ALEXIUM INTERNATIONAL GROUP LIMITED
ANNUAL REPORT
For the Year Ended 30 June 2020
ABN 91 064 820 408
PRESENTED IN US DOLLARS
TABLE OF CONTENTS
Company Directory
Letter from the Chair
Letter from CEO
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
1
2
3
4
19
20
21
22
23
24
48
49
53
ALEXIUM INTERNATIONAL GROUP LIMITED
COMPANY DIRECTORY
DIRECTORS
COMPANY SECRETARY
REGISTERED OFFICE
AUDITORS
SHARE REGISTRY
BANKERS
SOLICITORS
ABN
Ms Rosheen Garnon
Brigadier General Stephen Cheney, USMC(Ret)
Mr Simon Moore
Dr Paul Stenson
Dr Robert Brookins
Mark Licciardo and Belinda Cleminson
(Appointed 1 March 2020)
Maja McGuire (Resigned 29 February 2020)
Level 7, 330 Collins Street
Melbourne VIC 3000
Telephone: +61 8 9384 3160
Grant Thornton Audit Pty Ltd
Level 17
383 Kent Street
Sydney NSW 2000
Automic Registry Services
Level 5, 126 Phillip St
Sydney NSW 2000
Telephone: 1300 288 664
Macquarie Bank
Level 23, 235 St Georges Terrace
Perth WA 6000
Steinepreis Paganin
Level 4, The Read Buildings
16 Milligan Street
Perth WA 6000
91 064 820 408
DOMICILE AND COUNTRY OF INCORPORATION
Australia
LEGAL FORM OF ENTITY
SECURITY EXCHANGE
Listed Public Company
Australian Securities Exchange Limited
Home Exchange: Perth
ASX Code: AJX
ALEXIUM INTERNATIONAL GROUP LIMITED
1
LETTER FROM THE CHAIR
Dear Shareholders,
Three themes best describe this past year for Alexium and its shareholders which culminated amidst a global pandemic. Perseverance. Innovation.
Advancement.
Perseverance
Through a collaborative approach, we were committed to adjusting our R&D, sales and other operational practices in the face of the health and
economic challenges COVID-19 posed to our industry. Inside the company, we instituted new remote work/training programs and improved our
facilities to create a safe working environment for our employees. Beyond our walls, we maintained steady communication and safe interaction
with our customers highlighted by the launch of our redesigned website. This took a genuine commitment from everyone and I greatly appreciate
the due diligence and perseverance of our team in this respect.
Innovation
Our culture of continuous improvement means we’re always finding new ways to provide consumers with the latest, innovative technologies in
cooling and flame-retardant solutions. The recent release of the Alexicool® Phonon™ Perpetual Cooling Technology represents a major game
changer in bedding and other market segments such as upholstery, medical, sporting goods, outdoor apparel/accessory and others. And the flame-
retardant Alexiflam® NF Technology treatment of natural cotton removes fiberglass from mattress barriers, providing a new solution that is both
sustainable and safe. Innovation developed and ready for early stage commercialisation, which includes early evaluation by existing customers, in
spite of the pandemic.
Advancement
It’s pivotal to recognize the financial accomplishments captured in our quarterly earnings reports including the $22.3m capital raise completed in
January of 2020 and repayment of $9.47m the outstanding debt (US dollars). This coupled with new commercial agreements, a strengthening sales
pipeline and expanded product portfolio has Alexium well-positioned to achieve our milestones.
This year I was also pleased to welcome two new members to the Board of Directors. Paul Stenson will serve as a Non-Executive Director with a
wealth of experience in advanced material sciences R&D and product launches through third party distributors. Simon Moore was also named as
Non-Executive Director who brings over 20 years of experience in senior private equity roles onto our team.
In closing, Alexium is at the forefront of the industry reaching agreements with distributors to ensure our continued success for years to come. In
my second year as Chair, it has been a privilege to oversee such a talented and dedicated team. Stay safe and healthy.
Sincerely,
Ms Rosheen Garnon
Chair of the Board
ALEXIUM INTERNATIONAL GROUP LIMITED
2
LETTER FROM THE CEO
Dear Shareholders,
FY2020 has been a key period for Alexium as the management team put critical pieces in place to strengthen the company for sustained future
growth. To achieve this, we have focused on two key points:
1. Drive our major initiatives to success.
2. Position the company with the financial and operational resources to do this.
In the annual report, you can see how we have made significant accomplishments in this regard. For our major initiatives, a number of key
milestones have been achieved including:
•
•
•
Alexiflam® NF Technology Passed UL Flammability Trial: This solution provides an advanced sustainable design for flame-retardant
cotton/polyester blend sock barriers that are required for foam mattresses. It’s also 100% fiberglass-free, a safer alternative that keeps
fiberglass shards out of the bedroom.
Alexicool® Partnership with Soft-Tex International: Reached an exclusive 2-year supply agreement with Soft-Tex to purchase Alexicool®
phase-change material for bedding systems.
Agreement with Pegasus Home Fashions for Alexicool® Top-of-Bed Applications: With a focus on pillows, the 2-year supply term
ensures a proven distribution for Alexicool® products.
These commercial achievements speak to how we have driven the growth of the company and will continue to do so in the future.
To the second point, I’m pleased with our progress in strengthening the balance sheet and cash position after the mid-year capital raise. This
allowed the company to eliminate the prior high-cost debt and to provide working capital for our initiatives. All of this works to drive growth of the
company and realize the commercial value of Alexium’s proprietary technologies.
Our entire Alexium team has the experience, confidence and strategy to drive through challenging times to meet our commercial targets, and we
will continue to maintain a tight focus on costs and operations to manage our business responsibly considering the continuing economic
environment. Thank you for your continued support as we embark on a new fiscal year.
Sincerely,
Dr. Bob Brookins
Chief Executive Officer
ALEXIUM INTERNATIONAL GROUP LIMITED
3
DIRECTORS’ REPORT
Your Directors present their report on Alexium International Group Limited and its subsidiaries (‘Company’) for the period ended 30 June 2020.
DIRECTORS
The Directors of the Company in office during the period ended 30 June 2020 and until the date of this report are as follows. Directors were in
office for the entire period unless otherwise stated.
Brigadier General Stephen Cheney
Dr Robert Brookins
• Ms Rosheen Garnon
•
•
• Mr Simon Moore (Appointed 1 February 2020)
•
Dr Paul Stenson (Appointed 15 June 2020)
• Ms Claire Poll (Resigned 1 March 2020)
PRINCIPAL ACTIVITIES
The development of advanced materials 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 (2019:nil).
SHARE CAPITAL
The following were on issue:
Type
Ordinary shares
Unlisted options
Outstanding warrants
Performance rights
30-Jun-20
634,456,542
1,500,000
3,829,787
2,992,160
30-Jun-19
345,443,598
2,400,000
4,255,319
4,960,938
OPERATING AND FINANCIAL REVIEW
Operations and Technology Review
The Company’s corporate and operating activities are performed from our single facility located in Greer, South Carolina, USA. Alexium, Inc., a US
formed company incorporated in 2007. The company utilizes contract manufacturers to produce finished goods; this creates a variable cost model
for manufacturing overhead and allows the Company to focus efforts on product development and commercialization of high-performance products.
The main product families are phase change material (“PCM”) for the bedding industry and flame retardant (“FR”) technologies for markets such as
bedding, military, and workwear.
Alexium has made great progress during the year in the following areas:
Agreement with Pegasus Home Furnishings: The Company entered into an agreement with an initial two-year term (renewable annually after first
term) to supply Alexicool® for Pegasus top of bed applications with a focus on pillows. This has been a relationship that has been ongoing since
2017.
PCM applications to foam: The Company was able to leverage the development of applying Alexicool® on foam which lead to the signing of a supply
agreement with Soft-Tex International as the exclusive provider of PCM for their Reactex™ technology. This success lays the foundation for
penetration into the foam market.
Perpetual Cooling Technology for Textile/Foam Products: The Company developed a unique cooling approach the provides never-ending comfort to
consumer products. This IP protected technology marketed as Alexicool® Phonon™ is a lightweight product that has benefits of being
adaptive/responsive cooling, non-flammable, non-toxic and is environmentally friendly. In contrast to PCM Technology, which works by absorbing
heat, Phonon™ technology builds on this by counteracting the insulative effects of foam and textiles and constantly moving heat away from the
consumer.
Alexiflam® NF-treated Sock for Foam Mattresses: The Company developed an application to apply the Alexiflam® NF technology to a 100% cotton-
based FR sock and passed the flammability requirements under 16 CFR 1633 as regulated by the US Consumer Product Safety Commission enabling
ALEXIUM INTERNATIONAL GROUP LIMITED
4
DIRECTORS’ REPORT
the commercial launch of this product line. The sock’s FR barrier properties provide protection for the highly flammable foam components. With
these milestones completed the next step will be to scale up to production while introducing the product to new and existing customers.
Alexiflam® FR for military uniforms: In CY 2019, the Company signed a mutually exclusive Development Agreement with Pine Belt Processing (Pine
Belt), a subsidiary of Warmkraft, Inc., covering the development and potential supply of the Company’s flame-retardant chemistry for the treatment
of nylon/cotton military uniforms. During the current year, the Company has actively worked towards commercial scale up of the product and
application with Pine Belt in their facilities. The Company will work with Pine Belt to comply with their production requirements and to facilitate the
provision of treated uniforms by Pine Belt to the US military for limited user evaluation (LUE).
Commercialisation of Alexiflam® NF: The Company signed a supply and evaluation agreement for the commercialisation of Alexiflam NF® with a
major flame-retardant chemical company (“Business Partner”) following an MOU announced April 4, 2019. The agreement grants access to the
technology for the Business Partner to actively evaluate the potential uses with target markets of global FR cotton including workwear. The Company
will market the technology in FR socks for foam mattresses, cotton fleece, and military uniforms.
Financing: The Company strengthened the balance sheet and cash position by successfully executing a financing strategy of a capital raise combined
with a convertible loan. The strategy raised a total of A$22.3M that was used to pay off an existing loan of US$9.5M (circa A$14.0M). The balance
of the proceeds after capital raise costs are to be used as working capital to fund the growth of the company. The Company also obtained $0.5M
loan from the US CARES act Paycheck Protection Program which is expected to forgivable based on the submission of qualifying expenses.
COVID-19: With the unexpected development of the COVID-19 global pandemic, the safety and security of our employees and stakeholders became
a top priority. By implementing safety protocols at the onset of the outbreak, the Company was able to respond to the unique circumstances and
provide a safe working environment while continuing to serve our customers and work with our contract manufacturers and suppliers.
The financial impact of COVID-19 was focused in the fourth quarter. As local governments enacted shelter in place orders for non-essential services
in early April, manufacturing plants ceased operation and product orders slowed. A rebound in sales began in May and continued into June which
represented near normal return to revenue as our customers began ramping up production. Revenue and gross profit for the quarter amounted to
20.7% and 19.7% of their respective annual totals.
Operationally, the Company was able to maintain headcount throughout the fourth quarter. Travel restrictions and cancellation of industry
conferences reduced travel expenses for the quarter and are expected to remain in place into the near future. Other fixed operating costs remained
flat to down over the affected quarter as management continued to manage costs.
Management has taken a multifaceted approach to reviewing the balance sheet for COVID-19 related asset impairment. In estimating the
recoverable amount of intangible assets as part of impairment testing, management has considered any potential impacts. The results of our
assessment indicate that assets are not held at amounts higher than the recoverable amount. Further, no expected credit losses are recognised, and
year end customer receivables are considered fully collectable.
In response to the unprecedented risk of economic injury, governments worldwide extended various stimulus packages to support businesses. In
Australia, the “Boosting Cash Flow for Employers” program provided up to $100,000 to eligible small and medium sized businesses in the form of a
credit on BAS filings. The company was able to participate in this program and anticipates continued program credits for three quarters after year
end.
In the US, the “CARES Act” provided low interest loans to support continued employment levels. The Company was granted a loan in the amount of
$460,352 funded by the Small Business Administration which is designed to be up to 100% forgivable when the funds are used for program qualifying
costs. The Company anticipates full forgiveness of this loan.
As we monitor the industries served, the Company has not seen any major impacts after the initial downturn in revenue in the fourth quarter.
