Annual
Report
for the year ended 30 June 2018
Adherium Limited
ABN 24 605 352 510
Company Overview
Adherium (ASX:ADR) is a global leader in digital health
technologies which address sub-optimal medication use
in chronic diseases. Our Hailie™ solution (formerly known
as Smartinhaler™ solution) is the world’s most clinically
supported asthma and COPD medication adherence
solution, leading to improved health outcomes for patients
with chronic respiratory disease.
Adherium has the broadest range of “smart” devices for
respiratory medications globally. The Bluetooth® enabled
Hailie™ sensors wrap around a patient’s existing inhalers and
automatically send usage data to their smartphone. Using
the Hailie™ app enables patients, caregivers and healthcare
professionals to track medication adherence, set daily
reminders, and discover insights into their medication usage.
Table of
Contents
Chairman’s Statement
CEO’s Report
Directors’ Report (including Remuneration Report)
Auditor’s Independence Declaration
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 to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Australian Securities Exchange Additional Information
02
03
05
20
22
23
24
25
26
45
46
50
1
Annual Report 2018 Adherium Ltd Chairman’s
Statement
Dear Shareholders
In last year’s report I noted that the US market represents
just under half of the world’s healthcare spend, and so
is critical to Adherium’s future. It is also a market that
has a unique structure as compared to many others
around the world, and one in which Adherium’s Hailie™
platform can make a real difference. With so many lives
essentially covered privately by both insurers and self-
insured corporates, there is a large opportunity to help
these entities reduce treatment costs arising from non-
adherence to prescribed medications. This is the basis of
our direct-to-payor channel strategy.
Building on our Biopharmaceutical Partner business,
through 2018 our CEO, Arik Anderson, has established
the infrastructure in the US – including a commercial
team, US FDA marketing approvals of Hailie™ sensors,
and logistics – to launch commercially. This has
culminated in the Company securing its first customer
in this channel, Vitalus Health, who’s network covers
more than 40,000 patients. Adherium is well positioned
to expand our US customer base and I look forward to
reporting through this year on increasing numbers of
subscribing patients on our Hailie™ platform.
We continue to appreciate the support of all
shareholders. Through 2018 we held quarterly investor
update calls and I encourage you as fellow shareholders
to call in and attend these going forward to follow
Adherium’s growth.
Adherium is well
positioned to expand
our US customer base
and I look forward to
reporting through this
year on increasing
numbers of subscribing
patients on our
Hailie™ platform.
Thomas Lynch
Non-executive Chairman
2
Annual Report 2018 Adherium Ltd
CEO’s
Report
Dear fellow Shareholders
Adherium innovated a chronic disease management
platform targeting avoidable treatment costs resulting
from medication non-adherence. Our platform has been
developed with a proprietary infrastructure to address
global medication adherence. Today we are targeting the
respiratory disease market, where more than 300 million
people suffer from chronic asthma or COPD; in the future
we expect to have other disease market opportunities,
such as diabetes and heart disease attached to the
platform that our research and development teams are
currently working on.
Our Hailie™ respiratory solution is approved for use with the
broadest range of medication inhalers enabling us to be
part of more than 65 healthcare provider programs and
over 130,000 of our regulatory cleared sensors sold to date.
Importantly, data from our technology is being captured
and utilized daily by patients, caregivers and physicians in
the USA and 40 other countries across the world.
Fiscal 2018 has been a pivotal year for Adherium. A year
ago, we communicated our fiscal year 2018 goals, which
included launching our Hailie™ solution to U.S. consumers,
and plans to continue leveraging our Biopharma
relationships, in particular with AstraZeneca.
Our team achieved these goals and much more. On the
financial front, we set a revenue target range of $5.7 to
$7 million and a cash position greater than $10 million at
June 30, 2018. Our full fiscal year 2018 revenue was $5.9
million and we ended the year with a cash balance of
more than $12 million.
Our Biopharmaceutical partnerships are a key component
upon which our strategy of profit growth is built. We
established this channel in 2015, beginning with a
10-year manufacturing and development agreement with
AstraZeneca supporting our global expansion. For the full
fiscal year 2018 our business with AstraZeneca was almost
50% ahead of last year as part of the growing commercial
rollouts in Europe and Australia. We also saw additional
strong clinical results published in peer reviewed journals
that continue to support the significant benefits of
medication adherence provided by our Hailie™ system.
Looking ahead, we are focusing our attention on
driving global adoption of adherence solutions through
demonstrating the healthcare economic benefits,
particularly in the USA.
Importantly, during the year we received USA FDA 510(k)
clearances for both prescription and over-the-counter
use of our Hailie™ sensor system with a wide range of
asthma inhalers. This enabled us to officially launch
commercially in the USA at the end of fiscal 2018 through
our direct-to-consumer and direct-to-payor channels.
During the year we
received USA FDA 510(k)
clearances for both
prescription and
over-the-counter use of
our Hailie™ sensor system
with a wide range of
asthma inhalers.
