding whether revenue is to be recognised over time at a point in time;
• provides a new and more detailed guidance on specific topics (e.g. multiple element arrangements,
variable pricing, rights of return and warranties); and
• expands and improves disclosures about revenue.
50
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
The Company is in the processes of evaluating which is the most appropriate adoption method, whether
the full retrospective or the modified retrospective. Presently, the Company anticipates using the modified
retrospective transition method. Under the modified retrospective method, the cumulative impact (if any)
will be recognised at the date of initial application (July 1, 2018).
The company has undertaken a detailed assessment of the standard and determined that when this
standard is first adopted for the year ending 30 June 2019, there will be no material impact on the
transactions and balances recognised in the financial statements.
While the approach under AASB 15 is significantly different than the existing literature, due to the nature
of the Company’s business, management has identified no significant differences that will impact the
ultimate timing of revenue recognition at the Company. Management recognises that the implementation
efforts are still underway, and additionally, that contracts / arrangements could change as the Company
enters into new markets and expands its customer base. Management will continue to monitor any
changes to ensure the accounting is in line with the context of AASB 15.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. Under the
new standard, a lessee is required to: (a) recognise all right of use assets and lease liabilities, with the
exception of short-term (under 12 months) and low value leases, on the statement of financial position. The
liability is initially measured at the present value of future lease payments for the lease term; (b) recognise
depreciation of right of use assets and interest on lease liabilities in profit or loss over the lease term; and
(c) separate the total amount of cash paid into a principal portion (presented within financing activities)
and interest portion (which the Group presents in operating activities) in the statement of cash flows.
The new AASB 16:
•
•
replaces AASB 117 Leases and some lease-related Interpretations;
requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low
value asset leases;
• provides new guidance on the application of the definition of lease and on sale and lease back
accounting;
largely retains the existing lessor accounting requirements in AASB 117; and
requires new and different disclosures about leases.
•
•
•
The entity is yet to undertake a detailed assessment of the impact of AASB 16. However, based on the
entity’s preliminary assessment, the Standard is expected to have a material impact on the transactions
and balances recognised in the financial statements when it is first adopted for the year ending 30 June
2020. As per the Note 26(a), the group has commitments for minimum lease payments totalling $708,369
over the next five years and expects the impact of the change in accounting standard to approximate that
amount.
51
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(d) Group Accounting Policies
Fair Value of Assets and Liabilities
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring
basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the
Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced)
transaction between independent, knowledgeable and willing market participants at the measurement
date.
As fair value is a market-based measure, the closest equivalent observable market pricing information
is used to determine fair value. Adjustments to market values may be made having regard to the
characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded
in an active market are determined using one or more valuation techniques. These valuation techniques
maximise, to the extent possible, the use of observable market data.
To the extent possible, market information is extracted from either the principal market for the asset
or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in
the absence of such a market, the most advantageous market available to the entity at the end of the
reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the
payments made to transfer the liability, after taking into account transaction costs and transport costs).
For non-financial assets, the fair value measurement also takes into account a market participant’s ability
to use the asset in its highest and best use or to sell it to another market participant that would use the
asset in its highest and best use.
The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-
based payment arrangements) may be valued, where there is no observable market price in relation to
the transfer of such financial instruments, by reference to observable market information where such
instruments are held as assets. Where this information is not available, other valuation techniques are
adopted and, where significant, are detailed in the respective note to the financial statements.
Valuation techniques
In the absence of an active market for an identical asset or liability, the Group selects and uses one or
more valuation techniques to measure the fair value of the asset or liability. The Group selects a valuation
technique that is appropriate in the circumstances and for which sufficient data is available to measure fair
value. The availability of sufficient and relevant data primarily depends on the specific characteristics of
the asset or liability being measured. The valuation techniques selected by the Group are consistent with
one or more of the following valuation approaches:
• Market approach: valuation techniques that use prices and other relevant information generated by
•
market transactions for identical or similar assets or liabilities.
Income approach: valuation techniques that convert estimated future cash flows or income and
expenses into a single discounted present value.
• Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current
service capacity.
52
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use
when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique,
the Group gives priority to those techniques that maximise the use of observable inputs and minimise
the use of unobservable inputs. Inputs that are developed using market data (such as publicly available
information on actual transactions) and reflect the assumptions that buyers and sellers would generally
use when pricing the asset or liability are considered observable, whereas inputs for which market data is
not available and therefore are developed using the best information available about such assumptions are
considered unobservable.
Fair value heirarchy
AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which
categorises fair value measurements into one of three possible levels based on the lowest level that an
input that is significant to the measurement can be categorised into as follows:
Level 1
Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date.
Level 2
Measurements based on inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly.
Level 3
Measurements based on unobservable inputs for the asset or liability.
The fair values of assets and liabilities that are not traded in an active market are determined using one
or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of
observable market data. If all significant inputs required to measure fair value are observable, the asset or
liability is included in Level 2. If one or more significant inputs are not based on observable market data,
the asset or liability is included in Level 3.
The Group would change the categorisation within the fair value hierarchy only in the following
circumstances:
•
•
if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice
versa; or
if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice
versa.
When a change in the categorisation occurs, the Group recognises transfers between levels of the fair
value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or
change in circumstances occurred.
53
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(e) Principles of Consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of the parent,
Alexium International Group Limited and all of the subsidiaries. Subsidiaries are entities the parent
controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. A
list of the subsidiaries is provided in Note 23.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of
the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is
discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains
or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies
of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the
accounting policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-
controlling interests”. The Group initially recognises non-controlling interests that are present ownership
interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on
liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s
net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or
loss and each component of other comprehensive income. Non-controlling interests are shown separately
within the equity section of the statement of financial position and statement of comprehensive income.
(f) Foreign currency translation
The consolidated financial statements are presented in United States dollars ($USD). The functional
currency of the parent company is Australian Dollar and the functional currencies of the Company’s
overseas subsidiaries are the Pound Sterling and the US Dollar.
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the rate of exchange ruling at the balance sheet date and exchange differences are
recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rates as at the date of the initial transaction. All resulting exchange differences are
recognised on other comprehensive income.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value was determined. All resulting exchange differences are recognised on other
comprehensive income.
As at the reporting date the assets and liabilities of these overseas subsidiaries are translated into the
presentation currency of Alexium International Group Limited at the rate of exchange ruling at the balance
sheet date and the statements of comprehensive income are translated at the weighted average exchange
rates for the year. All resulting exchange differences are recognised on other comprehensive income.
On disposal of a foreign entity, the cumulative exchange differences are reclassified to profit or loss as part
of the gain or loss on sale.
54
ALEXIUM INTERNATIONAL GROUP LIMITED
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(g) Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and
impairment losses (see accounting policy (i)).
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for
as separate items of property, plant and equipment.
Leased assets
The Group uses finance leases for several pieces of analytical equipment used in our research and product
development. Management applies judgment in considering the substance of a lease agreement and
whether it transfers substantially all the risks and rewards incidental to ownership of the leased asset.
Key factors considered include the length of the lease term in relation to the economic life of the asset,
the present value of the minimum lease payments in relation to the asset’s fair value, and whether the
Group obtains ownership of the asset at the end of the lease term. See below accounting policy for the
depreciation methods and useful lives for assets held under finance leases.
The interest element of lease payments is charged to profit or loss, as finance costs over the period of the
lease.
All other leases are treated as operating leases. Where the Group is a leasee, payments on operating lease
agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs,
such as maintenance and insurance, are expensed as incurred.
Subsequent costs
The consolidated entity recognises in the carrying amount of an item of property, plant and equipment the
cost of replacing part of such an item when that cost is incurred if it is probable that the future economic
benefits embodied within the item will flow to the consolidated entity and the cost of the item can be
measured reliably. All other costs are recognised in profit or loss as an expense as incurred.
Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part
of an item of property, plant and equipment.
The estimated useful lives in the current and comparative years are as follows:
Computer equipment
Machinery and equipment
3 to 15 years
Furniture, fixtures and office equipment 3 to 10 years
Leased plant and equipment
3 years
Shorter of the lease term or the useful life
The residual value, the useful life and the depreciation method applied to an asset are reassessed at least
annually.
55
ALEXIUM INTERNATIONAL GROUP LIMITED
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(h) Intangible assets
Acquired intangible assets
Intangible assets acquired separately are capitalised at cost. Following initial recognition, the cost model
is applied to the class of intangible assets whereby capitalised costs are amortised on a straight-line basis
over their estimated useful lives, as these assets are considered finite.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation
(see below) and impairment losses (see accounting policy (i)).