Manufacturing in the bedding industry shows continuing activity and momentum with indications that there may be shift from traditional brick and
mortar sales channels to online retail. We do not expect changes in the US military’s initiative for widening use of FR to service members.
Financial Result Overview
The Company’s net loss attributable to members of the Company for the financial year ended 30 June 2020 was $6,125,476 (2019: $6,939,521). This
represents a 12% decrease in net loss over the prior period. The primary drivers behind this are described below.
Revenues from ordinary operating activities were up 20% from the prior year at $6,078,857 (2019: $5,059,039) as the Company continued to focus
on development and expansion of the Alexicool® product line. Along with the increase in revenue the company experienced an improvement in
gross profit for the period which was $2,313,099 (2019: $1,605,742) representing an average gross margin percentage across all lines of business of
38% (2019: 32%).
Operating costs decreased 22% to $5,025,347 from $6,408,915 by continued stewardship of expenditures through controls and processes.
As at 30 June 2020 the cash position was $4,741,251 (2019: $3,843,343). An improved cash position and balance sheet structure was achieved
through a capital raise / new term loan mid-year that allowed the company to pay off a high cost loan in late December. The company was also able
to obtain $460,352 loan from the US CARES act Paycheck Protection Program.
ALEXIUM INTERNATIONAL GROUP LIMITED
5
DIRECTORS’ REPORT
Material Business Risks
The Company has identified the below specific risks which could impact upon its prospects:
Maintaining strong intellectual property position: Product innovation is key to the Company's business model, thus maintaining a strong intellectual
property position is critical. To ensure this, the Company 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 Company.
Competition in key markets: The Company has worked diligently on its PCM-based products to ensure that market competition is well understood
and that the Company’s product portfolio adequately responds to these competitors. This response includes:
• Effective pricing strategies and product innovation;
• Analytical tools and methods that objectively demonstrate the value of the Company’s products versus competitor’s; and
• Identification of market gaps where current commercial technologies are not effective
Sufficient capital for achieving profitability: The Company monitors and manages its resources to ensure there is sufficient capital for achieving
profitability. Based on the Company’s budget, the Board is confident that the Company’s revenue forecasts, commercial pipeline, and funding options
will ensure that the Company is sufficiently capitalised for the upcoming twelve months.
Commercial risks due to market dynamics: Beyond threats from competitors, the Company 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.
Covid-19 Impact: COVID-19 presents business challenges due to the uncertainty of long-term impact to consumer spending and potential supply-
chain disruption in the bedding related Industry. The Company is proactively managing the circumstances as it evolves to protect employees and
stakeholder’s interests.
Likely Developments
During the reporting period, the Company continued to capitalise on the work and developments over the past several years which have
positioned Alexium well in terms of its initiatives.
In FY2021, Alexium is committed to:
• Continued expansion of Alexicool® FM into bedding products;
• initiate limited user evaluation of FR NyCo technology for military uniforms;
• Develop key partnerships for commercialization of Alexiflam® NF;
• First revenues from Alexiflam® FR Sock
• Increased expansion of revenue outside of the US.
• Significant growth of the Company’s revenue;
• Achieving positive EBITDA; and
• Ensuring a financially strong and stable business through detailed planning, responsible management and transparency of strategy and
outcomes.
The Company’s business strategies to achieve the above goals include:
• Leveraging market position and Company resources for greater market penetration;
• Strengthening and maintaining key relationships supporting the Company’s initiatives; and
• Applying a disciplined and conservative approach to expenditure relative to sales growth.
EVENTS SINCE THE END OF THE FINANCIAL PERIOD
There has not arisen any item, transaction or event of a material and unusual nature; which in the opinion of the Directors is likely to significantly
affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.
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 Company.
ENVIRONMENTAL REGULATIONS
The Company’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.
ALEXIUM INTERNATIONAL GROUP LIMITED
6
DIRECTORS’ REPORT
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 Company’s product portfolio is the environmentally friendly nature of its products. With this, the Company can ensure that the
environmental impact by its customers products are minimal and acceptable. Additionally, the Company’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 2020, the Board is not aware of any breach of applicable environmental regulations by the Company.
CORPORATE GOVERNANCE STATEMENT
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 - www.alexiuminternational.com/about/#corpGov
INFORMATION ON DIRECTORS
The names of the Directors holding office during the period ended 30 June 2020 are set out below, together with details of Directors’ experience,
qualifications, special responsibilities, and other company directorships during the past three financial years.
Ms Rosheen Garnon
Ms Garnon has been an independent Non-Executive Director of the Company since 19 September 2018. She was appointed Non-Executive Chair of
the Board of Directors on 31 March 2019.
Experience:
Ms Garnon has had a distinguished career in the accounting profession as a chartered accountant and taxation advisor. She was a senior partner
with KPMG and held senior executive leadership roles with the firm in Australia and at a global level. Ms Garnon was a member of the KPMG
Australian Executive Leadership Team for 6 years as the National Managing Partner for the Taxation Division. She has extensive experience of
working with Boards and C Suite executives.
Ms Garnon is a Non-Executive Director of Australian Rail Track Corporation, a Non-Executive Director of Resolution Life Australia, and a Trustee of
the Sydney Cricket and Sports Ground Trust. She is Chair of the Board of Taxation, an independent advisory board, that advises the Federal Treasurer
and the Assistant Treasurer on Australia’s taxation policy. Her not for profit and volunteer roles include a Non-Executive Director of The Smith Family;
a Non-Executive Director of Creative Partnerships Australia; Member of the Finance, Audit and Risk Committee, The University of Sydney and a Non-
Executive Director of Women Corporate Directors.
Ms Garnon’s qualifications include a Bachelor of Economics (Accounting Major) and Bachelor of Laws from the Australian National University. She is
a Fellow of Chartered Accountants in Australia and New Zealand, a Chartered Tax Advisor, and a Graduate of the Australian Institute of Company
Directors.
Qualifications: BEc (Accounting major), LLB, FCA, CTA, GAICD
Other directorships during the last 3 financial years:
Company
Resolution Life Australia Pty Limited
Australian Rail Track Corporation
The Smith Family
Australian Business Arts Foundation Limited trading as Creative Partnerships Australia
Women Corporate Directors Limited
Residence: Ms Garnon is an Australian resident and resides in Sydney, New South Wales.
Commenced
Nov-19
Nov-18
Feb-19
May-13
2012
Ceased
Current
Current
Current
Current
Current
Brigadier General Stephen Cheney
General Cheney has been an independent Non-Executive Director of the Company since 15 April 2015. General Cheney is the Chairman of the
Nomination and Remuneration Committee and a member of the Audit Committee and Risk 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 Defence 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 and is the President of the Washington D.C. based 501(C)3 policy group The American Security Project as
well as President of their 501(C)(4) company The American Security Action Fund.
Qualifications: USMC (ret)
ALEXIUM INTERNATIONAL GROUP LIMITED
7
DIRECTORS’ REPORT
Other directorships during the last 3 financial years:
Company
American Security Project
The American Security Action Fund
Commenced
2007
2017
Ceased
Current
Current
Mr Simon Moore
Mr Moore has been an independent Non-Executive Director of the Company since January 2020 and is currently Chair of the Audit Committee and
a member of the Nomination and Remuneration Committee and the Risk Committee.
Experience:
Mr Moore is the Senior Partner of investment firm, Colinton Capital Partners. Prior to establishing Colinton Capital Partners in 2017, Mr Moore was
a Global Partner of The Carlyle Group having established their operation in Australia in 2005. In his time at The Carlyle Group, he oversaw the Firm’s
investments in and served on the Boards of Directors of Coates Hire, Healthscope and Qube.
Mr Moore’s qualifications include a Bachelor of Commerce (Hons) and a Bachelor of Laws (Hons) from the University of Queensland
Qualifications: BComm (Hons); LLB (Hons) University of Queensland, Brisbane, Australia.
Other directorships during the last 3 financial years:
Company
Palla Pharma - Chairman
AMA Group – Deputy Chairman
Megaport – Deputy Chairman
FirstWave Cloud Technology – Non-executive Director
Commenced
Jul-16
Nov-18
Nov-14
Feb-17
Ceased
Current
Current
Sep-19
Aug-19
Residence: Mr Moore is an Australian resident and resides in Sydney, New South Wales.
Dr Paul H. Stenson
Dr Stenson has been an independent Non-Executive Director of the Company since 15 June 2020. Dr Stenson if the chair of the Risk Committee
and a member of the Audit Committee and Remuneration Committee.
Experience:
Dr Stenson has a distinguished career with the research, development, manufacture, and commercialization of new materials in the fields of coatings,
adhesives, nonwovens, and pharmaceuticals.
Dr Stenson has been President and CEO of StanChem Inc. since January 2018. StanChem Inc. comprises two companies – StanChem Polymers which
is a manufacturer of water-based polymers for the coatings and adhesives industries, and Albi Protective Coatings which focuses on the specialty
sector of fire protective intumescent paints.
Prior to joining StanChem in 2017, Dr Stenson worked as a global technology director at Axalta Coating Systems. Between 2011 and 2016, Dr Stenson
was the executive vice president of technology and product development at Ahlstrom for nonwoven and specialty high performance paper products.
Prior to joining Ahlstrom, Dr Stenson was the vice president of technology for industrial and packaging coatings at Valspar based in Minneapolis and
Zurich, Switzerland from 1993 until 2011. Dr Stenson is also the chairman of TopChem Pharmaceuticals (Ireland) which is a manufacturer of active
pharmaceutical ingredients.
Dr Stenson earned a PhD in chemistry from University College Dublin, Ireland in 1986 and studied at Institute Chimie Substances Naturelles - Paris,
France.
Qualifications: BSc (Science), PhD (Chemistry).
Other directorships during the last 3 financial years:
Company
TopChem Pharmaceuticals (Ireland) Limited
StanChem Holdings LLC
Commenced
Jul-09
Jul-17
Ceased
Current
Current
Residence: Dr Stenson is a citizen of Ireland and the USA and resides in Connecticut, USA
Dr Robert Brookins
Dr Brookins was appointed as the Company’s Chief Executive Officer and Managing Director on 13 July 2018.
ALEXIUM INTERNATIONAL GROUP LIMITED
8
DIRECTORS’ REPORT
Experience:
Dr Brookins has more than 15 years of experience in organic synthesis and materials chemistry. He received his PhD from the University of Florida
in the areas of synthesis and characterisation of conjugated polyelectrolytes and polymers with an emphasis on developing new polymerisation
methods. Upon completion of his PhD, 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 success in 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.
Qualifications : PhD, M.A.E. BA, BSc
Other listed directorships in the past 3 financial years: N/A
Other directorships in the past 3 financial years: N/A
Residence: Greer, South Carolina, USA
Other Directors in office during the reporting period:
Director
Ms Claire Poll
Office held
Non-Executive Chair
Commenced
11-Dec-17
Ceased
1-Mar-20
Ms Claire Poll
Ms Claire Poll is an experienced corporate director over the past 20 years having led strategy and corporate development for start-up technology
companies through to large multibillion-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 & Co, 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.
COMPANY SECRETARY
Mr Mark Licciardo and Ms Belinda Cleminson, both of Mertons Corporate Services Pty Ltd were appointed as Joint Company Secretaries effective 1
March 2020 following the resignation of Ms Maja McGuire also effective 1 March 2020. Mertons was established in 2007 by Mr Licciardo as a
specialist corporate governance and company secretarial consultancy. His 35-year corporate career has encompassed executive roles in banking,
finance, funds management, investment, and infrastructure development. Ms Cleminson has had a 17-year career providing outsourced company
secretarial services to a variety of public and private companies.
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 2020,
and the number of meetings attended and number of meetings applicable based on appointment/resignation date for each Director were:
Directors
Board of
Directors
Audit & Risk
Committee1
Audit Committee Risk Committee Remuneration &
Ms Garnon
Mr Cheney
Mr Moore
Dr Stenson
Dr Brookins
Ms Poll
26/26
25/26
6/6
-
26/26
21/22
2/2
2/2
-
-
-
2/2
3/3
3/3
2/2
-
-
2/2
3/3
3/3
3/3
-
-
-
(1) Audit & Risk Committee was organized into separate committees beginning in August 2019
The Board and committees meet regularly on an informal basis in addition to the above meetings.