The Haile™ solution consists of FDA-
approved Hailie™ sensors for different
inhaler medications, Hailie™ app, and
Hailie™ web portal.
3
Annual Report 2018 Adherium Ltd Our new channels to
market and growing
network of potential
partners reinforces our
vision of maximizing
our enterprise value by
becoming THE global
adherence company
in Digital Health.
Partnerships with payors (typically health insurers and
hospitals) and self-insured corporations are a key part
of our growth strategy, and we have already secured
a broad commercial relationship with Vitalus Health, a
significant leader in specialty lung disease management
programs that reduce chronic care costs through improved
patient engagement and increased compliance. We are
now rolling out our Hailie™ solution through Vitalus Health’s
network of lung specialists who engage with more than
40,000 patients in the south-west USA. Through fiscal 2019
we will also be focusing on other self-contained insurance
systems where doctors are a part of the same system as
the insurer, so everyone’s incentives are aligned when
the insurers save money. We are in active discussions with
large self-insured employers. I’m particularly excited about
these opportunities within this channel, as the self-insured
companies are able to implement changes more quickly,
and they’ve demonstrated a willingness to adopt new
technology to save costs and improve employee health.
Across both the direct-to-consumer and direct-to-payor
channels we expect to add at least 20,000 patients on a
monthly subscription this coming fiscal year.
Building on the solid progress we made in fiscal 2018, I am
confident that we are entering this next year in the strongest
market position in our history. We are committed to the
opportunities we see ahead in medication adherence and
intend to focus on our growth and the execution with a
strong leadership team. Our new channels to market and
growing network of potential partners reinforces our vision
of maximizing our enterprise value by becoming THE global
adherence company in Digital Health collecting data to
ensure proper patient use of medication, reducing costs of
healthcare, enhancing comprehensive care, and improving
the quality of patients’ lives.
Arik Anderson
Group CEO
Partnerships with payors
(typically health insurers and
hospitals) and self-insured
corporations are a key part of
our growth strategy.
4
Annual Report 2018 Adherium Ltd Directors’ Report
The Directors present their report on the consolidated entity (the Group), consisting of Adherium Limited (the Company
or Adherium) and the entities it controlled at the end of, or during, the year ended 30 June 2018, together with the
independent auditor’s report thereon.
Directors
The Directors of the Company at any time during the year and until the date of this report are:
Mr Thomas Lynch, BSc, FCA. Age 62.
Independent Non-Executive Chairman
Appointed as a Director and Chairman on 1 September 2016.
Mr Lynch has extensive capital markets experience in the internationalisation of the healthcare sector. He has recently
stepped down as chair of Icon plc, one of the world’s largest clinical research organisations having served on its board
for 22 years. Mr Lynch is currently a Chairperson at several notable organisations, including Evofem Holdings, Evofem,
Dublin Academic Medical Centre, Sigmoid Pharma, Molecular Medicine Ireland and the Queen’s University of Belfast
Foundation. Mr Lynch also serves as a non-executive director of GW Pharma plc, a biotechnology company listed on
NASDAQ and AIM. In a pro-bono capacity, Mr Lynch serves as chair of the Ireland East Hospital Group, the largest
hospital group in Ireland. Mr Lynch has also served in a range of roles at Elan Corporation plc and Amarin Corporation
plc. Throughout his career, Mr Lynch has been involved in the listing of a number of companies on the NASDAQ market
and brings significant international capital markets experience to Adherium. Mr Lynch has held no other Australian
public company directorships in the last three years.
Mr Arik Anderson, BSc. Age 52.
Executive Director
Appointed as a Director on 29 November 2017.
Mr Anderson has 25 years of experience in the medical technology and medical device manufacturing industries and has
led significant growth for emerging technology companies. He was previously President, Perfusion and Surgical Devices
Division for Terumo Cardiovascular since 2011. Prior to this Mr Anderson was Senior Vice President, R&D and Operations
and General Manager for Somanetics from 2007 until the completion of the integration with Covidien in 2011. Mr Anderson
has also served as Director of Product Development at Delphi Medical Systems, a provider of technology and products
to the infusion, respiratory care, vital signs monitoring and power mobility medical device markets. In addition, he was
President and Chief Executive Officer of Tasso Solutions, a product development and manufacturing consulting firm. Mr
Anderson retains Board positions on the University of Michigan Medical School MTRAC Board, which oversees investment
in medical technology, and the University of Michigan Ross School of Business Zell Lurie Healthcare Board which oversees
student investment in emerging technology via the Zell Lurie Commercialization Fund. Mr Anderson has held no other
Australian public company directorships in the last three years.
Mr Jeremy Curnock Cook, MA. Age 69.
Non-Executive Director
Appointed as a Director on incorporation of Adherium Limited on 17 April 2015.