Expenditure on internally generated goodwill and brands is recognised in the statement of comprehensive
income as an expense as incurred.
Expenditure on the research phase of projects to develop new specialty chemicals is recognised as an
expense as incurred.
Costs that are directly attributable to a project’s development phase are recognised as intangible assets,
provided they meet the following recognition requirements:
•
•
•
•
•
the development costs can be measured reliably;
the project is technically and commercially feasible;
the Group intends to and has sufficient resources to complete the project;
the Group has the ability to use or sell the software; and
the software will generate probable future economic benefits.
Development costs not meeting these criteria for capitalisation are expensed as incurred.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditures are expensed
as incurred.
Amortisation
A summary of the policies applied to the consolidated entity’s intangible assets is as follows:
Goodwill and intangible assets with an indefinite life are systematically tested for impairment at each
balance sheet date.
Capitalised development costs, patents, and trademarks with a finite life are amortised as follows:
- Patents and Trademarks: Lesser of 20 years or average remaining life of patents and trademarks
- Capitalised development costs: Over future periods on a basis related to expected future benefits
- Software: Lesser of 5 years or average remaining life of software benefit
Amortisation methods, useful lives and residual values are reviewed at each financial year-end and
adjusted as appropriate.
56
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Gains or losses arising from derecognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss
when the asset is derecognised.
The useful lives of these intangible assets are assessed to be either finite or indefinite. Where amortisation
is charged on assets with finite lives, this expense is taken to the income statement.
Intangible assets are tested for impairment where an indicator of impairment exists (see accounting policy
(i)). Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a
prospective basis.
(i) Impairment of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.
Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount.
Where the carrying amount of an asset exceeds its recoverable amount the assets is considered impaired
and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an
individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less cost
to sell and it does not generate cash inflows that are largely independent of those from other assets or
groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to
which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset.
(j) Trade and other receivables
Trade receivables, which generally have 30-120 day terms, are recognised and carried at original invoice
amount less an allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad
debts are written off when identified.
(k) Determination and presentation of operating segments
For management purposes, the Group is organised into one main operating segment which involves
the development and commercialisation of its proprietary flame retardant and Phase Change Material
technologies and selling its specialised chemistry to customers. All of the Group’s activities are interrelated
and discrete financial information is reported to the Chief Executive Officer (Chief Operating Decision
Maker) as a single segment. Accordingly, all significant operating decisions are based upon analysis of the
Group as one segment.
The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 requires a ‘management
approach’ under which segment information is presented on the same basis as that used for internal
reporting purposes.
57
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
An operating segment is a component of the Group that engages in business activities from which it may
earn revenues and incur expenses, including revenues and expenses that relate to transactions with any
of the Group’s other components. An operating segment’s operating results are reviewed regularly by the
Board to make decisions about resources to be allocated to the segment and assess its performance, and
for which discrete financial information is available.
The Board considers the business from both a product and a geographical perspective and takes the view
that the Group operates under one operating segment.
(l) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
(m) Financial instruments
Recognition, initial measurement, and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs,
except for those carried at fair value through profit or loss which are measured initially at fair value.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial
liability is derecognised when it is extinguished, discharged, cancelled or expired.
(n) Embedded Derivative
The Group has issued liability classified embedded derivatives in connection with its convertible debt.
An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host
contract with the effect that some of the cash flows of the combined instrument vary in a way similar to a
standalone derivative.
The embedded derivative is separated from the host contract and accounted for as a derivative if the
economic characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the host contract. The embedded derivative is measured at fair value with
changes in value being recorded in profit or loss.
(o) Trade and other payables
Trade payables and other payables are carried at amortised cost. They represent liabilities for goods and
services provided to the Group prior to the end of the financial year that are unpaid and arise when the
Group becomes obliged to make future payments in respect of the purchase of these goods and services.
The amounts are unsecured and are usually paid within 60 days of recognition.
58
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a
past event, it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in the statement of comprehensive
income, net of any reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a
finance cost.
(q) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
(r) Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the
extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured. The following specific recognition criteria must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to
the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to
the customer.
Deferred income
License agreements for the right to sell the Group’s products in given markets are generally granted by
the Group for a specific time period and consideration. Consideration received for the license is initially
deferred, included in other liabilities, and recognised on a straight-line basis over the corresponding license
period.
Interest and dividends
Interest income is recorded when earned based on cash balances. Interest expenses are reported on an
accrual basis using the effective interest method. Dividends are recognised at the time the right to receive
payment is established.
59
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(s) Grant revenue
Government grants are recognisable in profit or loss once there is reasonable assurance that the grant
will be received, and the Group will comply with the conditions attached to the grant. Grant revenue is
recognised on a systematic basis over the periods in which the entity recognises as expenses the related
costs for which the grants are intended to compensate.
(t) Income tax and other taxes
Deferred income tax is provided on all temporary differences at the statement of financial position date
between the tax bases of assets and liabilities and their carrying amounts for the financial reporting
purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
• except where the deferred income tax liability arises from the initial recognition of an asset or liability
in a transaction that is not a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, except where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
•
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, and the carry-forward of unused tax
assets and unused tax losses can be utilised:
• except where the deferred income tax asset relating to the deductible temporary differences arises
from the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised.
•
The carrying amount of deferred income tax assets is reviewed at each statement of financial position
date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available
to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised, or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the statement of financial position date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the
statement of comprehensive income.
60
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part
of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.
•
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the statement of financial position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash
flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation
authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation authority.
(u) Earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to members of the parent
entity for the reporting year, after excluding any costs of servicing equity (other than ordinary shares
and converting preference shares classified as ordinary shares of EPS calculation purposes), by weighted
average number of ordinary shares of the Group, adjusted for any bonus issue.
(v) Employee benefits
Termination benefits
Termination benefits are recognised as an expense when the Group is committed demonstrably, without
realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the
normal retirement date, or to provide termination benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense
if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted,
and the number of acceptances can be estimated reliably. If benefits are payable more than twelve (12)
months after the reporting date, then they are discounted to their present value.
Long-Term Employee Benefits
The Group’s liabilities for annual leave and long service leave are included in other long-term benefits as
they are not expected to be settled wholly within twelve (12) months after the end of the period in which
the employees render the related service. They are measured at the present value of the expected future
payments to be made to employees. The expected future payments incorporate anticipated future wage
and salary levels, experience of employee departures and periods of service, and are discounted at rates
determined by reference to market yields at the end of the reporting period on high quality corporate
bonds that have maturity dates that approximate the timing of the estimated future cash outflows. Any
re-measurements arising from experience adjustments and changes in assumptions are recognised in
profit or loss in the periods in which the changes occur.
The Group presents employee benefit obligations as current liabilities in the statement of financial position
if the Group does not have an unconditional right to defer settlement for at least twelve (12) months after
the reporting period, irrespective of when the actual settlement is expected to take place.
61
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Short-term employee benefits
Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled
wholly within twelve (12) months after the end of the period in which the employees render the related
service. Examples of such benefits include wages and salaries, non-monetary benefits and accumulating
sick leave. Short-term employee benefits are measured at the undiscounted amounts expected to be
paid when the liabilities are settled. Employee benefit expenses are presented separately on the face of
the statement of profit or loss and other comprehensive income. There are no employee-benefit expenses
recognised within cost of sales.
Share-based payment transactions
The grant-date fair value of share-based payment awards granted to employees is recognised as
an employee expense, with a corresponding increase in equity, over the period that the employees
unconditionally become entitled to the awards. The amount recognised as an expense is adjusted
to reflect the number of awards for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as an expense is based on the number
of awards that meet the related service and non-market performance conditions at the vesting date. For
share-based payment awards with non-vesting conditions, the grant date fair value of the share-based
payment is measured to reflect such conditions and there is no true-up for differences between expected
and actual outcomes.
(w) Inventories
Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each
product to its present location and condition are accounted for, as follows:
• Raw materials: purchase cost on a first-in/first-out basis
• Finished goods and work in progress: cost of direct materials and labour and a proportion of
manufacturing overheads based on the normal operating capacity, but excluding borrowing costs
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
(x) Significant accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty
about these assumptions and estimates could result in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected in future periods. The key assumptions concerning the
future and other key sources of estimation uncertainty at the reporting date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year, are described below. The Group based its assumptions and estimates on parameters available when
the consolidated financial statements were prepared. Existing circumstances and assumptions about
future developments, however, may change due to market changes or circumstances arising beyond the
control of the Group. Such changes are reflected in the assumptions when they occur.