Nomination
Committee
4/4
4/4
2/2
-
-
2/2
ALEXIUM INTERNATIONAL GROUP LIMITED
9
DIRECTORS’ REPORT - REMUNERATION REPORT
REMUNERATION REPORT - AUDITED
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 (‘KMP’)
For the purposes of this report personnel deemed KMP at any time during the reporting period ended 30 June 2020 are:
Name
Position
Appointed
Resigned
Ms Rosheen Garnon
Brigadier General Stephen Cheney
Mr Simon Moore
Dr Paul Stenson
Ms Claire Poll
Dr Robert Brookins
Mr Jason Lewis
Mr Allen Reihman
Non-Executive Chair
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Chief Financial Officer
Chief Commercial Officer
01-Feb-20
15-Jun-20
01-Mar-20
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 Remuneration and Nomination Committee continuously
monitors the remuneration framework with a goal of ensuring that remuneration is aligned with performance and the creation of value for
shareholders. The Company’s remuneration framework aims to ensure that:
•
•
•
•
•
Rewards reflect the competitive global market in which the Company operates;
Incentive remuneration is linked to KPI’s, which are designed to encourage behaviours that are short, medium and long term in nature;
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 Brigadier General
Cheney (Chair), Ms Garnon, Mr Moore and Dr Stenson.
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 $375,000 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 Managing Director and Executives remuneration packages contain the following key elements:
• Primary benefits – base salary, short-term incentives, pension contributions and medical benefit plan for US based executives.
• Equity – performance rights and shares under the Company’s Performance Rights Plan and Incentive Share Plan
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.
ALEXIUM INTERNATIONAL GROUP LIMITED
10
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 attract and retain executives and Directors who will create shareholder value;
• 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 Company, 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.
D. Consequence on Shareholder Wealth
In considering the performance of the Company and the benefits for shareholder wealth, the Remuneration Committee has regard to a range of
indicators in respect of senior executive remuneration and have linked these to the previously described short- and long-term incentives.
The following table presents these indicators over the past five financial years:
Net profit/ (loss)
Dividends declared
Share price as at 30 June (A$)
EPS (cents)
2020
2019
2018
2017
20161
(6,125,476)
(6,939,521)
(3,691,119)
(9,136,923)
(10,912,499)
Nil
0.060
(1.26)
Nil
0.155
(2.01)
Nil
0.120
(1.22)
Nil
0.560
(3.03)
Nil
0.700
(4.93)
(1) Net loss for fiscal year 2016 was originally reported in AUD. These totals reflect the USD equivalent at the average exchange rate for the year
ALEXIUM INTERNATIONAL GROUP LIMITED
11
DIRECTORS’ REPORT - REMUNERATION REPORT
E. Details of Remuneration
Short-term incentive plans paid as a cash bonus were awarded on 30 June 2020 for the achievement of a range of financial and non-financial
corporate objectives during the current fiscal year. The percentage of bonus granted for all KMP’s was 20% and 80% was forfeited due to not
meeting performance criteria, including:
a. Financial – EBITDA and cash improvements targets
b. Non-Financial - Securing supply contracts and licensing agreements with key partners and new product commercialization
c. Shareholder Value – increase in share price
Details of the remuneration of the KMP of the Company is set out below:
Short-term benefits
Share-based
payments
Salary and
fees
Non-
Monetary
benefits
Bonus1
Other
Performance
Rights 2
Shares in
lieu of
salary 3
Super-
annuation
Other Benefits
Long-
term
benefits
Termination
Benefits
Performance
based % of
Total
Total
2020
Non-Executive
Directors
Ms Garnon
BGen Cheney
Mr Moore
Dr Stenson
Ms Poll4
Total
72,777
49,637
29,166
2,916
47,290
201,786
-
-
-
-
-
-
-
-
-
-
-
-
Managing Director
Dr Brookins
314,269
15,953
18,900
Total
314,269
15,953
18,900
Executives
Mr Lewis
Mr Reihman
Total
Total
264,039
15,953
15,900
232,692
12,779
9,320
496,731
28,732
25,220
1,012,786
44,685
44,120
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,068
19,944
-
-
-
10,154
-
-
-
-
50,012
10,154
42,767
42,767
23,738
22,071
45,809
-
-
-
-
-
-
-
-
-
-
88,576
50,012
10,154
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
112,999
69,581
29,166
2,916
47,290
261,952
0.0%
0.0%
0.0%
0.0%
0.0%
391,889
15.7%
391,889
12.4%
11.3%
319,630
276,862
596,492
1,250,333
(1) Short-term incentive plans paid as a cash bonus were awarded on 30 June 2020 for the achievement of a range of financial and non-financial corporate objectives
during the current fiscal year. The percentage of bonus granted for all KMP’s was 20% and 80% was forfeited due to not meeting all of the performance criteria,
including:
a. Financial – EBITDA and cash improvements targets
b. Non-Financial - Securing supply contracts and licensing agreements with key partners and new product commercialization
c. Shareholder Value – increase in share price
(2) Performance Rights Plan details are found at Note 16
(3) Shares granted to directors in lieu of salary included $12,705 of total shares awarded under the FY 19 performance rights plan approved by shareholder at the
2018 AGM, and $37,307 approved by shareholders at the 2019 AGM but are not under a performance rights plan
(4) Resigned 1 March 2020
ALEXIUM INTERNATIONAL GROUP LIMITED
12
DIRECTORS’ REPORT - REMUNERATION REPORT
Short-term benefits
Share-based payments
Other Benefits
Salary
and fees
Non-
Monetary
benefits
Bonus3
Other
Performance
Rights1
Shares in
lieu of
salary2
Super-
annuation
Long-term
employee
benefits
Termination
Benefits
Total
Performance
based % of
Total
2019
Non-Executive
Directors
Ms Garnon
BGen Cheney
Ms Poll
Ms Thomas
Mr Metz
Ms Thurman
Total
Managing Director
39,021
57,068
57,208
26,250
24,194
22,333
226,074
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,742
-
-
115,4264
-
-
118,168
-
-
-
-
-
-
-
21,750
14,183
-
52,500
-
-
3,758
-
-
-
-
-
88,433
3,758
Dr Brookins
305,001
10,231
71,040
Total
305,001
10,231
71,040
-
-
83,794
83,794
67,271
71,251
57,208
194,176
24,194
22,333
436,433
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
470,066
470,066
32.9%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Executives
Mr Lewis
Mr Reihman
Mr Krech7
Total
Total
166,154
10,630
38,400
48,0005
164,423
46,282
8,585
2,688
36,000
50,2226
-
-
15,440
14,475
-
376,859
21,903
74,400
98,222
29,915
907,934
32,134
145,440
216,390
113,709
88,433
3,758
278,624
273,705
80,876
129,846
80,876
682,175
80,876
1,588,674
19.3%
18.4%
0.0%
(1) Performance Rights Plan details are found at Note 16
(2) Rights granted to directors in lieu of salary have vested at 30 June 2019 but not been issued as at that date
(3) Short-term incentive plans paid as a cash bonus were awarded on 30 June 2019 for the achievement of a range of financial and non-financial corporate objectives
during the current fiscal year. The percentage of bonus granted for all KMP’s was 80% and 20% was forfeited due to not meeting all of the performance criteria.
Performance criteria included;
d. Financial - EBIT and revenue growth within key partners
e. Non-Financial - Securing supply contracts and licensing agreements with key partners
(4) 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.
(5) Sign-on bonuses awarded after six months of service equivalent to 20% of annual salary
(6) Relocation reimbursement and sign-on bonuses awarded after six months of service equivalent to 20% of annual salary
(7) Resigned 30 September 2018
F. 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. Non-Executive directors are compensated for their
contributions to the board and any committees they lead or serve. These agreements can be terminated without cause by either party at any time.
The Company has also entered into service agreements with executives, 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 six months’ notice
by either party, or earlier in the event of certain breaches of the terms and conditions. The Company may at its sole discretion terminate the
employment without cause by giving six months written notice or make a payment of 6 months’ salary in lieu of notice. Remuneration is reviewed
annually and approved by the Board of Directors and includes potential short-term and long-term incentive opportunities as well as salary and other
benefits.
ALEXIUM INTERNATIONAL GROUP LIMITED
13
DIRECTORS’ REPORT - REMUNERATION REPORT
G. Share-based Compensation
Performance Rights
KMP were issued or are entitled to the following share-based remuneration during the reporting period:
o 948,152 Performance Rights (2019: 2,283,464) with a value of $31,811 (2019: $217,868) were granted
o 995,064 Performance Rights (2019: 966,610) with a value of $88,576 (2019: $113,709) vested
o Nil were forfeited (2019: 25,128) with a value of nil (2019: $7,813)
The valuation of performance rights granted and vested to KMP is detailed below:
Managing Director
Dr Brookins
Total Managing Director
Executives
Mr Lewis
Mr Reihman
Mr Krech
Total Executives
Total KMP
2020
2019
Granted ($)
Vested ($)
Forfeited ($)
Granted ($)
Vested ($)
Forfeited ($)
14,046
14,046
42,767
42,767
9,453
8,312
-
17,765
31,811
23,738
22,071
-
45,809
88,576
-
-
-
-
-
-
-
128,123
128,123
83,794
83,794
-
-
46,320
43,425
-
89,745
217,868
15,440
14,475
-
29,915
113,709
-
-
(7,813)
(7,813)
(7,813)
The number of performance rights held during the reporting periods to KMP including their personally related parties is set out below:
2020
Managing Director
Dr Brookins
Total Managing Director
Executives
Mr Lewis
Mr Reihman
Total Executives
Total KMP
2019
Managing Director
Dr Brookins
Total Managing Director
Executives
Mr Lewis
Mr Reihman
Mr Krech
Total Executives
Total KMP
Balance at
start of year
Granted
Issued
Forfeited
Balance at
end of year
Vested- not
issued
1,282,584
1,282,584
418,654
418,654
(619,262)
(619,262)
537,829
504,215
1,042,044
2,324,628
281,761
247,737
529,498
948,152
(179,277)
(168,072)
(347,349)
(966,611)
Balance at
start of year
Granted
Issued
Forfeited
-
-
-
-
-
-
-
-
1,081,976
1,081,976
471,214
471,214
640,313
583,880
1,224,193
2,306,169
273,198
250,652
523,850
995,064
Balance at
end of year
Vested-not
issued
1,282,584
1,282,584
619,262
619,262
41,164
41,164
1,241,420
1,241,420
-
-
25,128
25,128
66,292
537,829
504,215
-
1,042,044
2,283,464
-
-
-
-
-
-
-
-
-
(25,128)
(25,128)
(25,128)
537,829
504,215
-
1,042,044
2,324,628
179,277
168,072
-
347,348
966,610
ALEXIUM INTERNATIONAL GROUP LIMITED
14
DIRECTORS’ REPORT - REMUNERATION REPORT
Number of Performance rights granted during 2020:
Executives
Dr Brookins
Mr Lewis
Mr Reihman
Granted
Grant Date
Vesting Date
Expiry Date
FV per Right
at Grant
Date
418,654
281,761
247,737
25-Feb-20
25-Feb-20
25-Feb-20
Various
Various
Various
25-Feb-23
25-Feb-23
25-Feb-23
0.050
0.050
0.050
The performance rights vest equally over a three-year schedule beginning 30 June 2020 and include a service obligation through the vesting date.
Rights will be exercised at nil cost in the quarter following the vesting date.