Mr Curnock Cook was formerly head of the life science private equity team at Rothschild Asset Management in the UK and
an active investor in the Australian life science sector. At Rothschild, Mr Curnock Cook was responsible for the launch of the
first dedicated biotechnology fund for the Australian market. Over his 40-year career, Mr Curnock Cook has specialised in
creating value in emerging biotech enterprises, through active participation with management. He has served on over 40
boards in various roles, including chair of private and public biotechnology companies listed on NASDAQ, LSE, TSX and
ASX. Mr Curnock Cook received his MA in Natural Sciences from Trinity College in Dublin, Ireland. He is currently Managing
Director of BioScience Managers (manager of a major shareholder in Adherium), Chairperson of Avena Therapeutics and
AmpliPhi Biosciences and sits on the board of Avita Medical, Rex Bionics Pty and acts as an alternative director for Sea
Dragon Ltd. Mr Curnock Cook was previously a director of Bioxyne Limited and Phylogica Limited. He has held no other
Australian public company directorships in the last three years.
5
Annual Report 2018 Adherium Ltd Dr William Hunter, MD. Age 55.
Independent Non-Executive Director
Appointed as a Director on 17 December 2015.
Dr Hunter has extensive experience in commercialising medical device technologies. He co-founded Angiotech
Pharmaceuticals in 1992 and assumed the position of CEO in 1997 when Angiotech was a venture-stage, private,
pre-clinical company with less than 50 employees. He led Angiotech through its IPO and listing on the Toronto Stock
Exchange and NASDAQ. Dr Hunter has over 200 patents and patent applications to his name and products in which
he was an inventor or co-inventor, including the TAXUS® Drug-Eluting Coronary Stent, the Zilver PTX Peripheral
Drug-Eluting Stent, the Quill barbed wound closure device and the 5-FU Anti-Infective Catheter. Combined,
these products have generated revenues of over $12 billion and have helped the lives of over 15 million patients
globally. He is currently President and CEO of Cardiome Pharma Corp (NASDAQ: CRME), a Director of Rex Bionics,
Co-Founder of Canary Medical and is an Industry Expert Advisor for BioScience Managers (manager of a major
shareholder in Adherium). He has previously served as a director of Epirus Biopharmaceuticals (NASDAQ: EPRS)
and Union Medtech. Dr Hunter completed his BSc from McGill University and a MSC and MD from the University of
British Columbia. Dr Hunter served as a practising physician in British Columbia for five years. Dr Hunter held no other
Australian public company directorships in the last three years.
As noted, as an Industry Expert Advisor for BioScience Managers, Dr Hunter has an association with a significant
shareholder of the Company. The board of directors is of the opinion that this does not compromise Dr Hunter’s
independence as to the best of the board’s knowledge he is not involved in decision making by BioScience Managers
and the value of the advisory services provided is not material.
Mr Bruce McHarrie, B.Com, FCA, GAICD. Age 60.
Independent Non-Executive Director
Appointed as a Director on 20 July 2015.
Mr McHarrie is currently an independent director and consultant with over 20 years’ experience in the health and life sciences
sectors. He was formerly with Telethon Kids Institute in Perth, Western Australia, for 15 years, where his roles included Chief
Financial Officer, Director of Operations and Director of Strategic Projects. Prior to joining Telethon Kids, Mr McHarrie was a
Senior Manager at Deloitte in London before moving to Rothschild Asset Management as Assistant Director of the Bioscience
Unit, a life sciences private equity group investing in early stage biotechnology and healthcare companies. Outside his role
at Adherium, he is currently an advisor to BioScience Managers (manager of a major shareholder in Adherium), a director
at AusCann (Australasian Medical Cannabis) and an independent consultant. Mr McHarrie is a Fellow of the Institute of
Chartered Accountants Australia and New Zealand. He holds a Bachelor of Commerce from the University of Western
Australia and is a graduate member of the Australian Institute of Company Directors. Until recently, Mr McHarrie served as a
non-executive director and chairman on the board of ASX listed company, Phylogica Limited. Mr McHarrie has held no other
Australian public company directorships in the last three years.
As noted, as an advisor to BioScience Managers, Mr McHarrie has an association with a significant shareholder of the
Company. The board of directors is of the opinion that this does not compromise Mr McHarrie’s independence as to
the best of the board’s knowledge he is not involved in decision making by BioScience Managers and the value of the
advisory services provided is not material.
Professor John Mills, AO, SB, MD, FACP, FIDSA, FRACP. Age 78.
Independent Non-Executive Director
Appointed as a Director on 20 July 2015.