62
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Change in presentation currency
These financial statements and notes represent a change in presentation currency from the Australian
Dollar to the US Dollar. This change, which required significant accounting judgement, aligns the
company’s financial reporting with the nature of the business operations which primarily occur in the
United States. This financial report, the comparative period within, and all future financial reports, will
therefore be presented in US Dollars.
Share-based payments
The Group initially measures the cost of cash-settled transactions with employees using a binomial model
to determine the fair value of the liability incurred. The Group initially measures the cost of equity-settled
transactions with employees by reference to the fair value of the equity instruments at the date at which
they are granted. Estimating fair value for share-based payment transactions requires determination
of the most appropriate inputs to the valuation model including the expected life of the share option,
volatility and dividend yield and making assumptions about them. For cash-settled share-based payment
transactions, the liability needs to be remeasured at the end of each reporting period up to the date of
settlement, with any changes in fair value recognised in profit or loss. This requires a reassessment of the
estimates used at the end of each reporting period. The assumptions and models used for estimating fair
value for share-based payment transactions are disclosed in Note 17.
Fair value of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial
position cannot be measured based on quoted prices in active markets, their fair value is measured using
valuation techniques including the discounted cash flow (DCF) and Black-Scholes option pricing models.
The inputs to these models are taken from observable markets where possible, but where this is not
feasible, a degree of judgement is required in establishing fair values. Judgements include considerations
of inputs such as liquidity risk, credit risk and volatility. The assessed fair values of the embedded
derivatives were determined using a Black-Scholes option pricing model which approximates the results
that would have been achieved by using a binomial lattice. The model takes into account the expected
price volatility of the underlying instrument, expected dividend yield and the risk-free interest rate. A
collection of comparable companies has been used as a proxy for the volatility determined. Changes in
assumptions in relation to these factors could affect the reported fair value of financial instruments. See
Note 24 for further disclosures.
Intangible Assets
The Group assess at initial recognition whether an internally developed asset has met the recognition
requirements established in AASB 138 and measures the direct and indirect costs of development using
several estimates and assumptions. After capitalisation, management monitors whether the recognition
requirements continue to be met and whether there are any indicators that capitalised costs may be
impaired. In assessing impairment, management estimates the recoverable amount of each asset or
cash-generating unit based on expected future cash flows and uses an interest rate to discount them.
Estimation uncertainty relates to assumptions about future operating results and the determination of a
suitable discount rate. In the twelve months ended 30 June 2018 no impairment was identified. See Note
12 for further disclosures.
63
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(y) Going Concern
These financial statements have been prepared on the basis of going concern, which contemplates the
continuity of normal business activities and the realisation of assets and settlement of liabilities in the
ordinary course of business. During the financial year ended 30 June 2018, the Group has generated a loss
for the period of $3,961,119 (2017: $9,136,923) and the Group has used cash in operations of $5,558,690
(2017: $9,798,924).
The Director’s assessment is based on continued growth in revenue and commercial sales which the
company expects to continue over the next twelve months, the addition of a long-term debt facility, and
continued reduction in expenses. The directors are satisfied that there is sufficient working capital to
support the committed research and commercialisation activities over the next 12 months and the Group
has the ability to realise its assets and pay its liabilities and commitments in the normal course of business.
Accordingly, the directors have prepared the financial report on a going concern basis.
3. REVENUE & OTHER INCOME
Sale of goods
Other income (a)
Interest received
(a) Other income
Consolidated
2018 ($)
2017 ($)
11,911,816
-
11,911,816
17,929,361
159,000
18,088,361
20,119
9,075
During the period the Group received $Nil (2017: $159,000) in grant revenue from the South Carolina
Research Authority (SCRA). There were no other forms of government assistance from which the Group
has directly benefited.
4. ADMINISTRATIVE EXPENSES
Amortisation
Employee benefits expense- Admin
Insurance expenses
Other administrative expenses
Professional fees
Share-based payments
Total administrative expenses
Consolidated
2018 ($)
2017 ($)
10,310
1,657,936
128,335
547,841
913,983
(87,247)
3,171,158
9,672
2,692,954
57,914
716,411
1,148,831
396,873
5,022,655
64
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
5. DEPRECIATION AND AMORTISATION EXPENSE
Depreciation
Amortisation
Total depreciation and amortisation expenses
6. AUDITORS’ REMUNERATION
The Group’s auditor is Grant Thornton Audit Pty Ltd
Amount received or due and receivable by Grant Thornton
Audit Pty Ltd for:
(a) an audit or review of the financial report of the entity
and any other entity in the consolidated group
(b) Other services in relation to the entity and any other
entity in the consolidated group- Services in connection
with NASDAQ Listing
Amount received or due and receivable by related
practices of Grant Thornton Audit Pty Ltd for:
(a) an audit or review of the financial report of the entity
and any other entity in the consolidated group
(b) Other services in relation to the entity and any other
entity in the consolidated group
Consolidated
2018 ($)
2017 ($)
294,385
13,384
307,769
258,391
12,235
270,626
Consolidated
2018 ($)
2017 ($)
110,519
120,329
6,441
116,960
46,150
166,479
-
-
-
-
-
-
65
ALEXIUM INTERNATIONAL GROUP LIMITED
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
7. TAXATION
(a) Income tax recognised in profit and loss
Profit /(loss) before tax
Prima facie tax on operating loss before income tax at 27.5%
Deferred tax asset not recognised
Tax effect of permanent differences:
- Meals and entertainment
- Interest on convertible note
- Share-based payments expense
- Lobbying expenses
- Differences in jurisdictional tax rates
Tax losses not brought to account
Income tax benefit attributable to reversal of deferred tax
liability on intangible assets
(b) Deferred tax assets
Deferred tax assets at 30 June brought to account:
Employee benefits
Accrued expenses
Expenses deducted over 5 years
Income tax losses
(c) Deferred tax liability
Unrealised FX
Basis difference on fixed assets
(d) Net deferred tax position
Deferred tax liabilities
Net deferred tax position
2018 ($)
2017 ($)
(3,961,119)
(9,136,923)
(1,089,308)
(4,358)
(2,512,654)
(27,923)
18,144
192,241
(23,993)
66,000
(367,032)
1,980,285
771,979
576
20,231
117,776
790,037
928,620
13,848
46,411
109,190
63,800
(664,040)
2,971,368
-
-
29,342
14,561
485,474
529,377
2018 ($)
2017 ($)
2018 ($)
2017 ($)
848,378
80,242
928,620
524,479
4,898
529,377
2018 ($)
2017 ($)
928,620
928,620
-
529,377
529,377
-
66
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(e) Deferred tax assets not recognised
Charitable contributions
Accrued and prepaid expenses
Basis difference on intangibles and start-up costs
Deferred revenue
163(j) limitation
Income tax losses
Accrued and prepaid expenses
Net deferred tax position
2018 ($)
2017 ($)
24,874
20,709
498
-
238,420
7,511,434
-
7,795,935
36,473
55,851
152,849
9,118
-
9,670,319
-
9,924,610
No income tax is payable by the Group. The Directors have considered it prudent not to bring to account
the future income tax benefit of income tax losses until it is probable of deriving assessable income of a
nature and amount to enable such benefit to be realised.
The Group has estimated unrecouped income tax losses of $34,990,283 (2017: $29,960,460) which may
be available to offset against taxable income in future years.
The benefit of these losses and timing differences will only be obtained if there is sufficient probability
that taxable profits will be generated by the Group in future periods.
Deferred tax assets and liabilities which relate to income taxes levied by the same taxation authority are
offset where the Group intends to settle those tax assets and liabilities on a net basis.
8. EARNINGS PER SHARE
Classification of securities as ordinary shares
The Group has only one category of ordinary shares included in basic earnings per share.
Classification of securities as potential ordinary shares
There are currently no securities to be classified as dilutive potential ordinary shares on issue.
Weighted average number of ordinary shares used in the
calculation of basic earnings per share
Basic loss
Basic / Diluted loss per share
Consolidated
2018 Number
2017 Number
325,688,534
301,680,844
$
(3,961,119)
(0.0122)
$
(9,136,923)
(0.0303)
The above calculation does not include instruments that could potentially dilute basic earnings per
share in the future as these instruments were anti-dilutive in the years presented. A summary of such
instruments is as follows:
67
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Equity securities
Options over ordinary shares
Warrant options
Performance rights
Consolidated
2018 Number of securities
2017 Number of securities
2,400,000
4,255,319
1,324,000
7,979,319
13,491,626
-
-
13,491,626
The Group has incurred a loss for the year. The diluted earnings per share is therefore disclosed as the
same as the basic earnings per share.