Options:
No options were granted to directors during the reportable financial years. The movement in the number of options held by the KMP’s, including
their personally related parties, are set out below:
2020
Non-Executive Directors
BGen Cheney
Total Directors
Total KMP
2019
BGen Cheney
Mr Metz
Total Directors
Total KMP
Balance at
start of year
Granted
Exercised
Other
Changes
Balance at
end of year
Vested and
exercisable
750,000
750,000
750,000
750,000
750,000
1,500,000
1,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
750,000
750,000
750,000
750,000
750,000
750,000
750,000
750,000
1,500,000
750,000
750,000
1,500,000
1,500,000
1,500,000
ALEXIUM INTERNATIONAL GROUP LIMITED
15
DIRECTORS’ REPORT - REMUNERATION REPORT
Shares:
The value of shares issued or agreed to be issued in lieu of salary during the year was $50,012 (2019: $88,433) which was calculated based
on an issue price of AUD$0.1374 and was approved at the 2019 Annual General Meeting on 10 October 2019. The issue price represents
volume weighted average closing price of shares on ASX in the fourteen trading days prior to 13 September 2019. The movement in the
number of shares held by the KMP, including their personally related parties, are set out below:
2020
Non-Executive Directors
Ms Garnon
BGen Cheney
Mr Moore
Ms Poll
Total Directors
Managing Director
Dr Brookins
Total Managing Director
Executives
Mr Lewis
Mr Reihman
Total Executives
Total KMP
Balance at
start of year
Granted as
remuneration in
lieu of salary
Received on
conversion of
performance
rights
Received on
exercise of
options
227,159
219,225
-
28,572
474,956
3,120,000
3,120,000
-
-
-
3,594,956
312,344
203,023
-
-
515,367
-
-
-
-
-
-
-
619,262
619,262
-
-
-
515,367
179,277
168,072
347,349
966,611
-
-
-
-
-
-
-
-
-
-
-
Other changes1
Balance at end
of year
1,666,667
-
71,145,234
333,333
73,145,234
2,206,170
422,248
71,145,234
361,905
74,135,557
980,400
980,400
4,719,662
4,719,662
-
-
-
74,125,634
179,277
168,072
347,349
79,202,568
(1) Shares purchased during the reporting period capital raise by individual or related parties
2019
Non-Executive Directors
Ms Garnon
BGen Cheney
Ms Poll
Ms Thomas
Mr Metz
Ms Thurman
Total Directors
Managing Director
Dr Brookins
Total Managing Director
Executives
Mr Krech
Total Executives
Total KMP
Granted during
year as
remuneration
in lieu of salary
Received
during year on
conversion of
performance
rights
Received
during year on
exercise of
options
Balance at start
of year
Other changes
during year
Balance at end
of year
-
71,572
28,572
285,715
28,572
14,286
428,717
227,159
147,653
-
546,602
-
-
921,414
3,162,240
3,162,240
-
-
80,000
80,000
3,670,957
-
-
921,414
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
227,159
219,225
28,572
832,317
28,572
14,286
1,350,131
(42,240)
(42,240)
3,120,000
3,120,000
-
-
(42,240)
80,000
80,000
4,550,131
ALEXIUM INTERNATIONAL GROUP LIMITED
16
DIRECTORS’ REPORT - REMUNERATION REPORT
H. Additional Disclosures Relating to KMP
The interests of the Directors and other KMP of the Company in the shares and options is set out below:
Non-Executive Directors
Ms Garnon
BGen Cheney
Mr Moore
Ms Poll
Total Directors
Managing Director
Dr Brookins
Total Managing Director
Executives
Mr Lewis
Mr Reihman
Total Executives
Total Directors and Executives
I. Loans to KMP
No. of
ordinary
shares
No. of
performance
rights
No. of options
over ordinary
shares
2,206,170
422,248
71,145,234
361,905
74,135,557
-
-
-
-
-
-
750,000
-
-
750,000
4,719,662
4,719,662
1,081,976
1,081,976
-
-
179,277
168,072
347,349
79,202,568
640,313
583,880
1,224,193
2,306,169
-
-
-
750,000
No loans have currently been provided to KMP of the Company.
THIS IS THE END OF THE AUDITED REMUNERATION REPORT
ALEXIUM INTERNATIONAL GROUP LIMITED
17
DIRECTORS’ REPORT
SHARES UNDER OPTION/WARRANT
As at the date of this report there were 5,329,787 unlisted options and warrants (2019 – 6,665,319).
Details of these options are as follows:
Date Options
Granted
01-Oct-15
31-Dec-19
Expiry Date
30-Sep-20
29-Mar-23
Exercise price of
shares
A$ 0.75
A$ 0.06
Total
No. under
options
1,500,000
3,829,787
5,329,787
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 Company has granted 1,259,482 (2019: 2,956,744) performance rights for the reporting period. 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 Company paid a premium in respect of a contract ensuring 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.
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
The Company’s auditor, Grant Thornton Audit Pty Ltd corporate tax group has provided services to the Company beginning with the tax year ending
30 June 2020. The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those
non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the
Corporations Act 2001.
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.
Rosheen Garnon
Chair
Dated 28 August 2020
ALEXIUM INTERNATIONAL GROUP LIMITED
18
DECLARATION OF INDEPENDENCE
ALEXIUM INTERNATIONAL GROUP LIMITED
19
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE YEAR ENDED 30 June 2020
Revenue
Cost of sales
Gross Profit
Administrative expenses
Sales and marketing expenses
Occupancy expenses
Research and development costs
Other expenses
Operating expenses
Loss before finance costs
Interest expense
Loss on debt extinguishment
Gain / (Loss) on embedded derivative
Interest received
Total finance costs
Loss before tax
Tax expense
Loss for the year after tax
Other comprehensive income - Exchange differences on translation of foreign operations
which may subsequently be reclassified to profit or loss
Total comprehensive loss for the year
Loss for the year attributable to members of the group
Total comprehensive loss for the year attributable to members of the group
Note
3
4
15
15
3
7
2020
2019
US$
6,078,857
(3,765,758)
2,313,099
(3,000,901)
(935,575)
(553,061)
(353,285)
(182,525)
(5,025,347)
US$
5,059,039
(3,453,297)
1,605,742
(3,609,008)
(1,282,435)
(557,287)
(413,074)
(547,111)
(6,408,915)
(2,712,248)
(4,803,173)
(1,882,358)
(1,522,003)
(27,523)
18,656
(3,413,228)
(6,125,476)
-
(6,125,476)
(188,947)
(6,314,423)
(6,125,476)
(6,314,423)
(2,793,604)
-
629,642
27,614
(2,136,348)
(6,939,521)
-
(6,939,521)
(31,893)
(6,971,414)
(6,939,521)
(6,971,414)
Basic and diluted loss per share (cents)
8
(1.26)
(2.01)
This consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes to
the financial statement
ALEXIUM INTERNATIONAL GROUP LIMITED
20
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 June 2020
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total Current Assets
Non-Current Assets
Other financial assets
Property, plant and equipment
Intangible assets
Right of use asset
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Lease liabilities
Total Current Liabilities
Non-Current Liabilities
Borrowings
Derivative liability
Lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
Note
18
9
10
11
12
11
13
14
15
15
14
16
2020
US$
4,741,251
979,680
921,554
41,500
6,683,985
17,682
1,095,886
2,678,615
1,194,166
4,986,349
11,670,334
905,514
136,753
1,042,267
2,440,230
1,810,494
949,786
5,200,510
6,242,777
5,427,557
2019
US$
3,843,343
962,023
1,153,453
74,917
6,033,736
17,982
1,727,001
1,778,484
-
3,523,467
9,557,203
1,558,500
170,974
1,729,474
6,786,592
658,141
-
7,444,733
9,174,207
382,996
65,943,807
(927,236)
(59,589,014)
5,427,557
54,367,832
5,078,244
(59,063,080)
382,996
This consolidated statement of financial position should be read in conjunction with the accompanying notes to the financial statements
ALEXIUM INTERNATIONAL GROUP LIMITED
21
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 June 2020
Contributed
equity
$
Options &
Warrants
Reserve
$
Performance
Rights
Reserve
$
Balance at 1 July 2019
54,367,832
5,634,968
1,021,204
Foreign
Currency
Translation
Reserve
$
(1,577,928)
Consolidated
Accumulated
Losses
$
(59,063,080)
Total
$
382,996
Loss for the period
Foreign currency translation
Total comprehensive income / (loss)
Transactions with owners in their capacity
as owners:
Reclass to accumulated losses
Issued capital
Capital raising costs
Performance rights issued
Performance rights exercised
Share-based payments
Warrants outstanding
Balance at 30 June 2020
-
-
-
-
-
-
-
-
-
-
(188,947)
(188,947)
(6,125,476)
-
(6,125,476)
(6,125,476)
(188,947)
(6,314,423)
-
11,768,661
(634,502)
-
427,199
14,617
-
65,943,807
(4,992,832)
-
-
-
-
-
83,934
726,070
(606,710)
-
-
113,569
(427,199)
12,705
-
113,569
-
-
-
-
-
-
-
(1,766,875)
5,599,542
-
-
-
-
-
-
(59,589,014)
-
11,768,661
(634,502)
113,569
-
27,322
83,934
5,427,557
Balance at 1 July 2018
Change in accounting estimate
Loss for the period
Foreign currency translation
Total comprehensive income / (loss)
Transactions with owners in their capacity
as owners:
Issued Capital
Capital Raising Costs
Performance Rights Expense
Options Exercised
Share-based payment in lieu of salary
Balance at 30 June 2019
54,367,832
-
-
-
-
-
-
-
-
-
54,367,832
5,634,968
-
-
-
-
-
-
-
-
-
5,634,968
652,423
-
-
(593)
(593)
136,430
(1,695,787)
-
(18,571)
(18,571)
(53,806,617)
1,695,787
(6,939,521)
(12,729)
(6,952,250)
6,985,036
-
(6,939,521)
(31,893)
(6,971,414)
-
-
280,941
-
88,433
1,021,204
-
-
-
-
-
(1,577,928)
-
-
-
-
-
(59,063,080)
-
-
280,941
-
88,433
382,996
(1) Accumulated Losses and Foreign Currency Reserve balances at 1 July 2018 were adjusted from the 30 June 2018 balances reported in the FY 2018 Annual Report
to reflect a reallocation of $1,695,786 between the two accounts related to the foreign currency translation.
This consolidated statement of changes in equity should be read in conjunction with the accompanying notes to the financial statement
ALEXIUM INTERNATIONAL GROUP LIMITED
22
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
30 June 2020
Note
3
18(b)
18(c)
Cash flow from operating activities
Receipts from customers and other income
Payments to suppliers and employees
Interest received
Interest and other costs of finance paid
Goods & services tax received from ATO
Net cash flows (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of other non-current assets
Proceeds from disposal of property, plant and equipment
Payments for development costs
Net cash flows (used in) investing activities
Cash flows provided by financing activities
Proceeds from issue of ordinary shares
Proceeds from borrowings
Transaction costs related to issues of shares
Transaction costs related to issues of convertible notes
Repayment of borrowings
Net cash flows from/ (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
18(a)
2020
US$
6,422,456
(8,762,060)
18,656
(906,208)
52,021
(3,175,135)
(102,281)
-
430
(1,098,264)
(1,200,115)
11,768,661
4,071,918
(634,502)
(111,952)
(9,587,713)
5,506,412
1,131,162
3,843,343
(233,254)
4,741,251
2019
US$
4,844,649
(8,052,450)
27,614
(1,219,230)
57,876
(4,341,541)
(90,683)
(60,000)
-
(987,153)
(1,137,836)
-
-
-
-
(1,258,696)
(1,258,696)
(6,738,073)
10,641,763
(60,347)
3,843,343
This consolidated statement of cash flows should be read in conjunction with the accompanying notes to the financial statement
ALEXIUM INTERNATIONAL GROUP LIMITED
23
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
1. CORPORATE INFORMATION
The consolidated financial statements of Alexium International Group Limited and its subsidiaries (collectively ‘Company’) for the year ended 30
June 2020 were authorised for issue in accordance with a resolution of the directors on 28 August 2020. Alexium International Group Limited
(‘Parent’) is a company limited by shares incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities
Exchange under the trading AJX. These financial statements include the consolidated financial statements and notes of Alexium International Group
Limited and its controlled entities. This financial report, the comparative period within, and all future financial reports, are presented in US Dollars.
This presentation aligns the Company’s financial reporting with the nature of the business operations which primarily occur in the United States. The
nature of the operations and principal activities of the Company are described in the Directors’ Report.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting
Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001 (Cth).
The Company 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 accrual basis and are based on historical costs, modified where applicable by the measurement at fair value. 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 23.
(b) New and amended standards adopted by the Company in this financial report
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, except for 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 Company presents in operating activities) in the statement of cash flows.
The new standard:
• 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.
• Requires new and different disclosures about leases.
The Company implemented the new standard using the modified retrospective method also known as the cumulative catch-up approach. Under the
modified retrospective method, the cumulative impact (if any) is recognized at the date of initial application (1 July 2019). The modified retrospective
approach permits the measurement of the right-of-use asset equal to the lease liability at adoption.