Professor Mills is an internationally-regarded physician, scientist and biotechnology businessman. He was recruited
from the US to Melbourne 25 years ago as the managing director of the Burnet Institute of Medical Research and
Public Health. Since then Professor Mills has been managing director of an ASX-listed company, Narhex Life Sciences,
chairman of another ASX-listed company, AMRAD Corp., executive chairman of a Swedish biotechnology company,
Cavidi AB and non-executive director of a further ASX listed company, Phosphagenics Corp. Ltd. Thirteen years ago
he co-founded a boutique anatomic pathology practice, TissuPath Specialist Pathology. Before taking his current
position as Director of R&D at TissuPath, he served as Managing Director for three years. He is also a former investment
committee member at an Australian venture capital firm, GBS Venture Partners. Professor Mills is an honours graduate
of the University of Chicago and Harvard Medical School, and is a Fellow of both the US and Australian Colleges of
Physicians. His expertise is in infectious diseases and pulmonary diseases. He maintains a clinical practice at The Alfred
Hospital in Melbourne. Professor Mills has held no other Australian public company directorships in the last three years.
6
Annual Report 2018 Adherium Ltd Mr Bryan Mogridge BSc, ONZM, FNZIOD. Age 72.
Independent Non-Executive Director
Appointed as a Director on 20 July 2015.
Mr Mogridge has been a successful public company director for over 30 years. He has been CEO of two listed
companies and has a background in science, manufacturing, investment and technology. His business philosophy is to
be invested where he is involved and grow value for all shareholders. Mr Mogridge is currently a director of Mainfreight,
Clearspan, BUPA ANZ and Thinxtra, and until recently Chairperson of Rakon Ltd. He also recently joined as a director
of Auckland Regional Amenities Funding Board. Mr Mogridge also has significant involvement in philanthropy, chairing
one of New Zealand’s most successful charities (The Starship Foundation) for 20 years, helping to transform sick
children’s lives through New Zealand’s national children’s hospital “The Starship”. Mr Mogridge is currently a Trustee for
The Starship Foundation. He has held no other Australian public company directorships in the last three years.
Mr Garth Sutherland, MSc was an Executive Director until his resignation as a director on 29 November 2017.
Joint Company Secretaries
Rob Turnbull, B.Com, CA. Age 51.
VP Finance & Business Services and Joint Company Secretary
Appointed 21 August 2015.
Mr Turnbull has over 25 years’ corporate experience, starting his career with PricewaterhouseCoopers where he worked
in Auckland, Toronto, and London; and has over 15 years’ experience with technology and life-sciences companies. Mr
Turnbull has also been Chief Financial Officer for an ASX-listed biotech company undertaking multiple international
studies ranging from preclinical to clinical Phase 3, and with operations in the United States, Australia and New
Zealand. In addition to capital markets financing and compliance, treasury, tax, financial reporting, commercial
contract negotiations and general management, he has been involved in M&A activity to acquire and develop specific
technologies. Mr Turnbull graduated from Auckland University with a Bachelor of Commerce, and is a Chartered
Accountant and member of Chartered Accountants Australia and New Zealand.
Mark Licciardo, B.Bus (Acc), GradDip CSP, FCSA, FCIS, FAICD. Age 54.
Joint Company Secretary
Appointed 10 May 2016.
Mr Licciardo is Managing Director of Mertons Corporate Services Pty Ltd (Mertons) which provides company secretarial
and corporate governance consulting services to ASX listed and unlisted public and private companies. Prior to establishing
Mertons, Mr Licciardo was Company Secretary of the Transurban Group (2004-07) and Australian Foundation Investment
Company Limited, Djerriwarrh Investments Limited, AMCIL Limited and Mirrabooka Investments Limited (1997-2004). Mr
Licciardo has also had an extensive commercial banking career with the Commonwealth Bank and State Bank Victoria. Mr
Licciardo is a former Chairman of Governance Institute of Australia (GIA) (formerly the Chartered Secretaries Australia) in
Victoria, a fellow of both GIA and the Australian Institute of Company Directors (AICD), former Chairman of Melbourne Fringe
Limited and a director of ASX listed Frontier Digital Ventures and several unlisted public and private companies.
7
Annual Report 2018 Adherium Ltd Directors’ Meetings
The number of meetings of Directors (including meetings of committees of directors) held during the period and the
number of meetings attended by each Director was as follows:
Directors’ Meetings
Audit & Risk Committee
Meetings
Nomination & Remumeration
Committee Meetings
Meetings
eligible
to attend
Meetings
attended
Meetings
eligible
to attend
Meetings
attended
Meetings
eligible
to attend
Meetings
attended
T Lynch
A Anderson
J Curnock Cook
W Hunter
B McHarrie
J Mills
B Mogridge
G Sutherland
8
5
8
8
8
8
8
4
8
5
6
8
8
6
7
4
-
-
2
-
7
7
7
-
-
4*
2
-
7
6
7
-
4
-
4
-
-
4
4
-
4
1*
4
-
-
3
4
-
*In attendance ex-officio.
Committees of the Board
The Company has established the following committees of the board, with membership in the year to 30 June 2018 as noted:
Committee
Audit & Risk
Membership
Bruce McHarrie (Chair), Non-Executive Director
Jeremy Curnock Cook, Non-Executive Director (resigned September 2017)
John Mills, Non-Executive Director
Bryan Mogridge, Non-Executive Director
Nomination & Remuneration
Bryan Mogridge (Chair), Non-Executive Director
Jeremy Curnock Cook, Non-Executive Director
Thomas Lynch, Non-Executive Director
John Mills, Non-Executive Director
The committees’ Charters are available on the Company’s website.