9. TRADE AND OTHER RECEIVABLES
Current
Trade debtors
Other receivables
None of the trade and other receivables are past due or impaired.
10. INVENTORIES
Raw materials
Finished goods
Total inventory
Consolidated
2018 ($)
2017 ($)
487,353
26,447
513,800
2018 ($)
1,224,267
292,281
1,516,548
1,049,228
48,261
1,097,489
2017 ($)
1,073,391
533,773
1,607,164
68
ALEXIUM INTERNATIONAL GROUP LIMITED
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Leased assets Construction in
Total
Consolidated
11. PROPERTY, PLANT AND EQUIPMENT
Cost or valuation
Balance at 1 July 2016
Additions
Disposals
Transfers
Foreign exchange movements
Balance at 30 June 2017
Additions
Disposals
Foreign exchange movements
Furniture &
Equipment
$
649,591
147,958
(80,667)
1,098,263
(1,639)
1,813,506
42,646
(187,257)
1,066
$
333,901
527,069
-
-
-
860,970
342,907
(197,060)
-
Balance at 30 June 2018
1,669,961
1,006,817
Depreciation and impairment
Balance at 1 July 2016
Depreciation
Disposals
Foreign exchange movements
Balance at 30 June 2017
Depreciation
Disposals
Foreign exchange movements
356,416
178,032
(76,648)
(560)
457,240
194,350
(173,736)
52
260,020
80,359
-
-
340,379
100,035
(197,061)
-
Balance at 30 June 2018
477,906
243,353
progress
$
240,676
857,587
-
(1,098,263)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
1,224,168
1,532,614
(80,667)
-
(1,639)
2,674,476
385,553
(384,317)
1,066
2,676,778
616,436
258,391
(76,648)
(560)
797,619
294,385
(370,797)
52
721,259
Net book value
At 30 June 2016
At 30 June 2017
At 30 June 2018
293,175
1,356,266
1,192,055
73,881
520,591
763,464
240,676
-
-
607,732
1,876,857
1,955,519
69
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
12. INTANGIBLE ASSETS
(a) Patents and trademarks
Cost
Balance at 1 July
Additions- acquired
Impairment
Foreign exchange movements
Balance at 30 June
Depreciation and impairment
Balance at 1 July
Additions- acquired
Impairment
Foreign exchange movements
Balance at 30 June
Consolidated
2018 ($)
2017 ($)
199,152
205,131
-
-
3,187
202,339
101,864
10,309
-
1,472
113,645
-
-
(5,979)
199,152
94,674
9,809
-
(2,619)
101,864
Net book value
88,694
97,288
(b) Capitalised development costs
Cost
Balance at 1 July
Additions- internally developed
Impairment
Foreign exchange movements
Balance at 30 June
Depreciation and impairment
Balance at 1 July
Amortisation
Impairment
Foreign exchange movements
Balance at 30 June
Consolidated
2018 ($)
2017 ($)
-
662,717
-
-
662,717
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70
Net book value
662,717
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(c) Software
Cost
Balance at 1 July
Additions- acquired
Impairment
Foreign exchange movements
Balance at 30 June
Depreciation and impairment
Balance at 1 July
Amortisation
Impairment
Foreign exchange movements
Balance at 30 June
Net book value
Consolidated
2018 ($)
2017 ($)
15,377
-
-
-
-
15,377
-
-
15,377
15,377
2,563
3,075
-
-
5,638
9,739
-
2,563
-
-
2,563
12,814
Intangible assets have finite useful lives. The current amortisation charges for intangible assets are
included under depreciation and amortisation expense per the consolidated statement of profit or loss
and other comprehensive income. The ultimate recoupment of costs carried forward for intellectual
property is dependent on the successful development and commercial exploitation of the Group’s
technology. In accordance with Note 2(h) on significant accounting policies, amortisation will be
calculated on a straight-line basis over the average useful life of the assets and begins once the asset is
placed in service.
13. TRADE AND OTHER PAYABLES
Current
Trade creditors
Other creditors
Consolidated
2018 ($)
2017 ($)
259,110
179,683
438,793
1,093,552
313,011
1,406,563
Trade and other payable amounts represent liabilities for goods and services provided to the Group prior
to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid
within 30 days or recognition.
71
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
14. DEFERRED INCOME
Deferred income
Consolidated
2018 ($)
2017 ($)
-
24,947
At period end 2017 the Group had sales orders which were paid in advance and had not shipped. Revenue
was not recognised for the sales until shipment of the materials.
15. BORROWINGS
Convertible note- On September 30, 2017 the Company entered a convertible note, secured by the
company’s assets, with institutional lenders to refinance the Group’s previous debt. The USD$10 million
note carries a thirty-six-month term and 13.5% annual interest rate and is convertible into ordinary
shares upon a change of control. The Borrowings have been measured at amortised cost, a gain or
loss is recognised in profit or loss when the borrowings are derecognised or impaired, and through the
amortisation process. The Company allocates interest payments over the term of the borrowings at a
constant rate on the carrying value. $5 million of the proceeds from the funding was used to pay down
the loan facility originated on December 30, 2016, which carried a shorter term, higher interest rate, and
greater warrant coverage.
Capital leases- The Group leases certain equipment under financing leases expiring in various years
through 2023, with terms ranging from 3 to 5 years. The assets and liabilities under financing leases are
initially recorded at the lower of the present value of the minimum lease payments or the fair value of the
asset. See Note 26 for further disclosures.
Loan facility
Current capital leases payable
Loan facility
Non-current leases payable
2018 ($)
2017 ($)
-
243,667
243,667
6,820,549
360,416
7,180,965
4,354,294
145,380
4,499,674
-
302,888
302,888
7,424,632
4,802,562
72
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Derivative liability
Under the agreement, warrants will be issued up to 20% of the borrowings, with 47 cents (adjusted to 35
cents as being the price under the December 2017 placement) exercise price, for a period of five years.
The borrowing is a hybrid instrument with liability and derivative liability components. The warrants and
convertible note option include an embedded derivative relating to the exercise price that needs to be
measured at fair value and separated with changes in value being recorded in profit or loss. Derivative
liability has been valued using a Black-Scholes option pricing model which approximates the results
that would have been achieved by using a binomial lattice Monte Carlo simulation. Pricing model inputs
include; exercise price (0.35), risk-free rate (2.1%), remaining term (convertible note – 2.25 years, warrants -
4.25 years) and volatility (88.15%).
Derivative liability
Change in fair value of derivative liability recorded
at profit or loss
Gain on debt extinguishment
2018 ($)
2017 ($)
630,983
630,983
811,951
811,951
2018 ($)
2017 ($)
2,369,993
2,369,993
(142,073)
(142,073)
The previous loan facility of $5 million, which, was paid down at the origination of the current facility
included 4,166,667 attached warrants. The warrants included an embedded derivative relating to the
exercise price that was measured at fair value and separated with changes in value being recorded in
profit or loss. At the time of extinguishment, the derivative liability had a carrying value of $396,591, the
disposal of which is recognised on the consolidated profit and loss statement.
Gain on debt extinguishment
2018 ($)
2017 ($)
396,591
396,591
-
-
73
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
16. CONTRIBUTED EQUITY
(a) Issued capital
2018
Shares
2017
Shares
2018
$
2017
$
Ordinary shares fully paid
345,443,598
303,827,998
54,367,832
45,833,450
(b) Movement in share capital
Balance at beginning of year
303,827,998
298,736,791
45,833,450
Options converted to shares
2,425,000
4,202,083
338,244
Capital raising
Costs of capital raising
Conversion of performance rights
Shares issued in lieu of salary
and sales achievement
Shares issued in lieu of services
Foreign currency translation
(c) Movements in performance rights
43,657,181
509,607
-
-
-
39,005,600
-
-
-
-
-
10,106,575
(468,358)
-
185,000
535,713
52,728
245,759
-
-
353,411
-
-
(1,494,807)
155,857
1,265,046
2018
2017
Number
Number
2018
$
2017
$
Balance at beginning of year
Rights expired during year
Conversion of performance rights
Rights forfeited during year
Rights converted to shares during year
Rights issued, net of costs
-
-
-
-
-
1,324,000
1,324,000
3,250,000
(3,250,000)
-
-
-
-
-
-
-
-
-
-
54,272
54,272
304,250
(304,250)
-
-
-
-
-
74
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(d) Share options issued
At the year-end, there were Nil free attaching options outstanding (2017: 6,916,626) and 2,400,000 share-
based payment options outstanding (2017: 6,575,000). Refer to Note 17(c) for details of the share-based
payment options outstanding.