Under a modified retrospective approach, the Company
• Calculates lease assets and lease liabilities as at the beginning of the current period;
• Does not restate its prior-period financial information;
• Recognises an adjustment in equity at the beginning of the current period; and
• Carries forward all existing finance lease liabilities;
• Makes additional disclosures specified in the new standard and is exempt from certain of the disclosures usually required by AASB 108 para 28.
ALEXIUM INTERNATIONAL GROUP LIMITED
24
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
The Company undertook a detailed assessment of the impact of AASB 16 and determined the standard to have a material impact on the transactions
and balances recognised in the financial statements. At 30 June 2019, $628,964 was previously recorded as a finance lease and classified as property,
plant and equipment. This balance was classified to the right-of-use asset at 1 July 2019 upon adoption of the Standard. Management has recorded
the initial recognition of right of use asset and corresponding lease liability for operating leases at a book value of $902,952 at the implementation
date. Net book value of right of use assets at 30 June 2020 is $1,194,166 as detailed in Note 11.
Reconciliation of lease liabilities at adoption
Total operating lease commitments disclosed at 30 June 2019
Lease commitments beyond five-year disclosure requirement
Variable lease payments not recognized
Operating lease liabilities before discounting
Future value of operating leases
Discounted using incremental borrowing rate (9.7%)
Operating lease liabilities
Operating lease liabilities
Finance lease obligations
Total lease liabilities recognised under AASB 16 at 1 July 2019
01-Jul-19
890,440
851,657
(332,547)
1,409,550
1,409,550
(506,598)
902,952
902,952
361,413
1,264,365
Where a right to control an asset specified in a lease agreement exists, the Company recognises a right-of-use asset, representing its right to use the
underlying leased asset, and a lease liability representing its obligation to make lease payments. Right-of-use assets are recognized similarly to other
non-financial assets (such as property, plant and equipment) and lease liabilities similarly to financial liabilities. Therefore, a lessee recognises
depreciation of the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal
portion and an interest portion and presents them as such in the statement of cash flows. Assets and liabilities arising from a lease are initially
measured on a present value basis. The measurement includes non-variable lease payments expected to be incurred for the term of the lease. The
term of the lease is determined by reference to non-cancellable periods and those periods subject to exercise of an option, where that option is
considered reasonably certain to be exercised.
The Company has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of
low value assets. Payments made under such leases are expensed as incurred on a straight-line basis. In addition, certain variable lease payments
are not permitted to be recognised as lease liabilities and are expensed as incurred. The Company has applied practical expedient and excluded
initial direct costs from the measurement of the right-of-use asset at the date of initial application. The weighted average incremental borrowing
rate applied to lease liabilities recognised in the statement of financial position at the date of initial application was 9.7%.
(c) Impact of standards issued but not yet applied by the Company
There will be no new or revised Standards and Interpretations issued by the AASB that will be adopted by the Company that are relevant to its
operations and effective for the upcoming reporting period.
(d) Company Accounting Policies
Fair Value of Assets and Liabilities
The Company 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 Australian Accounting Standard. Fair value is the price the Company 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.
ALEXIUM INTERNATIONAL GROUP LIMITED
25
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
Valuation techniques
In the absence of an active market for an identical asset or liability, the Company selects and uses one or more valuation techniques to measure the
fair value of the asset or liability. The Company 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 Company are consistent with one or more of the following valuation approaches:
• Market approach uses prices and other relevant information generated by market transactions for identical or similar assets or liabilities.
• Income approach converts estimated future cash flows or income and expenses into a single discounted present value.
• Cost approach reflects the current replacement cost of an asset at its current service capacity.
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 Company 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 hierarchy
AASB 13: Fair value measurement 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 Company 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 Company 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.
(e) Principles of Consolidation
The consolidated financial statements incorporate all assets, liabilities and results of the Company. 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 can affect those returns
through its power over the entity. A list of the subsidiaries is provided in Note 21.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Company from the date on which control
is obtained by the Company. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances
and unrealised gains or losses on transactions between Company 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 Company.
Equity interests in a subsidiary not attributable, directly, or indirectly, to the Company are presented as “non-controlling interests". The Company
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. After
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 ($). The functional currency of the Parent is Australian Dollar and the
functional currencies of the 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 reporting 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
ALEXIUM INTERNATIONAL GROUP LIMITED
26
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
initial transaction. 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 subsidiaries are translated into the presentation currency at the rate of exchange ruling at
the reporting 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.
(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. Where parts of an item
of property, plant and equipment have different useful lives, they are accounted for as separate items.
Leases assets
Right-of-use assets under lease agreements are initially measured at the present value of future lease payments using an incremental borrowing
rate. Book value is stated as net present value less accumulated depreciation. Upon completion of the certain finance lease terms, ownership of the
subject asset is transferred to the Company which begins recognition as property, plant, and equipment.
Subsequent costs
The Company 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 asset.
The estimated useful lives in the current and comparative years are as follows:
Asset Type
Computer equipment
Machinery and equipment
Furniture, fixtures and office equipment
Leased plant and equipment
Years
3 years
3 to 15 years
3 to 10 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.
(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, which is considered five years, as these assets are
considered finite. Other intangible assets that are acquired by the Company are stated at cost less accumulated amortisation and impairment losses.
Internally Generated Intangible Assets
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:
• Development costs can be measured reliably;
• Project is technically and commercially feasible,
• The Company intends to and has sufficient resources to complete the project,
• The Company has the ability to use or sell the asset; and
• The asset will generate probable future economic benefits.
Costs directly attributable to capitalized development include employee expenses incurred on technology development, external testing fees, and
product trial costs. Costs not meeting these criteria are expensed as incurred. The ultimate recoupment of costs carried forward for capitalized
development is dependent on the successful development and commercialization of the Company’s technology. Any internally generated asset that
is not yet complete and not fully amortised is subject to impairment testing.
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.
ALEXIUM INTERNATIONAL GROUP LIMITED
27
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
Amortisation
Goodwill and intangible assets with an indefinite life are systematically tested for impairment at each annual reporting date.
Capitalised development costs, patents, and trademarks with a finite life are amortised based on estimated future economic life. Amortisation
charges are included as an expense in the consolidated statement of profit or loss and other comprehensive income.
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. The useful lives of 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 profit or loss. Intangible assets are tested for impairment where an
indicator of impairment exists. Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted as
appropriate.
(i) Impairment of assets
At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment
exists, the Company makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the
asset is considered impaired and is written down to its recoverable amount to profit or loss.
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 are recognised and carried at original invoice amount less any expected credit losses (ECL) determined under the simplified
approach to accounting for trade and other receivables as detailed in AASB 9. These are the expected shortfalls in contractual cash flows, considering
the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external
indicators and forward-looking information to calculate the expected credit losses. The Group assess impairment of trade receivables on a collective
basis as they possess shared credit risk characteristics they have been grouped based on the days past due.
(k) Determination and presentation of operating segments
For management purposes, the Company 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 the Company’s activities
are interrelated, and discrete financial information is reported to the Chief Executive Officer as a single segment. Accordingly, all significant operating
decisions are based upon analysis of the Company as one segment. The Company 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.
An operating segment is a component of the Company 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 Company’s other components. An operating segment’s 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
Company operates under a single operating segment.
(l) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash on hand and short-term deposits. 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 and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument.
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 expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance
with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other
financial items, except for impairment of trade receivables which is presented within other expenses.
ALEXIUM INTERNATIONAL GROUP LIMITED
28
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount
outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Company’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments
as well as listed bonds that were previously classified as held-to-maturity under AASB 139.
In the periods presented the corporation does not have any financial assets measured at amortized cost.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value
through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal
and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as
hedging instruments, for which the hedge accounting requirements apply (see below).
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category
are determined by reference to active market transactions or using a valuation technique where no active market exists.
Financial assets at fair value through other comprehensive income (FVOCI)
The Company accounts for financial assets at FVOCI if the assets meet the following conditions:
• they are held under a business model whose objective it is “hold to collect” the associated cash flows and sell and
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount
outstanding.
Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset. The Company does not have
any financial assets categorised as FVOCI.
Impairment of financial assets
AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL)
model’. Instruments within the scope of the ECL model included loans and other debt-type financial assets measured at amortised cost and FVOCI,
trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the
issuer) that are not measured at fair value through profit or loss.
Recognition of credit losses is not dependent on the Company first identifying a credit loss event. Instead the Company considers a broader range
of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and
supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
• Financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’)
• Financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’).
• ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are
recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial
instrument.
Trade and other receivables and contract assets
The Company makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss
allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any
point during the life of the financial instrument. In calculating, the Company uses its historical experience, external indicators and forward-looking
information to calculate the expected credit losses using a provision matrix. The Company assess impairment of trade receivables on a collective
basis as they possess shared credit risk characteristics they have been grouped based on the days past due. At the reporting date expected lifetime
credit losses are nil.
Classification and measurement of financial liabilities
The Company’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are initially
measured at fair value, and, where applicable, adjusted for transaction costs unless the Company designated a financial liability at fair value through
profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and
financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than
derivative financial instruments that are designated and effective as hedging instruments). All interest-related charges and, if applicable, changes in
an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income.
ALEXIUM INTERNATIONAL GROUP LIMITED
29
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
(n) Embedded Derivative
The Company 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 and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Company prior to the end
of the financial year that are unpaid and arise when the Company 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.
(p) Provisions
Provisions are recognised when the Company 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 Company 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. Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the
present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.
(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
In accordance with the standard, revenue is recognised and measured when the entity satisfies a performance obligation by transferring a promised
good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset [AASB 15.31] and no
additional goods or services, warranties, repurchase agreements, or public return policies, or other limitations exist that that would not allow the
Company to consider its performance completed at this time of transfer. The Company considers the transfer complete in line with “FOB Shipping
Point” Incoterms and recognizes the completion of this performance obligation when the finished product is shipped. Revenue is recognized at this
point in time.
Sale of goods
Revenue is recognised at a specific point in time and measured when the entity satisfies a performance obligation by transferring a promised good
or service (i.e. an asset) to a customer. AASB 15 - Revenue from Contracts with Customers outlines the accounting requirements for when and how
revenue is recognized using one core principle: “Recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.“ This is accomplished by using a 5-
step recognition process consisting of the following:
1.)
2.)
Identify the contract - The Company utilizes a set of criteria to clearly identify the existence of contracts with customers, which includes contract
approval by both parties, identification of each parties’ rights and commitments, determination of payment terms, presence of commercial
substance and a probability consideration will be collected.
Identify the performance obligations - The Company has identified the sole performance obligation of customer contracts to be the complete
transfer of the goods to the customer. In accordance with AASB 15.24, there are no additional goods or services, warranties, repurchase
agreements, or public return policies, or other limitations of the seller that would not allow the Company to consider its performance completed
at this time of transfer. The Company considers the transfer complete in line with “FOB Shipping Point” Incoterms and recognizes the
completion of this performance obligation when products are shipped.
3.) Determine the transaction price - The Company considers the transaction price to be the amount of consideration to which it expects to be
entitled in exchange for transferring promised goods or services to a customer. As and when a performance obligation is satisfied the Company
recognizes revenue to the extent of the transaction price allocated to that performance obligation taking into account the impact of constraints
arising from variable consideration [AASB 15.46].
4.) Allocate the transaction price to separate performance obligations - Given that there is a single performance obligation to each contract, and
the price is clearly identified in the contract, the Company allocates the full contract price to the transfer of goods discussed in Step 2, with the
exception of combined contracts noted as having variable consideration.
5.) Recognize revenue when each obligation is satisfied - at contract inception the Company has determined that the sole performance obligation
is the complete transfer of goods to the customer. The Company must then determine the specific point in time at which it is appropriate to
recognize revenue for the contract. AASB 15 states that an entity shall consider indicators of the transfer of control, which include, but are not
limited to, the following
ALEXIUM INTERNATIONAL GROUP LIMITED
30
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
• Company has a present right to payment for the asset;
• Customer has legal title to the asset;
• Company has transferred physical possession of the asset;
• Customer has the significant risks and rewards of ownership of the asset; and
• Customer has accepted the asset.
Management recognizes that the application of the control criteria requires judgment and there are various factors to consider, as described above.
Accordingly, management believes that control is transferred in accordance with the shipping terms, as this is the point in time that the customer
obtains legal title, when customer obtains the risk and rewards of ownership, and when the customer has an obligation to pay for the asset. The
standard discusses that an entity should consider whether there is any agreement to repurchase the asset transferred to the customer, or a
component. This topic is not applicable to the Company as it is not the practice nor discussed in any contracts. Management recognizes that contracts
and arrangements could change as the Company enters 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.