Principal Activities
During the year, the principal continuing activity of the Group was the development, manufacture and supply of its
Hailie™ (formerly Smartinhaler™) digital health technologies which address sub-optimal medication use and improve
health outcomes in chronic disease.
Results and Dividends
The net loss after tax of the Group for the year ended 30 June 2018 was $9,338,000.
No dividends were paid, declared or recommended during the year ended 30 June 2018.
8
Annual Report 2018 Adherium Ltd Review of Operations
Adherium is pleased to report achievement of all of its milestones set at the beginning of the 2018 fiscal year. Revenue this
year was $5.9 million, up 150% on 2017 and within guidance given of between $5.7 million and $7.0 million; 27,000 Hailie™
(previously known as Smartinhaler™) sensors were sold, with over 25,000 to AstraZeneca as forecasted; the Hailie™ solution
was launched online in the United States in June 2018; and closing cash was $12.1 million compared with the minimum of
$10 million forecasted.
The milestones were achieved across three strategic channels:
• BioPharma Partner volumes with AstraZeneca met guidance, at over 25,000 sensors. In addition, new device
design, development and regulatory approval programs achieved the targets needed to support customer roll-
outs, while at the same time generating significant revenue for the Company. Notably, Adherium gained two US
FDA 510(k) clearances in the year for its Hailie™ sensor for use with AstraZeneca’s Symbicort® asthma
medication in the US, the most recent being over-the-counter (OTC) clearance to enable sales direct
to consumers;
• The direct to consumer program commenced at the beginning of fiscal 2018 with the launch of the New Zealand
pilot through an online eCommerce store. Vik Panda, VP of Marketing was hired in Q2, and further development
of the online offering and OTC clearances culminated in the US online launch in June 2018 with a target of 1,000
subscribing customers within the first three months. Subscribing customers are anticipated to be acquired through
a combination of online store, retailers, pharmacies and consumer product partners looking to add value to their
products in the market place;
• For payers and providers, Adherium has the best supporting clinical outcome data in reducing hospitalisations
due to poorly controlled asthma. To initiate this channel in the US, Tim Houchin, VP of Sales, was appointed in
Q3 to focus on payers and providers and in Q4 announced its first program in this channel with Vitalus Health in
the southwest region of the United States, targeting patients with chronic obstructive pulmonary disease (COPD)
using Adherium’s technology.
Revenue was up 150% on the prior year, at $5,867,000. This increase resulted from:
• Sensor volume increasing from 18,000 in 2017 to over 27,000 in 2018. Commercial to clinical volume continued
to increase from a ratio of 25:75 in the first half of fiscal 2017, to 95:5 in 2018, demonstrating a valuable shift in the
Company’s operations with less focus on clinical business, and significantly increased focus on commercial; and
• The commercialisation with AstraZeneca of innovative product design, engineering and other services which
amounted to $4,049,000 for the period.
Research and development activities for the year ended 30 June 2018 amounted to $4,447,000 and included:
• Clearance in August 2017 by the US FDA of Adherium’s 510(k) application for its SmartTouch™ for Symbicort®.
This device has been designed for AstraZeneca’s Symbicort® medication that is marketed in the US as a
pressurised Metered Dose Inhaler (pMDI), as compared with the Turbuhaler marketed in most other countries in
the world and for which Adherium supplies its SmartTurbo device, branded for AstraZeneca as Turbu+;
• Following the initial 510(k) clearance for SmartTouch™ for Symbicort® the Company submitted an application
to extend this to over-the-counter (OTC) sales directly to consumers. This OTC clearance was received in
March 2018, enabling support of AstraZeneca’s Symbicort® medication sales in the US as well as Adherium’s
direct to consumer and payer initiatives;
• Adherium gained its US FDA 510(k) clearance for its SmartTouch™ device for GlaxoSmithKline (GSK) medications
in 2014 and in fiscal 2018 submitted an application to extend this to an OTC clearance. This was received in July
2018, enabling the Company’s Hailie™ solution to be sold to users of ProAir®, Ventolin® and Flovent® aerosol
asthma inhalers;
• Ongoing development of our mobile apps (iOS and Android) and cloud software platform, enabling self-
enrolment by patients, as well as developing an online portal for healthcare professionals and clinicians to
provide patient-group data collection and reporting from Hailie™ sensors. This platform will support
engagement between healthcare professionals and patients by enabling sharing and monitoring of patient
inhaler usage; and
• Continued development of a new SmartTouch™ sensor (ADR ST19) for an inhaled respiratory drug currently in
development and scheduled by the drug’s owner for clinical trials in calendar 2018.