(e) Movements in share options
Year
2018
Grant
date
Exercise
Price
Expiry
date
Balance at
beginning
of
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Expired
during the
year
Number
Balance at
end of year
Number
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
01/09/14
$0.18
31/08/17
175,000
13/05/15
$0.70
31/12/17
500,000
13/05/15
$0.80
31/12/17
1,000,000
20/5/15
$0.13
31/08/17
30,000
06/05/15
$0.75
07/05/18
6,916,626
06/08/15
$0.16
31/08/17
30,000
01/10/15
$0.75
30/09/20
1,500,000
04/11/15
$0.18
31/08/17
1,065,000
09/11/15
$1.207
09/11/17
125,000
09/11/15
$1.314
09/11/17
125,000
26/02/16
$0.20
31/08/17
1,125,000
04/11/16
$0.75
04/11/19
300,000
04/11/16
$1.25
04/11/19
300,000
04/11/16
$1.75
04/11/19
300,000
13,491,626
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(175,000)
-
-
-
(500,000)
(1,000,000)
(30,000)
-
-
(6,916,626)
(30,000)
-
(1,065,000)
-
-
-
-
-
(125,000)
(125,000)
(1,125,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000
-
-
-
-
300,000
300,000
300,000
(2,425,000)
(8,666,626)
2,400,000
• 8,666,626 options expired during the current year (2017: 88,648).
• 2,425,000 share-based payment options were exercised during the current year (2017: 3,343,750).
• Nil free attaching options were exercised during the current year (2017: 858,333).
• All options were exercised for an equivalent number of ordinary shares.
75
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Year
2017
Grant
date
Exercise
Price
Expiry
date
Balance at
beginning
of
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Expired
during the
year
Number
Balance at
end of year
Number
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
Unlisted
options
30/11/12
$0.08
31/12/16
1,500,000
10/11/14
$0.25
9/11/16
946,981
10/11/14
$0.198
9/11/17
750,000
01/09/14
$0.18
31/08/17
175,000
13/05/15
$0.70
31/12/17
500,000
13/05/15
$0.80
31/12/17
1,000,000
20/5/15
$0.13
31/08/17
30,000
06/05/15
$0.75
07/05/18
6,916,626
06/08/15
$0.16
31/08/17
970,000
01/10/15
$0.75
30/09/20
1,500,000
04/11/15
$0.18
31/08/17
1,125,000
09/11/15
$1.207
09/11/17
125,000
09/11/15
$1.314
09/11/17
125,000
26/02/16
$0.20
31/08/17
1,218,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
04/11/16
$0.75
04/11/19
04/11/16
$1.25
04/11/19
04/11/16
$1.25
04/11/19
-
-
-
300,000
300,000
300,000
(1,500,000)
-
(858,333)
(88,648)
(750,000)
-
-
-
-
-
(940,000)
-
(60,000)
-
-
(93,750)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
175,000
500,000
1,000,000
30,000
6,916,626
30,000
1,500,000
1,065,000
125,000
125,000
1,125,000
300,000
300,000
300,000
In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and
creditors and are fully entitled to any proceeds of liquidation.
16,882,357
900,000 (4,202,083)
(88,648)
13,491,626
(f) Terms and conditions of contributed equity
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled
to one vote per share at shareholders’ meetings.
In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and
creditors and are fully entitled to any proceeds of liquidation.
76
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(g) Capital management
The Company’s objectives in managing capital are to safeguard the Group’s ability to continue as a going
concern, so that it can continue to provide returns to shareholders and benefits for the stakeholders and
to maintain an optimal capital structure to reduce the cost of capital.
17. SHARE-BASED PAYMENTS
The following is the summary of share-based payments expensed during the year:
2018
Number
185,000
$
54,758
(431,264)
(199,597)
1,324,000
57,592
2017
Number
1,320,388
-
Nil
$
599,602
-
Nil
Nil
Nil
900,000
92,387
(a) Shares issued during the year
(b) Shares agreed to be issued
forfeited during the year
(c) Performance Rights allocated
but not issued
(d) Options issued during the
year
(a) Shares
The equity-settled share-based payments provided during the year related to:
(i) 185,000 shares issued as part of the employee share plan.
(ii) 431,264 shares agreed to be issued in the prior year were forfeited during the year.
The equity-settled share-based payments provided during the prior year related to:
(i) 250,000 shares issued in lieu of incentive payment for sales achievement.
(ii) 716,977 shares issued or agreed to be issued in lieu of salary to the Directors of the Company.
The Company agreed and approved at the 2016 AGM on 21 November 2016.
(iii) 353,411 shares issued in lieu of services provided by the external consultants of the Company.
(vi) Share-based payments totalled $691,990, of which $295,117 was included in employee benefit
expense and $396,873 is included as share-based payments.
(b) Performance rights
During the period ended 30 June 2018 1,324,000 performance rights were granted for the 12-month
performance period ending 31 December 2018. At the reporting date, 450,000 of these rights had been
forfeited due to staff departures and an expense of Nil recognised. An expense of $57,592 was recognised
for the remaining 874,000 rights.
77
ALEXIUM INTERNATIONAL GROUP LIMITED
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(c) Options
The following table illustrates the number and weighted average exercise prices (WAEP) of, and
movements in share-based payment options.
2018
2017
Number
WAEP
Number
WAEP
Outstanding at 1 July
6,575,000 $
0.63
9,018,750 $
Granted during the year
Reinstated during the year
Forfeited during the year
- $
- $
- $
-
-
-
900,000 $
- $
- $
Exercised during the year
(2,425,000) $
0.19 (3,343,750) $
Expired during the year
Outstanding at 30 June
(1,750,000 $
2,400,000 $
0.84
0.94
- $
6,575,000 $
0.39
1.25
-
-
0.13
-
0.63
The weighted average remaining contractual life of share options outstanding at the end of the financial
year was 0.45 years (2017: 0.13 years), and the exercise prices range from 75 cents to 175 cents (2017: 18
cents to 175 cents).
The assessed fair values of the options were determined using a variation of the binomial option pricing
model that considers factors specific to the share incentive plans. The following principal assumptions
were used in the valuation:
Number
30-Jun-18
Average fair
value per
option
30-Jun-17
$
Number Average fair
$
value per
option
-
-
-
-
-
-
-
-
-
900,000
0.102652
92,387
-
-
-
900,000
0.102652
92,387
a) Services rendered
b) Directors
2017
(No.) of options issued
300,000
300,000
300,000
Services rendered
Spot price of asset
Exercise price
Risk free rate (%)
Start date
Expiry date
Volatility
0.59
0.75
1.71%
04/11/2016
04/11/2019
60%
0.59
1.25
1.71%
04/11/2016
04/11/2019
60%
0.59
1.75
1.71%
04/11/2016
04/11/2019
60%
78
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
18. RESERVES
2018
Option
premium
reserve
$
Balance at 1 July 2017
5,856,738
Performance right expense
-
Performance
rights
reserve
Foreign currency
translation
reserve
$
619,640
54,272
$
(2,287,525)
-
Total reserve
$
4,188,853
54,272
Foreign currency translation
differences arising during
the year
Balance at 30 June 2018
2017
(221,770)
5,634,968
(21,489)
652,423
2,423,955
136,430
2,180,696
6,423,821
Option
premium
reserve
$
Performance
rights
reserve
Foreign currency
translation
reserve
Total reserve
$
$
$
Balance at 1 July 2016
5,590,802
601,036
Performance right expense
92,387
-
(748,131)
-
5,443,707
92,387
Foreign currency translation
differences arising during
the year
Balance at 30 June 2017
19. ACCUMULATED LOSSES
Balance at beginning of year
Net loss attributable for the year
Foreign currency translation
Balance at end of year
173,549
5,856,738
18,604
619,640
(1,539,394)
(2,287,525)
(1,347,241)
4,188,853
Consolidated
2018 ($)
2017 ($)
(49,853,653)
(3,961,119)
8,155
(40,716,730)
(9,136,923)
-
(53,806,617)
(49,853,653)
20. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in
banks and deposits at call, net of outstanding bank overdrafts. Cash and cash equivalents at the end of
the year as shown in the statement of cash flows are reconciled to the related item in the statement of
financial position as follows.