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.
(s) Income 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.
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 is classified as operating cash flows. Commitments and
contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(t) Earnings per share
Basic earnings per share (‘EPS’) 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 Company, adjusted for any bonus issue.
ALEXIUM INTERNATIONAL GROUP LIMITED
31
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
(u) Employee benefits
Termination benefits
Termination benefits are recognised as an expense when the Company 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 Company 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 12 months after the reporting date, then they are discounted to their present value.
Long-Term Employee Benefits
The Company’s liabilities for annual leave are included in other current liabilities. Any adjustments and changes in assumptions are recognised in
profit or loss in the periods in which the changes occur. The Company presents employee benefit obligations as current liabilities in the statement
of financial position if the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period,
irrespective of when the actual settlement is expected to take place.
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. 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.
(v) 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: average cost; and
• Finished goods and work in progress: cost of direct materials and manufacturing charges from contract manufacturer.
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.
(w) Significant accounting judgements, estimates and assumptions
The preparation of the Company’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 Company 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 Company. Such changes are reflected in the assumptions when they occur.
Share-based payments
The Company initially measures the cost of cash-settled transactions with employees using a binomial model to determine the fair value of the
liability incurred. The Company 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 valuation model, which is dependent on the terms and conditions of the grant. This estimate also 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 16.
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 considers the expected price volatility of the underlying instrument, expected dividend yield
and the risk-free interest rate. The twelve-month share price history has been used to determine the expected price volatility. Changes in
assumptions in relation to these factors could affect the reported fair value of financial instruments. See Note 22(f) for further disclosures.
ALEXIUM INTERNATIONAL GROUP LIMITED
32
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
Intangible Assets
The Company assesses 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, the determination of a suitable discount
rate, and the appropriate classification of cash generating units. See Note 12 for further disclosures.
(x) 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. The director’s assessment is based on forecasted growth in
commercial sales, which the Company expects to continue over the next twelve months.
During the financial year ended 30 June 2020, the Company generated a loss of $6,125,476 (2019: $6,939,521) and the Company has used cash in
operating and investing activities of $4,375,250 (2019: $5,479,377). As at 30 June 2020 the Company had net assets of $5,427,557 (2019: $382,996)
and a cash balance of $4,741,251 (2019: $3,843,343).
3. REVENUE & OTHER INCOME
Revenue is recognised at a specific point in time and measured when the entity satisfies a performance obligation by transferring a promised good
or service (i.e. an asset) to a customer.
Sale of goods
Rebates
Total
Interest received
4. ADMINISTRATIVE EXPENSES
Employee benefit expense
Professional fees
Other administrative expenses
Insurance expense
Amortisation
Total
5. DEPRECIATION AND AMORTISATION EXPENSE
Depreciation
Amortisation
Total
6. AUDITORS’ REMUNERATION
Amount received or due and receivable by Grant Thornton Australia for:
(a) an audit or review of the financial report of the Company
(b) Tax compliance services in relation to the entity and any other entity in the Company
(c) Other services in relation to the entity and any other entity in the Company
Total
2020
6,422,859
(344,002)
6,078,857
2019
5,225,286
(166,247)
5,059,039
18,656
27,614
2020
2,168,879
482,245
146,949
177,080
25,748
3,000,901
2020
430,526
158,041
588,567
2019
2,662,003
653,150
156,008
128,011
9,836
3,609,008
2019
338,240
17,411
355,651
2020
2019
141,770
7,954
7,132
156,856
143,671
7,043
7,179
157,893
ALEXIUM INTERNATIONAL GROUP LIMITED
33
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
7. TAXATION
(a) Income tax recognised in profit and loss
Profit /(loss) before tax
Prima facie tax on operating loss before income tax at 30.0%
Deferred tax asset not recognised
Temporary differences not recognized
Tax effect of permanent differences:
Other
Meals and entertainment
Interest on convertible note
Fair value movement
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 assets
Deferred tax liabilities
Net deferred tax position
(e) Deferred tax assets not recognised
Charitable contributions
Accrued and prepaid expenses
Other
263A costs
163(j) limitation
Income tax losses
Net deferred tax position
2020
2019
(6,125,476)
(6,939,521)
(1,837,643)
(1,908,368)
(387,962)
(331,123)
558,706
3,216
329,749
8,196
-
-
235,152
1,090,586
-
-
25,909
58,734
2,021,908
2,106,551
1,575,652
530,899
2,106,551
2,106,551
2,106,551
-
20,107
58,840
23,587
1,271
-
9,255,446
9,359,251
-
10,611
399,648
(173,152)
48,720
1,219
333,306
1,619,139
-
1,339
23,902
83,671
1,583,548
1,692,460
1,334,855
357,605
1,692,460
1,692,460
1,692,460
-
23,978
174,965
-
-
-
8,507,735
8,706,678
No income tax is payable by the Company. 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 Company
has estimated unrecouped income tax losses of $52,753,419 (2019: $43,498,018) which may be available to offset against taxable income in future
years. The benefit of these losses and timing differences will only be obtained if there is sufficient probability that taxable profits will be generated
by the Company in future periods. Deferred tax assets and liabilities which relate to income taxes levied by the same taxation authority are offset
where the Company intends to settle those tax assets and liabilities on a net basis.
ALEXIUM INTERNATIONAL GROUP LIMITED
34
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
8. EARNINGS PER SHARE
Classification of securities as ordinary shares
The Company has only one category of ordinary shares included in basic earnings per share.
Classification of securities as potential ordinary shares
There are currently no securities to be classified as dilutive potential ordinary shares on issue.
Weighted average number of ordinary shares
Basic loss ($)
Basic / Diluted loss per share (cents)
2020
486,421,703
2019
345,443,598
(6,125,476)
(1.26)
(6,939,521)
(2.01)
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:
Equity securities
As the Company has incurred a loss for the year, the diluted earnings per share is therefore disclosed as the same as the basic earnings per share.
Options over ordinary shares
Warrant options
Performance rights
Total
9. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Total
None of the trade and other receivables are past due or impaired.
10. INVENTORIES
Raw materials
Finished goods
Provision for obsolescence
Total
2020
Number
1,500,000
3,829,787
1,286,182
6,615,969
2020
944,496
35,184
979,680
2019
Number
2,400,000
4,255,319
2,989,775
9,645,094
2019
943,027
18,996
962,023
2020
500,566
426,453
(5,465)
921,554
2019
699,183
462,500
(8,230)
1,153,453
ALEXIUM INTERNATIONAL GROUP LIMITED
35
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
11. PROPERTY, PLANT AND EQUIPMENT
Cost
Balance at 30 June 2018
Additions
Disposals
Transfers
Foreign exchange movements
Balance at 30 June 2019
Initial application of AASB 16
Additions
Disposals
Transfers
Foreign exchange movements
Balance at 30 June 2020
Depreciation and impairment
Balance at 30 June 2018
Depreciation
Disposals
Foreign exchange movements
Balance at 30 June 2019
Initial application of AASB 16
Depreciation
Disposals
Transfers
Foreign exchange movements
Balance at 30 June 2020
Net book value
At 30 June 2018
At 30 June 2019
At 30 June 2020
Furniture and
equipment
Right-of-use
equipment
Right-of-use
building
Construction in
progress
1,669,961
134,987
(119,601)
9,450
(2,646)
1,692,151
-
94,122
(62,597)
328,876
-
2,052,552
477,906
203,740
(86,099)
(1,433)
594,114
-
199,394
(59,100)
222,258
-
956,665
1,006,817
-
-
-
-
1,006,817
-
-
(328,876)
-
677,941.49
243,353
134,500
-
-
377,853
-
121,683
-
(222,258)
-
277,278
1,192,055
1,098,037
1,095,886
763,464
628,964
400,663
-
-
-
-
-
-
902,952
-
-
-
-
902,952
-
-
-
-
-
-
109,449
-
-
-
109,449
-
-
793,503
-
9,450
-
(9,450)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
2,676,778
144,437
(119,601)
-
(2,646)
2,698,968
902,952
94,122
(62,597)
-
-
3,633,445
721,259
338,240
(86,099)
(1,433)
971,967
-
430,526
(59,100)
-
-
1,343,393
1,955,519
1,727,001
2,290,052
ALEXIUM INTERNATIONAL GROUP LIMITED
36
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
12. INTANGIBLE ASSETS
Cost
Balance at 30 June 2018
Additions
Disposals
Foreign exchange movements
Balance at 30 June 2019
Additions
Disposals
Foreign exchange movements
Balance at 30 June 2020
Amortization and impairment
Balance at 30 June 2018
Amortisation
Disposals
Foreign exchange movements
Balance at 30 June 2019
Amortisation
Disposals
Foreign exchange movements
Balance at 30 June 2020
Net book value
At 30 June 2018
At 30 June 2019
Balance at 30 June 2020
Patents and
trademarks
Capitalised
development
costs
Software
Total
202,339
-
(161,817)
-
40,522
-
-
-
40,522
113,645
9,836
(112,988)
-
10,493
25,748
-
92
36,333
662,717
1,023,574
-
-
1,686,291
1,098,264
-
-
2,784,555
-
1,583
-
-
1,583
108,546
-
-
110,129
88,694
30,029
4,189
662,717
1,684,708
2,674,426
15,377
60,000
-
-
75,377
-
(40,000)
-
35,377
5,638
5,992
-
-
11,630
23,747
-
-
35,377
9,739
63,747
-
880,433
1,083,574
(161,817)
-
1,802,190
1,098,264
(40,000)
-
2,860,454
119,283
17,411
(112,988)
-
23,706
158,041
-
92
181,839
761,150
1,778,484
2,678,615
Impairment testing for intangible assets
An impairment loss is recognised for the amount by which the carrying amount of an asset (or cash-generating unit) exceeds its recoverable amount,
which is the higher of fair value less costs of disposal and value-in-use.
Cash flow forecasting inputs are based on the Board approved budget for FY2021 along with forecasts from management for an additional four
years. Management forecasts include an assessment of market size and the ability of the Company to penetrate the market. The forecasting methods
also include identifiable and addressable markets for the Company along with consideration for customer adoption rates. These forecasts are also
based on management’s knowledge of the business and assessment of the likely current economic environment impacts, adjusted to account for an
expected arm’s length market participant’s view of cash flow risks.
In particular, the discounted cash flow forecast for Alexiflam® technologies in relation to military uniforms is based on current supply chain
information which has been accumulated during the development process including current production scale trials and evaluations taking place with
the military. The directors note that whilst there is an exclusivity agreement in place regarding the development of this technology, no supply
agreement has been entered as at the reporting date.
With the assistance of an independent third-party valuation firm, the Company estimated the recoverable amount of two Cash Generating Units
(“CGUs”) as of 30 June 2020. A CGU is the smallest group of assets that includes the subject asset and generates cash inflows that are largely
independent of cash inflows from other assets or groups of assets. The Company determined Alexiflam® and Alexicool® to be independent cash-
generating units that are unable to be disaggregated. The valuer used a combination of management provided cash flow projections and observable
external market information to determine the key assumptions for their determination. The fair value measurement is categorized in its entirety as
Level 3 in the fair value hierarchy designated in AASB 13. This categorization has several market observable factors including public companies
deemed comparable to the Company, market royalty rates for comparable transactions and discount rate market factors for such items as risk free
rate, beta, equity risk premium and size premium. Carrying values of Alexiflam® and Alexicool® CGU’s at year end were $1.6M and $1.1M
respectively, while estimated recoverable amount of each was $2.2M and $2.1M.
There are important assumptions used in the valuation including the enterprise value. Management forecasts include growth rates of 0.0% to 10.0%
after a technology has been commercialized, risk adjusted discount rates averaging 27%, obsolescence factors and royalty rates ranging from 3.0%
in the first quartile to a maximum of 8.0%. The valuation was subject to stress-testing by conducting sensitivity analysis with respect to the various
key assumption inputs. Management do not believe that any reasonable possible change in these assumptions would result in an impairment of
either CGU technologies. No impairment loss has been recognised for Alexiflam® and Alexicool® technologies CGUs as of 30 June 2020 (2019: $nil).