9
Annual Report 2018 Adherium Ltd
Sales and marketing expenses were $3,687,000 for the year. Following a reorganisation at the end of fiscal 2017, the
majority of sales and marketing activities are now based in the US where Adherium is headquartered in San Mateo,
California. Milestones through the year include:
• Appointment of Vik Panda as Vice President of Marketing, with proven experience in direct to consumer online
community growth through digital marketing;
• The addition of Tim Houchin as its Vice President of Sales, bringing over 20 years US sales experience, including
key relationships with insurance carriers, and will be primarily responsible for Adherium’s US direct to
payer channel;
• Initiation of a program with Vitalus Health in the southwest region of the United States, targeting patients with
chronic obstructive pulmonary disease (COPD) using Adherium’s technology;
• Launch of Adherium’s new Hailie™ global brand and solution, comprising the OTC-cleared Hailie™ sensors, the
Hailie™ mobile app, and cloud platform to connect people with asthma and COPD to better care; and
• Launch of Adherium’s online direct to consumer channel in both the US and New Zealand.
Administrative expenses of $5,412,000 included the key hire, Arik Anderson, as Adherium’s Chief Executive Officer based
in the US, as well as recruitment of the US based Chief Financial Officer role, with David Allinson appointed in the
second half of fiscal 2018. Non-cash costs in the six months included a share and option compensation credit of $13,000
due to employee share plan reversals following the reorganisation completed during the first half of fiscal 2018 (2017:
$478,000 expense), and depreciation and amortisation expense of $212,000 (2017: $234,000).
Cash at 30 June 2018 was $12,118,000, a net use of $10,661,000 in the year. Included in this net use was $408,000
invested in cash term deposits in the June 2018 quarter with a maturity greater than three months resulting in its
classification as a short-term investment rather than cash under accounting rules.
Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of the Group during the financial year ended 30 June 2018.
Events since the end of the Financial Year
There are no matters or circumstances that have arisen since the end of the financial year that have significantly affected
or may significantly affect the operations of the Group, the results of those operations or the state of affairs in future years.
Likely Developments and Expected Results
Commentary on the Group’s strategic direction and plan is set out in the CEO’s Report on pages 3 to 4.
Environmental Regulation
The Group’s operations are not subject to any significant environmental Commonwealth or State regulations or laws.
Directors’ Interests
The relevant interest of each Director in shares and options over shares in the Company as notified by the Directors to
the ASX in accordance with section 205G of the Corporations Act 2001 as at 30 June 2018 is:
Director
T Lynch
A Anderson
J Curnock Cook
W Hunter
B McHarrie
J Mills
B Mogridge
Ordinary Shares
Options over Ordinary Shares
1,000,000
1,500,000
380,000
800,000
464,853
396,000
9,856,105 *
-
-
-
-
-
-
-
* relevant interest includes 7,813,023 ordinary shares held in the Director’s capacity as trustee of the Company’s Employee Share Plan.
10
Annual Report 2018 Adherium Ltd
Indemnification and Insurance of Directors and Officers
The Company has entered into deeds of access, insurance and indemnity with each director and officer which contain
rights of access to certain books and records of the Group for a period of seven years after the director or officer ceases
to hold office. This seven-year period can be extended where certain proceedings or investigations commence before
the seven-year period expires.
In respect of the indemnity of the directors and officers, the Company is required, pursuant to the constitution, to indemnify
all directors and officers, past and present, against all liabilities allowed under law. Under the deed of access, insurance
and indemnity, the Company indemnifies parties against all liabilities to another person that may arise from their position
as a director or an officer of the Company or its subsidiaries to the extent permitted by law. The deed stipulates that the
Company will meet the full amount of any such liabilities, including reasonable legal costs and expenses.
In respect of insurance being obtained on behalf of the directors and officers, the Company may arrange and maintain
directors’ and officers’ insurance for its directors and officers to the extent permitted by law. Under the deed of access,
insurance and indemnity, the Company must obtain such insurance during each director’s and officer’s period of
office and for a period of seven years after a director or an officer ceases to hold office. This seven-year period can be
extended where certain proceedings or investigations commence before the seven-year period expires.
Disclosure of the insurance premiums and the nature of liabilities covered by such insurance are prohibited by the
relevant contracts of insurance.
Shares Under Option
Unissued shares
As at the date of this report, unissued ordinary shares of the Company under option comprised:
Exercise price
Total Number of Options
Vested Options
Expiry Date
$0.075268
$0.075268
$0.134039
$0.134039
$0.134039
$0.134039
$0.134039
$0.134039
$0.665
Outstanding at 30 June 2018
625,823
416,654
173,238
217,214
542,952
1,039,428
259,857
173,238
1,400,000
4,848,404
625,823
416,654
173,238
217,214
542,952
1,039,428
259,857
173,238
1,400,000
4,848,404
31 March 2019
31 March 2020
31 March 2020
30 November 2020
16 December 2020
1 January 2021
24 March 2021
31 March 2022
3 September 2018
The options over unissued ordinary shares do not entitle the holder to participate in any share issue of the Company or
any entity in the Group.