Consolidated
Cash on hand
2018 ($)
2017 ($)
10,641,763
2,620,759
79
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(b) Reconciliation of operating loss after income tax to net cash used in operating activities
Operating loss after income tax
Non-cash items
Depreciation and amortisation of non-current assets
Share-based payment
Fair value movement- embedded derivative
Interest and amortisation on cost of raising borrowings
Gain on Debt Extinguishment
Unrealised foreign exchange (gains) / losses
Changes in assets and liabilities net of effect of purchase of subsidiaries
(Increase) / Decrease in trade and other receivables
(Increase) / Decrease in inventories on hand
(Increase) / Decrease in other current assets
Increase / (Decrease) in trade and other payables
Increase / (Decrease) in other current liabilities
Net cash (used in) operating activities
Consolidated
2018 ($)
2017 ($)
(3,976,257)
(9,136,923)
322,907
(87,247)
(2,369,993)
1,068,060
(396,591)
393,727
270,626
679,015
142,072
62,870
-
(1,560)
583,689
(954,799)
90,616
7,851
(374,437)
(10,111)
(967,770)
(689,694)
(227,682)
214,017
(5,558,690)
(9,798,924)
(c) Reconciliation of property, plant and equipment additions to investing activities
Property, plant and equipment additions per note 11
Non-cash items
Addition of financing leases
Foreign exchange movement on transfers
Change in liabilities related to additions
(Increase) / Decrease in current liabilities
Purchase of property, plant and equipment per statement of cash flows
21. RELATED PARTY TRANSACTIONS
(a) American Security Project
Consolidated
2018 ($)
2017 ($)
385,553
1,532,614
(342,907)
(527,069)
-
-
(849)
41,797
198,865
1,204,410
During the period, the following was paid to American Security Project, a related party of Brig. Gen.
Stephen Cheney, Non-Executive Director:
(i) US$23,778 (2017: US$51,240) was for lease charges on office space in Washington D.C. which expired in
March 2018
(ii) Nil (2017: US$50,000) contribution to “Pathways to the Future of US-Cuba Relations” program which
facilitated access to high level government and military officials in order to further our efforts in the
protective military garment space.
80
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(b) Nelson Mullins Riley & Scarborough LLP
During the period, the following was paid to Nelson Mullins, a related party of Craig Metz, Non-Executive
Director: (i) US$48,000 (2017: US$48,000) was paid by The Nardelli Group on behalf of Alexium for the
continuation of Government Relations Activity.
(c) Transactions with key management personnel
Short-term employee benefits
Salary and fees
Medical benefits
Other
Total short-term employee benefits
Post-employment super-annuation
Total post-employment benefits
Share-based payments- Performance rights
Total share-based payments
Short-Term Incentive Plan
Long-Term Incentive Plan
Total incentive plan payments
Total remuneration
22. SEGMENT REPORTING
2018 ($)
2017 ($)
1,026,682
1,434,390
42,451
97,698
52,469
165,857
1,166,831
1,652,716
-
-
3,588
3,588
20,612
20,612
329,154
329,154
-
-
-
-
-
-
1,187,443
1,985,458
For management purposes, the Group is organised into one main operating segment which involves the
development and licensing of its proprietary flame retardant (FR) and phase change material (PCM)
chemistries, reactive surface treatment (RST) technologies, and selling its specialised chemistry to
customers. All of the Group’s activities are interrelated and discrete financial information is reported to the
Chief Executive Officer (Chief Operating Decision Maker) as a single segment. Accordingly, all significant
operating decisions are based upon analysis of the Group as one segment. The financial results from this
segment are equivalent to the financial statements of the Group as a whole.
Geographic information of revenue and non-current assets excluding financial instruments are as follows:
81
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
2018
Sales revenue
Interest revenue
Other income
Interest expense
Property, plant and equipment
Intangible assets
Depreciation and amortisation
2017
Sales revenue
Interest revenue
Other income
Interest expense
Property, plant and equipment
Intangible assets
Depreciation and amortisation
Australia
US
Cyprus
Total
-
11,911,816
10,985
437,210
2,075,375
-
-
2,342
9,134
(40,619)
222,251
1,923,164
657,318
291,670
-
-
-
-
32,355
88,695
13,757
11,911,816
20,119
396,591
2,297,626
1,955,519
746,013
307,769
Australia
US
Cyprus
Total
-
17,929,361
5,946
-
26,690
3,793
-
3,281
3,129
159,000
422,652
1,837,889
12,814
254,426
-
-
-
-
35,175
97,288
12,919
17,929,361
9,075
159,000
449,342
1,876,857
110,102
270,626
23. INVESTMENTS IN CONTROLLED ENTITIES
Name of Entity
Parent Entity
Country of
Incorporation
Percentage Owned
(ordinary shares)
Percentage Owned
(ordinary shares)
2018 (%)
2017 (%)
Alexium International Group Limited
Australia
Subsidiaries of Alexium International
Group Limited
Alexium Limited
Alexium Inc.
Cyprus
USA
100
100
100
100
The parent entity has an interest free unsecured loan with Alexium Inc. amounting to US$40,196,893 (2017:
US$23,765,319).
The parent entity has an interest free unsecured loan with Alexium Ltd amounting to US$303,108 (2017:
US$298,348).
82
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
24. FINANCIAL INSTRUMENTS
(a) Interest rate risk exposures
The Group is exposed to interest rate risk through primary financial assets and liabilities. The carrying
amounts of financial assets and financial liabilities held at balance date approximate their estimated net
fair values and are given below. The net fair value of a financial asset or a financial liability is the amount
at which the asset could be exchanged, or liability settled in a current transaction between willing parties
after allowing for transaction costs. The Group’s exposure to interest rate risk and the effective weighted
average interest rate for classes of financial assets and financial liabilities is set out below:
Weighted
Average
Effective
Interest
Rate
Variable
Interest
Rate
Fixed
Maturity
Dates
Less than
1 Year
Fixed
Maturity
Dates 1-5
Years
Fixed
Maturity
Dates
5+ years
Non-
Interest
Bearing
Total
2018
%
$
$
$
$
$
$
Financial Assets
Cash and cash
equivalents
Trade and other
receivables/other
financial assets
Financial Liabilities
Trade and other
payables
Capital lease liabilities
Convertible note
Derivative Liability
0.38
10,317,995
-
-
-
9.27
13.50
-
-
-
10,317,995
-
-
-
-
-
-
-
-
-
-
-
-
-
289,572
402,232
-
-
10,000,000
630,983
289,572
11,033,215
-
-
-
-
-
-
-
-
323,768
10,641,763
513,800
513,800
837,568
11,155,563
438,793
438,793
-
-
-
691,804
10,000,000
630,983
438,793
11,761,580
83
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Weighted
Average
Effective
Interest
Rate
Variable
Interest
Rate
Fixed
Maturity
Dates
Less than
1 Year
Fixed
Maturity
Dates 1-5
Years
Fixed
Maturity
Dates
5+ years
Non-
Interest
Bearing
Total
2017
%
$
$
$
$
$
$
Financial Assets
Cash and cash
equivalents
Trade and other
receivables/other
financial assets
Financial Liabilities
Trade and other
payables
Capital lease liabilities
Convertible note
Derivative Liability
(b) Interest rate risk
0.21
889,260
-
-
-
9.93
15.00
-
-
889,260
-
-
-
-
-
-
-
-
-
-
-
-
-
182,533
345,444
4,499,674
-
-
811,951
4,682,207
1,157,395
-
-
-
-
-
-
-
-
1,731,499
2,620,759
1,097,489
1,097,489
2,828,988
3,718,248
1,634,245
1,634,245
-
-
-
527,977
4,499,674
811,951
1,634,245
7,473,847
At 30 June 2018, if interest rates had increased by 1% from the year end variable rates with all other
variables held constant, post tax profit and equity for the Group would have been $106,418 higher (2017:
changes of 1% $26,208 higher/$26,208 lower) based on cash and cash equivalents.
The 1% (2016: 1%) sensitivity is based on reasonably possible changes, over a financial year, using an
observed range of historical RBA movements over the last year.
(c) Foreign currency risk
The Group currently conducts its operations across international borders. A large proportion of the
Group’s revenues, cash inflows, other expenses, capital expenditure and commitments are denominated in
foreign currencies, mostly with costs and income in US dollars with smaller, less frequent transactions in
GBP, Euros and Australian Dollars.
For the reporting period ended 30 June the Group has changed reporting currencies from Australian
Dollars to US Dollars. This change was made to mitigate the Group’s exposure to foreign currency risk.
While the majority of transactions will now have decreased risk of currency fluctuations, the Group
does still conduct business, procure services, and engage in financing activities in other currencies. This
will result in the income, expenditure and cash flows of the Group being exposed to the fluctuations
and volatility of the rate of exchange between other currencies and the US dollar, as determined in
international markets.