ALEXIUM INTERNATIONAL GROUP LIMITED
37
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
13. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Interest payable
Additional Provisions
Total
2020
230,846
639,159
35,509
-
905,514
2019
557,098
752,152
101,250
148,000
1,558,500
Trade and other payable amounts represent liabilities for goods and services provided to the Company 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.
14. LEASE LIABILITIES
The Company leases facilities, office and lab equipment, and IT infrastructure under various agreements. These assets are used for administration
and operational activities with remaining lease terms of 1-7 years. Where a right to control an asset specified in a lease agreement exists, the
Company recognises a right-of-use asset, representing its right to use the underlying leased asset, and a lease liability representing its obligation to
make lease payments. Lease liabilities are recognized similarly to financial liabilities with cash repayments recorded into a principal portion and an
interest portion and presents them as such in the statement of cash flows. Assets and liabilities arising from a lease are initially measured on a
present value basis. The measurement includes non-variable lease payments expected to be incurred for the term of the lease. The term of the lease
is determined by reference to non-cancellable periods and those periods subject to exercise of an option, where that option is considered reasonably
certain to be exercised.
2020
2019
Lease payments during the period:
Principal payments
Interest
Variable lease payments not included in measurement of lease liability
Total
Minimum future rental payments under non-cancellable leases:
Current
Non-current
Total
Present value of future minimum rental payments under leases:
Current commitments:
Lease liability
Finance charges
Net present value
Non-current commitments:
Lease liability
Finance charges
Net present value
Total
15. BORROWINGS
Convertible note carrying value
Other borrowings
Principal balance outstanding
178,319
112,899
33,081
324,299
235,484
1,285,257
1,520,741
136,753
98,731
235,484
949,786
335,471
1,285,257
1,520,741
2020
1,979,878
460,352
2,440,230
210,406
44,776
-
255,182
198,438
206,217
404,655
170,974
190,439
361,413
-
43,242
43,242
404,655
2019
6,596,153
190,439
6,786,592
ALEXIUM INTERNATIONAL GROUP LIMITED
38
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
Convertible note
On 24 December 2019 the Company entered a convertible note, secured by the Company’s assets, with an institutional lender. The $3.5 million
($A5.15M) note carries a four-year term and 6.0% annual interest rate with coupon interest payments due quarterly. The note is convertible into
ordinary shares at the holder’s discretion and with shareholder approval. The proceeds from the funding were used to pay down the loan facility
originated on 30 September 2017, which carried a higher interest rate and was due to expire on 30 September 2020.
The Borrowings have been measured at amortised cost in accordance with AASB 9 and gain or loss is recognised in profit or loss through the
amortisation process and when the borrowings are derecognised. The Company allocates interest payments over the term of the borrowings at a
constant rate on the carrying value. The carrying balance over the remaining life of the facility will increase to the current principal balance of $3.5
million.
Convertible note carrying value
Remaining amortization of effective interest
Foreign currency exchange rate impact
Principal balance outstanding
2020
1,979,878
1,631,688
(70,369)
3,541,197
2019
6,596,153
2,403,847
-
9,000,000
Other borrowings
On 6 May 2020, the Company was granted a loan in the amount of $460,352 funded by the Small Business Administration and administered by Wells
Fargo. Under Division A, Title I of the CARES Act enacted 27 March 2020. The program called Paycheck Protection Program was created with the goal
to support small businesses during the COVID-19 pandemic.
The loan is in the form of a note that matures on 5 May 2022 and bears interest at a rate of 1% per annum, payable monthly principal and interest
payments commencing on 6 November 2020. The note may be prepaid by the Borrower at any time prior to maturity without prepayment penalty.
Funds from the loan are intended to support payroll costs, costs used to continue health care benefits, mortgage payments, rent, utilities, and
interest on other debt obligations which were impacted by the COVID-19 pandemic.
The loan is designed to be forgivable up to 100% of the loan value when used for expenses described above.
Derivative liability
The current and previous borrowings are considered hybrid instruments with host and derivative liability components. When initially recorded the
derivative is measured at fair value and separated from the host liability. Subsequently changes in value are recorded in profit or loss upon
revaluation. This has been valued using a Black-Scholes option pricing model which approximates a Monte Carlo binomial lattice simulation. Pricing
model inputs of the current derivative include exercise price (A$0.075), risk-free rate (0.575%), remaining term (3.5 years) and volatility (105.02%).
Derivative liability
Gain/ (Loss) on embedded derivative
2020
1,810,494
2019
658,141
(27,523)
629,642
Loss on debt extinguishment
The previous loan with a $9,000,000 balance was paid in full on 31 December 2019 and was measured at the amortised cost using the effective
interest method. The residual value was amortised to face value over the life of the note. On extinguishment, the liability was derecognised and the
difference between the carrying amount of the extinguished liability and the consideration paid is recognised in profit or loss. The attached
embedded derivative liability is also derecognised and netted against the residual value of the host liability and the consideration paid.
Loss on debt extinguishment
2020
(1,522,003)
2019
-
ALEXIUM INTERNATIONAL GROUP LIMITED
39
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
16. CONTRIBUTED EQUITY
(a) Issued capital
Ordinary shares fully paid
(b) Movement in share capital
Balance at 1 July
Capital raising
Costs of capital raising
Conversion of performance rights
Share-based payments
Shares issued - severance
Balance at 30 June
(c) Movements in performance rights
Balance at 1 July
Previously granted not yet vested at July 1
Granted in lieu of director's fees
Converted to shares
Forfeited
Granted
Granted not yet vested
Balance at 30 June
2020
Shares
2019
Shares
2020
$
2019
$
634,456,542
345,443,598
65,943,807
54,367,832
345,443,598
285,727,610
-
2,068,366
1,216,968
-
634,456,542
345,443,598
-
-
-
-
-
345,443,598
54,367,832
11,768,661
(634,502)
331,213
110,603
-
65,943,807
54,367,832
-
-
-
-
-
54,367,832
2,989,775
1,971,163
140,554
(3,130,334)
(238,480)
1,259,482
(1,705,978)
1,286,182
-
1,324,000
921,414
-
(241,220)
2,956,744
(1,971,163)
2,989,775
414,501
226,352
12,705
(427,213)
(27,378)
42,256
(127,654)
113,569
-
403,380
83,288
-
(185,344)
339,529
(226,352)
414,501
(d) Share options issued
At year-end there were Nil free attaching options outstanding (2019: Nil) and 1,500,000 share-based payment options outstanding (2019:
2,400,000). Warrants issued under the extinguished convertible note and previously recognized as a derivative liability were transferred to the
option reserve account at the payoff date.
(e) Movements in share options
Grant
Date
Exercise
Price
Expiry
date
Balance at
start of year
Granted
Exercised
Expired
Balance at
end of year
2020
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Warrants
Total
2019
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Total
01-Oct-15
04-Nov-16
04-Nov-16
04-Nov-16
31-Dec-19
$0.75 30-Sep-20
$0.75 04-Nov-19
$1.25 04-Nov-19
$1.75 04-Nov-19
$0.06 29-Mar-23
01-Oct-15
04-Nov-16
04-Nov-16
04-Nov-16
$0.75 30-Sep-20
$0.75 04-Nov-19
$1.25 04-Nov-19
$1.75 04-Nov-19
1,500,000
300,000
300,000
300,000
-
2,400,000
1,500,000
300,000
300,000
300,000
2,400,000
-
-
-
-
3,829,787
3,829,787
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(300,000)
(300,000)
(300,000)
-
(900,000)
-
-
-
-
-
1,500,000
-
-
-
3,829,787
5,329,787
1,500,000
300,000
300,000
300,000
2,400,000
ALEXIUM INTERNATIONAL GROUP LIMITED
40
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
(f) Details of share options
Outstanding at 1 July
Granted
Exercised
Expired
Outstanding at 30 June
(1) Weighted average exercise price
(2) Weighted average remaining contractual life
a) Warrants
b) Directors
c) Services rendered
Total
Number
2,400,000
3,829,787
-
(900,000)
5,329,787
2020
WAEP1
WARCL2
0.94
0.04
-
(1.25)
0.25
0.91
1.97
-
-
2.04
Number
2,400,000
-
-
-
2,400,000
2019
WAEP
WARCL
0.94
-
-
-
0.94
0.91
-
-
-
0.91
2020
Average fair
value per
option
$
Number
0.04
-
-
142,025
-
-
142,025
-
1,500,000
900,000
2,400,000
2019
Average fair
value per
option
-
-
-
$
-
-
-
-
Number
3,829,787
1,500,000
-
5,329,787
(g) 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.
(h) Capital management
The Company’s objectives in managing capital are to safeguard the Company’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:
Shares in lieu of salary
Performance rights vested but not issued
Professional services
Shares forfeited
Total
2020
2019
Number
526,523
1,286,182
1,453,704
-
3,266,409
$
50,012
113,569
56,763
-
220,344
Number
$
921,414
2,068,366
-
(241,220)
2,748,560
88,433
328,898
-
(173,767)
243,564
The equity-settled share-based payments provided during the year related to:
(a) Shares
526,523 shares (2019: 921,414) in lieu of salary for non-executive directors and 1,453,704 shares (2019: nil) for professional services.
(b) Performance rights
During the reporting period performance rights totalling 1,286,182 (2019: 2,068,366) were granted. An operating expense of $113,569 (2019:
$328,898) was recognised for the vested performance rights.
ALEXIUM INTERNATIONAL GROUP LIMITED
41
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
18. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents
Cash on hand
2020
2019
4,741,251
3,843,343
(b) Reconciliation of operating loss after income tax to net cash used in operating activities
Operating loss after income tax
(6,125,476)
(6,939,521)
Non-cash items:
Depreciation and amortisation of non-current assets
Share-based payment
Amortisation on borrowings
Loss on impairment
Loss on debt extinguishment
Loss on fair value movement- embedded derivative
Loss on disposal of assets
Changes in assets and liabilities net of effect of purchase of subsidiaries:
(Increase) in trade and other receivables
Decrease in inventories on hand
Decrease / (Increase) in other current assets
(Decrease) / Increase in trade and other payables
(Decrease) / Increase in other current liabilities
Net cash (used in) operating activities
(c) Reconciliation to net cash used in investing activities
Property, plant, and equipment additions and proceeds from disposal
Intangible asset additions
Non-cash items
Foreign exchange movement on transfers
(Increase) / Decrease in working capital
Net cash flows (used in) investing activities
19. RELATED PARTY TRANSACTIONS
(a) Related party transactions
588,567
220,344
1,084,075
-
1,522,003
27,523
2,694
(17,657)
231,899
33,417
(708,304)
(34,221)
(3,175,135)
355,651
369,374
1,453,261
48,750
-
(629,642)
-
(448,223)
363,095
(5,041)
616,205
474,550
(4,341,541)
93,691
1,098,264
144,437
1,083,574
-
8,160
-
(90,175)
1,200,115
1,137,836
Colinton Capital Partners
During the period, $333,904 (2019: Nil) was paid to Colinton Capital Partners, a related party of Simon Moore, Non-Executive Director
Coupon interest on convertible note
Due Diligence
Underwriting fee
Total
2020
105,381
103,305
125,218
333,904
2019
-
-
-
-
ALEXIUM INTERNATIONAL GROUP LIMITED
42
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
(b) Transactions with KMP
Short-term employee benefits
Salary and fees
Non-monetary benefits
Other
Total
Post-employment super-annuation
Total
Share-based payments- Performance rights
Share-based payments – Shares in lieu of salary
Total
Bonus
Termination Benefits
Total
Total
20. SEGMENT REPORTING
2020
2019
1,012,786
44,685
-
1,057,471
10,154
10,154
88,576
50,012
138,588
44,120
-
44,120
907,934
32,134
216,390
1,156,458
3,758
3,758
113,709
88,433
202,142
145,440
80,876
226,316
1,250,333
1,588,674
The financial results from this segment are equivalent to the financial statements of the Company as a whole.