No options were granted to the Directors of the Company or other key management personnel of the Group in the year
to 30 June 2018.
Details of fully paid ordinary shares issued on exercise of options in the year to 30 June 2018 are contained in the
accompanying consolidated financial statements.
11
Annual Report 2018 Adherium Ltd Proceedings on behalf of the Company
There are no legal or other proceedings being made on behalf of the Company or against the Company as at the date of this report.
Non-audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Group are important.
The fees paid to PricewaterhouseCoopers for other services set out in note 6 of the Group’s financial statements for the year
ended 30 June 2018 related to independent assurance services provided pursuant to the Group’s claims for reimbursement
under governmental research and development grant programmes. The directors are satisfied that the provision of these
services during the year by the auditor did not impair the auditors’ independence as the amounts paid were not significant
and the services provided were assurance related.
Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 in
relation to the audit for the financial year is provided with this report.
Corporate Governance Statement
The board of Directors of Adherium Limited is responsible for corporate governance. The board has prepared the
Corporate Governance Statement (CGS) in accordance with the third edition of the ASX Corporate Governance
Council’s Principles and Recommendations under which the CGS may be made available on the Company’s website.
Accordingly, a copy of the Company’s CGS is available on the Adherium website at www.adherium.com under the
Investors/Corporate Governance/Governance Documents section.
Remuneration Report (Audited)
The Directors present the Group’s 2018 remuneration report which sets out the remuneration information for the
Company’s Non-Executive Directors, Executive Director and other key management personnel of the Group.
The report contains the following sections:
(a) Details of key management personnel disclosed in this report
(b) Remuneration governance
(c) Executive remuneration policy and framework
(d) Relationship between remuneration and Group performance
(e) Non-Executive director remuneration policy
(f) Details of remuneration of key management personnel
(g) Service agreements
(h) Details of share and option based compensation
(i) Equity instruments held by key management personnel
(j) Other transactions with key management personnel
(a) Details of key management personnel disclosed in this report
The following persons acted as key management personnel of the Company and the Group during the year ended
30 June 2018.
12
Annual Report 2018 Adherium Ltd
(i) Non-Executive and Executive Directors
•
•
•
•
•
•
•
•
Thomas Lynch
Arik Anderson
Non-Executive Chairman (appointed 1 September 2016)
Executive Director (appointed 29 November 2017) and Group CEO (appointed 9 June 2017)
Jeremy Curnock Cook
Non-Executive Director (appointed on incorporation 17 April 2015)
William Hunter
Non-Executive Director (appointed 17 December 2015)
Bruce McHarrie
Non-Executive Director (appointed 20 July 2015)
John Mills
Non-Executive Director (appointed 20 July 2015)
Bryan Mogridge
Non-Executive Director (appointed 20 July 2015)
Garth Sutherland
Executive Director (appointed 20 July 2015; resigned 29 November 2017)
and Founder (Group CEO until 9 June 2017)
(ii) Other key management personnel
•
•
•
•
•
David Allinson
Chief Financial Officer (appointed 22 May 2018)
Rob Turnbull
Mark Licciardo
Joint Company Secretary (appointed 21 August 2015) and VP Finance & Business Services
(Chief Financial Officer until 11 September 2017)
Joint Company Secretary (appointed 10 May 2016)
Ross Bradding
Chief Operating Officer (appointed 1 August 2016; resigned 31 August 2017)
Timothy Marcotte
Chief Financial Officer (appointed 11 September 2017; resigned 31 January 2018)
(iii) Changes since the end of the reporting period
In the period after 30 June 2018 and up to the date of this report there have been no changes in key management personnel.
(b) Remuneration Governance
The Nomination and Remuneration Committee is a committee of the board. Its responsibilities include assisting the
board in ensuring that the Company:
• has coherent remuneration policies and practices which are observed and which enable it to attract and
retain executives and directors who will create value for shareholders;
• fairly and responsibly rewards executives having regard to the performance of the Company,
the performance of the executive and the general pay environment;
• provides disclosure in relation to the Company’s remuneration policies to enable investors to understand the
costs and benefits of those policies and the link between remuneration paid to directors and key executives
and corporate performance; and
• complies with the provisions of the ASX Listing Rules and the Corporations Act.