84
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument
fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial
instruments which are other than the AUD functional currency of the parent or USD functional currency of
US Alexium Inc. or the UK pound sterling functional currency of Alexium Ltd.
With instruments being held by overseas operations, fluctuations in the US dollar and UK pound sterling
may impact on the Group’s financial results. The following table shows the foreign currency risk on
the financial assets and liabilities of the Group’s operations denominated in currencies other than the
functional currency of the operations.
Consolidated
USD
AUD
GBP
Other
Total USD
Net Financial Assets/(Liabilities) in USD
Functional currency of entity:
Australian dollar
US dollar
UK pound sterling
Statement of financial position
exposure
40,196,893
-
-
303,108
(571,573)
-
-
-
-
-
40,196,893
(268,465)
2017 Consolidated
USD
AUD
GBP
Other
Net Financial Assets/(Liabilities) in USD
Functional currency of entity:
Australian dollar
US dollar
UK pound sterling
Statement of financial position
exposure
23,765,319
-
-
298,348
(682,318)
-
-
-
-
-
40,500,001
(571,573)
39,928,428
Total USD
24,063,667
(682,318)
-
-
-
-
-
-
-
-
23,765,319
(383,970)
23,381,349
The above balances relate to intercompany loans between member companies of the Group.
(d) Credit Risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents.
The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum
exposure equal to the carrying amount of these instruments. The Group does not hold any credit
derivatives to offset its credit exposure. The Group’s exposure to credit risk is minimal. As of 24 August
2018, Alexium had collected 99% of all receivables outstanding at 30 June 2018. Total bad debt expense
for the year was $12,364, 0.1% of total revenue.
As the Group does not currently have any significant debtors, lending, stock levels or any other credit risk,
a formal credit risk management policy is not maintained.
85
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
As at 30 June 2018, the Group’s non-derivative financial liabilities have contractual maturities as
summarised below:
(e) Liquidity risk
The Group manages liquidity risk by continuously monitoring scheduled debt servicing payments for
long-term financial liabilities as well as forecasted cash inflows and outflows due in day-to-day business.
Liquidity needs are monitored in various time bands, on a day-to-day basis, as well as based on a rolling
30-day projection. Long-term liquidity needs for a 180-day and 360-day period are identified monthly. Net
cash requirements are compared to available borrowing facilities to determine headroom or shortfalls.
As at 30 June 2018, the Group’s non-derivative financial liabilities have contractual maturities as
summarised below:
2018 Consolidated
Trade and other payables
Finance lease obligations
Borrowings
Total
2017 Consolidated
Trade and other payables
Finance lease obligations
Borrowings
Total
Current
1-5 Years
5+ years
438,793
289,572
-
728,365
-
402,232
13,078,750
13,480,982
Current
1-5 Years
5+ years
1,431,510
182,553
5,562,500
7,176,563
-
345,444
-
345,444
(f) Fair values of financial assets and liabilities
Cash and cash equivalents
The carrying amount approximates fair value because of their short-term to maturity.
Trade receivables and trade creditors
The carrying amount approximates fair value
Financial assets and financial liabilities measured at fair value in the statement of financial position are
grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability
of significant inputs to the measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly.
• Level 3: unobservable inputs for the asset or liability.
-
-
-
-
-
-
-
-
86
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
As at 30 June 2018 and 2017, there were no other financial assets and liabilities other than cash, trade
receivables and payables, and borrowings.
Measurement of fair value of financial instruments
The Group’s finance team performs valuations of financial items for financial reporting purposes, including
Level 3 fair values, in consultation with third party valuation specialists for complex valuations. Valuation
techniques are selected based on the characteristics of each instrument, with the overall objective of
maximising the use of market-based information. Valuation processes and fair value changes are discussed
among the audit committee and the valuation team at least every year, in line with the Group’s reporting
dates.
Embedded derivatives (Level 3)
The assessed fair values of the derivatives were determined using a Black-Scholes option pricing model
which approximates the results that would have been achieved by using a binomial lattice. The model
takes into account the expected price volatility of the underlying instrument, expected dividend yield and
the risk-free interest rate. A collection of comparable companies has been used as a proxy for the volatility
determined. The embedded derivative liability is classified as non-current based on a convertible note
maturity of three years and warrant expiration date of five years from the 29 September 2017 issuance
date.
The following shows the levels within the hierarchy of financial assets and liabilities measured at fair value
on a recurring basis at 30 June 2018 and 30 June 2017.
2018
Financial Liabilities
Derivative Liability
Total Liabilities
2017
Financial Liabilities
Derivative Liability
Total Liabilities
Level 1
Level 2
Level 3
Total
Level 1
-
-
-
-
Level 2
-
-
-
-
630,983
630,983
630,983
630,983
Level 3
Total
811,951
811,951
811,951
811,951
There were no transfers Level 1 and Level 2 in 2018 or 2017.
87
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
25. PARENT ENTITY INFORMATION
The following details information related to the parent Entity, Alexium International Group Limited, at 30
June 2018. The information presented here has been prepared using consistent accounting policies as
presented in Note 2.
Parent Entity
Current assets
Non-current assets
Total assets
Current assets
Non-current assets
Total assets
Contributed equity
Accumulated losses
Foreign currency reserve
Performance rights reserves
Options reserves
Total equity
Loss for the year
Other comprehensive income net of tax for the year
Total comprehensive income net of tax for the year
The Group’s commitments and contingencies are detailed in Note 26.
26. COMMITMENTS AND CONTINGENCIES
The Group has the following contingent liabilities and commitments.
2018 (US$)
2017 (US$)
1,458,930
13,133,137
14,592,067
155,498
7,451,533
7,607,031
269,540
1,192,780
1,462,320
481,719
811,951
1,293,670
54,367,832
45,833,450
(53,806,617)
(49,853,653)
136,430
652,423
5,634,968
6,985,036
(3,952,964)
685,889
(3,267,075)
(2,287,525)
619,640
5,856,738
168,650
(9,136,923)
(82,195)
(9,219,118)
Reactive Surface Treatment (RST) technology is a legacy chemistry for Alexium which is not currently
utilised in any of the Company’s existing FR or PCM solutions. Alexium has entered into an agreement with
the United States Department of Defense whereby Alexium owns exclusive rights for the RST Technology
under patent application in the United States in exchange for a 2.5% gross sales royalty to be paid to the
US Government. Alexium has also entered into an agreement with Dr Owens for exclusive rights to the
rest of the world, for the same patent application excluding the United States, in exchange for a 5% gross
sales royalty to be paid to Dr Owens. These royalties only apply where the RST technology is used in the
product production process, which does not include the Company’s current fire-retardant and phase
change products.
88
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
(a) Commitments
Lease commitments
1) Operating leases
The Group leases certain premises under operating lease agreements. These premises are used for
administration and operational activities with lease terms approximating 1-10 years. There are no
contingent rent payments, and one lease is on month to month terms.
Minimum future rental payments under non-cancellable leases having remaining terms in excess of one
year are as follows as of 30 June:
Consolidated
2018 ($)
2017 ($)
Commitments for minimum lease payments in
relation to operating
Within one year
Later than one year but not later than 5 years
2) Finance leases
121,395
586,974
708,369
123,832
495,607
619,439
The Group leases certain equipment under financing leases expiring in various years through 2023, with
terms ranging from 3 to 5 years. The assets and liabilities under financing leases are initially recorded at
the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are
depreciated over the shorter of their related lease terms or their estimated productive lives.
Depreciation of assets under financing leases is included in depreciation expense and totalled $100,035
and $80,359 for the years ended 30 June, 2018 and 2017 respectively.
Present value of future minimum rental payments under financing leases having remaining terms in excess
of one year are as follows as of 30 June:
89
ALEXIUM INTERNATIONAL GROUP LIMITED NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2018
Not later than one year
Later than one year and not later than five years
Total
Future finance charges on finance leases
Present value of finance lease liability
Present value of finance lease liabilities totals the
following as of 30 June:
2018 ($)
2017 ($)
289,572
402,232
691,804
(87,721)
604,083
182,533
345,444
527,977
(79,709)
448,268
Not later than one year
Later than one year and not later than five years
Total
2018 ($)
2017 ($)
243,667
360,416
604,083
145,380
302,888
448,268
Lease liabilities are secured over property, plant, and equipment. These assets will revert back to the lessor
in the event of a default, as described in the agreements.
The Group had no other commitments as at 30 June 2018.
(b) Contingencies
The Group has no other contingent liabilities as at 30 June 2018.
27. DIVIDENDS
No dividend has been declared or paid during the current financial year or the prior financial year.