Geographic information of revenue and non-current assets excluding financial instruments are as follows:
2020
Revenue
Interest received
Other income
Interest expense
Property, plant and equipment
Right of use asset
Intangible assets
Depreciation and amortisation
2019
Revenue
Interest received
Other income
Interest expense
Property, plant and equipment
Intangible assets
Depreciation and amortisation
Australia
US
Cyprus
-
15,468
-
1,192,013
-
-
-
-
6,078,857
3,189
-
690,345
1,095,886
1,194,166
2,675,292
562,819
-
-
-
-
-
-
3,323
25,748
Australia
US
Cyprus
-
12,321
-
1,453,261
-
-
-
5,059,039
15,293
-
1,340,343
1,727,001
1,748,455
343,880
-
-
-
-
-
30,029
11,771
Total
6,078,857
18,656
-
1,882,358
1,095,886
1,194,166
2,678,615
588,567
Total
5,059,039
27,614
-
2,793,604
1,727,001
1,778,484
355,651
ALEXIUM INTERNATIONAL GROUP LIMITED
43
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
21. INVESTMENTS IN CONTROLLED ENTITIES
Parent Entity
Alexium International Group Limited
Subsidiaries of Alexium International Group Limited
Alexium Limited
Alexium Inc.
Percentage Owned
(ordinary shares)
2020
2019
Country of
Incorporation
Australia
Cyprus
USA
100
100
100
100
(1) The parent entity has an interest free unsecured loan with Alexium Inc. amounting to $42,523,293 (2019: $39,186,654).
(2) The parent entity has an interest free unsecured loan with Alexium Ltd amounting to $282,820 (2019: $291,446).
22. FINANCIAL INSTRUMENTS
(a) Interest rate risk exposures
The Company 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 Company’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
> 1 Year
$
1-5 Years
$
5+ years
$
Non-
Interest
Bearing
$
Total
$
2020
Financial Assets
Cash and cash equivalents
Trade and other receivables/other
financial assets
Financial Liabilities
Trade and other payables
Lease liabilities
Convertible note
Derivative liability
Other borrowings
2019
Financial Assets
Cash and cash equivalents
Trade and other receivables/other
financial assets
Financial Liabilities
Trade and other payables
Lease liabilities
Convertible note
Derivative liability
0.27
3,503,515
1,237,736
-
-
-
3,503,515
-
1,237,736
-
-
-
-
-
-
-
4,741,251
979,680
979,680
979,680
5,720,931
-
9.60
6.00
-
1.0
-
-
-
-
-
-
-
-
235,484
-
-
-
235,484
-
1,004,491
3,611,566
1,810,494
460,352
6,886,903
-
280,766
-
-
-
280,766
905,513
-
-
-
-
905,513
905,513
1,520,741
3,611,566
1,810,494
460,352
8,308,666
0.38
3,138,132
-
-
-
3,138,132
-
-
-
-
-
-
-
9.27
13.50
-
-
-
-
-
-
-
-
198,438
-
-
198,438
-
206,217
9,000,000
658,141
9,864,358
-
-
-
-
-
-
-
-
705,211
3,843,343
962,023
1,667,234
962,023
4,805,366
1,558,500
-
-
-
1,558,500
404,655
9,000,000
658,141
1,558,500 11,621,296
ALEXIUM INTERNATIONAL GROUP LIMITED
44
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
(b) Interest rate risk
At 30 June 2020, if interest rates had increased by 1% from the yearend variable rates with all other variables held constant, post tax profit and
equity for the Company would have been $47,413 higher (2019: $38,433 higher) based on cash and cash equivalents.
The 1% sensitivity is based on reasonable possible changes using an observed range of historical RBA movements over the last year.
(c) Foreign currency risk
The Company currently conducts its operations across international borders. A large proportion of the Company’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. 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 Company 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 Australian dollar and to a lesser degree UK pound sterling may impact on
the Company’s financial results. The following table shows the foreign currency risk on the financial assets and liabilities of the Company’s operations
denominated in currencies other than the functional currency of the operations.
2020
Australian dollar
US dollar
UK pound sterling
Statement of financial position exposure
2019
Australian dollar
US dollar
UK pound sterling
Statement of financial position exposure
Net Financial Assets/(Liabilities) in USD
USD
AUD
GBP
Total USD
42,523,293
-
559,032
43,082,325
-
(42,523,293)
(282,820)
(42,806,113)
282,820
(559,032)
-
(276,212)
42,806,113
(43,082,325)
276,212
-
39,186,654
-
560,632
39,747,286
-
(39,186,654)
(291,446)
(39,478,100)
291,446
(560,632)
-
(269,186)
39,478,100
(39,747,286)
269,186
-
The above balances relate to intercompany loans between member companies of the Company.
(d) Credit Risk
Credit risk arises from the financial assets of the Company, which comprise cash and cash equivalents. The Company's exposure to credit risk arises
from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The Company does not
hold any credit derivatives to offset its credit exposure. The Company’s exposure to credit risk is minimal. Total bad debt expense for the year was
nil. As the Company does not currently have any significant debtors, lending, stock levels or any other credit risk, a formal credit risk management
policy is not maintained.
(e) Liquidity risk
The Company 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.
The Company’s non-derivative financial liabilities have contractual maturities as summarised below:
2020
Trade and other payables
Lease liabilities
Borrowings
Statement of financial position exposure
2019
Trade and other payables
Finance lease obligations
Borrowings
Statement of financial position exposure
ALEXIUM INTERNATIONAL GROUP LIMITED
Current
1-5 Years
5+ years
905,513
235,484
-
1,140,997
-
1,004,491
5,981,427
6,985,918
-
280,766
-
280,766
1,558,500
198,438
-
1,756,938
-
206,217
10,944,000
11,150,217
-
-
-
-
45
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
(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.
As at 30 June 2020 and 2019, 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 Company’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.
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 Monte Carlo binomial lattice simulation. The model considers 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 four years.
The following shows the levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis:
2020
Derivative liability
Statement of financial position exposure
2019
Derivative liability
Statement of financial position exposure
There were no Level 1 or Level 2 transfers in 2020 or 2019.
23. PARENT ENTITY INFORMATION
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
1,810,494
1,810,494
1,810,494
1,810,494
658,141
658,141
658,141
658,141
The following details information related to the parent entity, Alexium International Group Limited. The information presented here has been
prepared using consistent accounting policies as presented in Note 2.
Current Assets
Non-current assets
Total Assets
Current Liabilities
Long Term Liabilities
Total Liabilities
Contributed equity
Accumulated losses
Performance rights reserves
Option reserves
Total Equity
Loss for the year
2020
1,656,632
7,794,935
9,451,567
233,638
3,790,372
4,024,010
2019
698,849
7,067,227
7,766,076
128,786
7,254,294
7,383,080
65,943,807
(61,355,889)
113,569
726,070
5,427,557
54,367,832
(60,641,008)
1,021,204
5,634,968
382,996
(6,314,423)
(6,971,414)
ALEXIUM INTERNATIONAL GROUP LIMITED
46
NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 June 2020
24. COMMITMENTS AND CONTINGENCIES
The Company has the following contingent liabilities and commitments:
(a) Commitments
The Company does not have any commitments beyond those disclosed as disclosed in the notes above.
(b) Contingencies
The Company has no contingent liabilities.
25. DIVIDENDS
No dividend has been declared or paid during the current financial year or the prior financial year. The Company does not have any franking credits
available for current or future years as it is not in a tax paying position.
26. SUBSEQUENT EVENTS
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 Company, the results of those operations, or the state of affairs of the Company, in future financial years.
ALEXIUM INTERNATIONAL GROUP LIMITED
47
DIRECTOR’S 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 2020 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.
2. The remuneration disclosures included in the Directors’ Report (as part of the audited Remuneration Report) for the year ended 30 June
2020, comply with section 300A of the Corporations Act 2001 (Cth).
3.
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.
4. 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:
Rosheen Garnon
Chair
Dated 28 August 2020
ALEXIUM INTERNATIONAL GROUP LIMITED
48
INDEPENDENT AUDITOR’S REPORT
ALEXIUM INTERNATIONAL GROUP LIMITED
49
INDEPENDENT AUDITOR’S REPORT
ALEXIUM INTERNATIONAL GROUP LIMITED
50
INDEPENDENT AUDITOR’S REPORT
ALEXIUM INTERNATIONAL GROUP LIMITED
51
INDEPENDENT AUDITOR’S REPORT
ALEXIUM INTERNATIONAL GROUP LIMITED
52
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 11 August 2020.
Quoted equity securities
634,456,542 fully paid ordinary shares are held by 4,502 shareholders.
Unquoted equity securities
Date
Options/Warrants
Granted
01-Oct-15
04-Nov-16
04-Nov-16
04-Nov-16
31-Dec-19
Expiry Date
30-Sep-20
04-Nov-19
04-Nov-19
04-Nov-19
29-Mar-23
Exercise price of
shares
No. under options
A$ 0.75
A$ 0.75
A$ 1.25
A$ 1.75
A$ 0.35
1,500,000
300,000
300,000
300,000
4,255,319
Shareholder distribution
The number of shareholders, by size of holding, are:
Holding Range Units
Holders
Total Units
1
1,001
5,001
10,001
100,001
-
-
-
-
-
1,000
5,000
10,000
100,000
999,999,999
481
1,077
684
1,720
540
4,502
194,969
3,199,246
5,473,803
65,122,336
560,466,188
634,456,542
% Issued
Share
Capital
0.03%
0.50%
0.86%
10.26%
88.34%
100.00%
Unmarketable parcels
Minimum parcel A$500 at $0.060 per unit
Holding Range Units
Substantial holders
Rank
Name
1 COLINTON CAPITAL PARTNERS PTY LTD - COLINTON CP FUND 1 (A) A/C
2 SANDHURST TRUSTEES LTD - WENTWORTH WILLIAMSON A/C
3 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
4 DR STUART LLOYD PHILLIPS & MRS FIONA JANE PHILLIPS - L & FJ PHILLIPS PENS F A/C
Holders
Total Units
1,936
5,919,899
% Issued
Share Capital
0.93%
Total Units
71,145,234
58,826,712
50,497,322
36,803,605
% Issued
Share Capital
11.21%
9.27%
7.96%
5.80%
Voting rights
The voting rights attaching to each class of equity securities are set out below:
• 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.
• Options: No voting rights.
• Warrants: No voting rights.
Stock exchange listing
• Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Stock Exchange Ltd.
ALEXIUM INTERNATIONAL GROUP LIMITED
53
SHAREHOLDER INFORMATION
Equity Security Holders
Twenty largest holders of quoted equity securities:
Name
COLINTON CAPITAL PARTNERS PTY LTD - COLINTON CP FUND 1 (A) A/C
SANDHURST TRUSTEES LTD - WENTWORTH WILLIAMSON A/C
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
DR STUART LLOYD PHILLIPS & MRS FIONA JANE PHILLIPS - L & FJ PHILLIPS PENS F A/C
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NAAM GROUP PTY LTD - NAAM INVESTMENT A/C
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
BOND STREET CUSTODIANS LIMITED - LAM1 - D08059 A/C
DDH GRAHAM LIMITED - THE LUGARNO FUND A/C
Rank
1
2
3
4
5
6
7
8
9
10 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - EUROCLEAR BANK SA NV A/C
11 MR HERMAN BROOKINS
12 DUCKY'S LIFELINE PTY LTD - THE R EDWARDS SUPER A/C
13 MNM CAPITAL PTY LTD - BRIGHT FUTURE A/C
14
15 MR MARTIN KEITH THOMAS & MRS HELEN PATRICIA THOMAS
16
17
18 DR STUART LLOYD PHILLIPS & MRS FIONA JANE PHILLIPS - SL & FJ PHILLIPS S/F A/C
19 DAVID RIVETT PTY LIMITED - SUPER FUND A/C
20
LOMAND SERVICES LIMITED
CANNOW PTY LTD - C & T FAMILY S/FUND A/C
BOND STREET CUSTODIANS LIMITED - LAM1 - D08047 A/C
CITICORP NOMINEES PTY LIMITED
Total Units
71,145,234
58,826,712
50,497,322
36,803,605
22,460,535
18,874,256
13,835,189
9,966,667
9,200,000
8,337,055
8,333,333
8,200,552
6,658,082
6,174,040
5,431,500
5,281,500
4,400,000
4,280,000
4,000,000
3,772,798
% Issued
Share Capital
11.21%
9.27%
7.96%
5.80%
3.54%
2.97%
2.18%
1.57%
1.45%
1.31%
1.31%
1.29%
1.05%
0.97%
0.86%
0.83%
0.69%
0.67%
0.63%
0.59%
ALEXIUM INTERNATIONAL GROUP LIMITED
54