The Group does not have any franking credits available for current or future years as it is not in a tax
paying position.
28. SUBSEQUENT EVENTS
On 13 July 2018, the Board of Directors appointed Dr. Robert Brookins as Chief Executive Officer and
Managing Director. Dr. Brookins was appointed as interim Chief Executive Officer on 31 May 2018. Please
see the 13 July 2018 Appendix 3X for more details.
No other significant event has occurred since the end of the financial year that may have a significant
impact on the financial position of the group.
90
ALEXIUM INTERNATIONAL GROUP LIMITED DIRECTORS’ DECLARATION
The Directors of the Company declare that:
1. The financial statements, comprising the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of financial position, consolidated statement of
cash flows, consolidated statement of changes in equity and accompanying notes, are in accordance
with the Corporations Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001, other mandatory
professional reporting requirements
(b) give a true and fair view of the Company’s financial position as at 30 June 2018 and of its
performance for the year ended on that date; and
(c) comply with International Financial Reporting Standards as disclosed in Note 2 of the financial
statements.
1. The remuneration disclosures included in the Directors’ Report (as part of the audited Remuneration
Report) for the year ended 30 June 2018, comply with section 300A of the Corporations Act 2001
(Cth).
2.
In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay
its debts as and when they become due and payable.
3. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial
Officer required by section 295A of the Corporations Act 2001 (Cth).
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on
behalf of the directors by:
Susan Thomas
Chair
Dated 31 August 2018
91
ALEXIUM INTERNATIONAL GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT
Central Park, Level 43
152-158 St Georges Terrace
Perth WA 6000
Correspondence to:
PO Box 7757
Cloisters Square
Perth WA 6850
T +61 8 9480 2000
F +61 8 9322 7787
E info.wa@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Alexium International Group Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Alexium International Group Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement
of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary
of significant accounting policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
92
ALEXIUM INTERNATIONAL GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Borrowings – Embedded derivative liability – refer to
Notes 2 (n) and 15
On September 30, 2017 the Group entered a convertible note,
secured by the Group’s assets, with institutional lenders to
refinance the Group’s previous debt facility and increase
working capital.
The USD$10 million note with GPB debt Holdings II LLC
carries a thirty-six-month term and 13.5% annual interest rate
and is convertible into ordinary shares upon a change of
control.
Under the agreement, warrants will be issued up to 20% of the
borrowings for a period of five years. The borrowing is a hybrid
instrument with liability and derivative liability components.
An embedded derivative is a provision in a contract that
modifies the cash flow of that contract by making it dependent
on an underlying measurement.
Determining the appropriate accounting treatment for
embedded derivatives may be complex and involve significant
management judgement. This area is a key audit matter as
there is a risk of material misstatement associated with the
significant management judgment applied to determining the
accounting treatment and associated estimates in applying fair
value measurements.
Intangible assets – refer to Notes 2 (h), 2 (x) and 12
The Group has capitalised development costs in relation to its
current development projects (Nyco, Alexiflam NF and
Alexicool CCE).
There is a risk that costs capitalised may not comply with the
recognition requirements relevant to AASB 138 Intangible
Assets.
Management judgement is applied in determining the
commercial and technical feasibility of capitalised projects,
including management’s assessment of future economic
benefits.
Our procedures included, amongst others:
• evaluating and assessing the design of controls over the
processes to record, review and report the Group’s debt
facilities;
• obtaining and reading the loan agreements to understand
the transactions and its related terms;
•
• evaluating management’s determination of the accounting
treatment of the convertible note. Management determined
that it is a hybrid instrument, with an embedded derivative
that needed a valuation;
testing management’s assumptions used in the Black-
Scholes option pricing calculation of the fair value of the
embedded derivative, using the work of management’s
expert;
reviewing the calculation of amortised cost and interest
expense of the loan to assess mathematical and clerical
accuracy, as well as tracing inputs to source
documentation;
tracing the funds received and reimbursed into the
respective financial institutions;
•
•
• performing testing of management’s debt extinguishment
calculations for the TCA Global Credit Master Fund debt;
and
• assessing the appropriateness of the financial statement
disclosures.
Our procedures included, amongst others:
• understanding the design of controls over the processes to
record and evaluate development costs capitalised;
• assessing the appropriateness of management’s policy for
capitalising development costs pursuant to AASB 138 by
obtaining management’s position paper;
• obtaining and reviewing evidence to support the key
assumptions used by management including mostly third-
party evidence, such as Memorandum of Understanding
agreement on their current development projects, email
correspondence with lawyers and invoices;
• selecting a sample of capitalised costs and agreeing to
third party support and payroll reports to identify whether
they have been appropriately capitalised in accordance
with accounting policies;
93
ALEXIUM INTERNATIONAL GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT
This area is a key audit matter due to the subjectivity involved
in assessing the recognition criteria for capitalised
development costs.
• assessing the appropriateness of the financial statement
disclosures.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors’ for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
94
ALEXIUM INTERNATIONAL GROUP LIMITED
INDEPENDENT AUDITOR’S REPORT
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 13 to 22 of the Directors’ report for the year ended 30 June
2018.
In our opinion, the Remuneration Report of Alexium International Group Limited, for the year ended 30 June 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
M J Hillgrove
Partner – Audit & Assurance
Perth, 31 August 2018
95
ALEXIUM INTERNATIONAL GROUP LIMITED
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 10 September 2018.
Quoted equity securities
345,443,598 fully paid ordinary shares are held by 5,510 shareholders.
1,500,000 unlisted options expiring 30/09/2020 at $0.75.
Unquoted equity securities
•
• 300,000 unlisted options expiring 04/11/2019 at $0.75.
• 300,000 unlisted options expiring 04/11/2019 at $1.25.
• 300,000 unlisted options expiring 04/11/2019 at $1.75.
Shareholder distribution
The number of of shareholders, by size of holding, are:
Holding Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
Unmarketable parcels
Minimum $500.00 parcel at $0.13 per
unit
Substantial holders
Holders
Total Units
% Issued Share Capital
540
1,571
904
2,046
444
256,482
4,722,065
7,362,069
70,577,846
262,525,136
5,505
345,443,598
0.07%
1.37%
2.13%
20.43%
76.00%
100.00%
Holders
1,639
Total Units
% Issued Share Capital
2,806,924
0.81%
JP Morgan Nominees Australia Limited
32,440,267
Number of ordinary shares
Percentage
9.3909%
Voting rights
The voting rights attaching to each class of equity securities are set out below:
1. Ordinary shares: 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.
2. Options: No voting rights.
Stock exchange listing
1. Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of
the Australian Stock Exchange Ltd.
2. Alexium is fully quoted on the NASDAQ International.
96
ALEXIUM INTERNATIONAL GROUP LIMITED SHAREHOLDER INFORMATION
Equity security holders
Twenty largest holders of quoted equity securities are:
1
2
3
4
5
6
7
8
9
Name
J P MORGAN NOMINEES AUSTRALIA LIMITED
SANDHURST TRUSTEES LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
DR STUART LLOYD PHILLIPS & MRS FIONA JANE PHILLIPS
BNP PARIBAS NOMINEES PTY LTD
MR MARTIN KEITH THOMAS & MRS HELEN PATRICIA THOMAS
LOMAND SERVICES LIMITED
FLOREANT AMBO PTY LTD
10 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
11
CANNOW PTY LTD
12 DR STUART LLOYD PHILLIPS & MRS FIONA JANE PHILLIPS
Number
Percentage
32,440,267
16,722,684
9.39%
4.84%
10,000,000
2.89%
9,716,809
7,568,167
2.81%
2.19%
6,035,390
1.75%
5,431,500
5,281,500
5,060,715
4,314,439
4,000,000
3,500,000
1.57%
1.53%
1.47%
1.25%
1.16%
1.01%
13 MR ANIL BHASKAR UTTURKAR & MRS REKHA ANIL UTTURKAR
3,200,000
0.93%
14 DR STUART LLOYD PHILLIPS
15 DAVID RIVETT PTY LIMITED
16 MR ROBERT NEAL BROOKINS
17 CITICORP NOMINEES PTY LIMITED
18
SL & FJ PHILLIPS PENSION FUND
19 MS TEN SOO LAN
20 MR EGAN HARVEY JOHNSON
3,060,000
0.89%
2,800,000
0.81%
2,581,000
2,498,496
2,142,858
2,042,665
1,974,558
0.75%
0.72%
0.62%
0.59%
0.57%
97
ALEXIUM INTERNATIONAL GROUP LIMITED alexiuminternational.com
98
ALEXIUM INTERNATIONAL GROUP LIMITED