The primary purpose of the Nomination and Remuneration Committee is to support and advise the board in fulfilling its
responsibilities to shareholders in ensuring that the board is appropriately remunerated, structured and comprised of
individuals who are best able to discharge the responsibilities of directors by:
• assessing the size, composition, diversity and skills required by the board to enable it to fulfil its
responsibilities to shareholders, having regard to the Company’s current and proposed scope of activities;
• assessing the extent to which the required knowledge, experience and skills are represented on the board;
• establishing processes for the identification of suitable candidates for appointment to the board;
• overseeing succession planning for the board and the Chief Executive Officer;
• establishing processes for the review of the performance of individual directors and the board as a whole;
• assessing the terms of appointment and remuneration arrangements for non-executive directors; and
• assessment and reporting to the board in relation to:
- executive remuneration policy;
-
-
the remuneration of executive directors;
the remuneration of persons reporting directly to the Chief Executive Officer, and as appropriate,
other executive directors;
- diversity plans, measurable diversity objectives and ensuring equality in remuneration across gender
aligned, where relevant, with the ASX Corporate Governance Guidelines;
-
- superannuation arrangements; and
- all equity-based plans.
the Company’s recruitment, retention and termination policies and procedures;
13
Annual Report 2018 Adherium Ltd
(c) Executive remuneration policy and framework
Remuneration policy
The policy for determining the nature and amount of remuneration of key management personnel is agreed by the
board of directors as a whole on advice from the Nomination and Remuneration Committee. The board obtains
professional advice where necessary to ensure that the Group attracts and retains talented and motivated directors and
employees who can enhance the performance of the Group through their contributions and leadership. The Nomination
and Remuneration Committee makes specific recommendations on the remuneration package and other terms of
employment for the CEO having regard to his performance, relevant comparative information, and if appropriate,
independent expert advice.
For key management personnel, the Group provides a remuneration package that incorporates both cash-based
remuneration and, if appropriate, share-based remuneration. The contracts for service between the Group and key
management personnel are on a continuing basis, the terms of which are to align executive performance-based
remuneration with Group objectives.
The Nomination and Remuneration Committee is also responsible for making recommendations to the board in relation
to the terms of any issue of equity-based remuneration to employees, as part of their individual package, or a wider staff
incentive and retention scheme, and for ensuring that any such issue is made in accordance with the ASX Listing Rules.
Executive pay
The executive pay and reward framework has three components:
• base pay and benefits, including legislative superannuation;
• short-term performance incentives; and
•
long-term incentives through participation in the Adherium Employee Share Plans.
A combination of some or all of these components comprises an executive’s total remuneration.
Base pay
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for
executives is reviewed annually to ensure that executive remuneration is competitive with the market.
There are no guaranteed base pay increases included in any executives’ contracts.
Short-term incentives (STI)
Executives have a target STI opportunity depending on the accountabilities of the role and impact on the organisation.
The STI is a cash-based incentive which forms part of the executive’s total compensation, representing between 0%
and 50% of base salary. Each year, the Nomination and Remuneration Committee in conjunction with the CEO, will
consider the appropriate targets and key performance indicators (KPIs) of each executive to link the STI plan and the
level of payout if targets are met. This will include setting any maximum payout under the STI plan, and minimum levels
of performance to trigger payment of STI. The targets and KPIs selected are chosen to align executive performance
with the Group’s annual business objectives set by the board and encompassing business development, research &
development, and cash management.
The STI achievement is calculated and paid annually. The Nomination and Remuneration Committee in conjunction
with the CEO assesses the extent to which targets and KPIs have been achieved at a Company and individual
performance level to determine the STI to be paid. Measurement of achievement of the business objectives does not
involve comparison with factors external to the Company.
14
Annual Report 2018 Adherium Ltd
Long-term incentives (LTI)
Long-term incentives are provided to certain employees via the Adherium Employee Share Plans (the Plans), one of
which is operated for New Zealand resident participants and the other for participants resident elsewhere.
The board has the discretion to offer and issue to eligible employees including directors:
• ordinary shares in the Company issued at an issue price determined by the board. To date all shares have been
•
issued at the Company’s initial public offering price of A$0.50 per share;
limited recourse loans where some or all of the issue price of the share awards are funded by way of a loan
from the Company.
The Plans are designed to focus directors and executives on delivering long-term shareholder returns.
Share awards issued under the Plans generally vest in three equal tranches over three years of continuing employment.
If the vesting condition is not met, the related share award is forfeited and loan cancelled such that the executive
receives no benefit from unvested shares.
Participation in the Plans is at the board’s discretion and executives do not have a contractual right to participate in the Plans.
(d) Relationship between remuneration and Group performance
The Group is presently in a business growth phase, as it undertakes continued product development, and seeks relevant
regulatory approvals for its technologies and market penetration for its products, and this is the focus of executives and
the board. During this phase expenditures continue to exceed revenues, and in the year ended 30 June 2018 the Group
incurred a loss after tax of $9,338,000 (5.4 cent loss per share). In the year to 30 June 2018 the Company’s shares traded
between 6.8 and 20.0 cents per share. Given the stage of the Group’s commercial development, the board does not
utilise earnings per share as a performance measure and does not presently include the Company’s share price as a
measure of executive performance.
No dividends were paid, declared or recommended during the period ended 30 June 2018.
(e) Non-Executive Director remuneration policy
On appointment to the board, Non-Executive Directors enter into a service agreement with the Company in the form of a
letter of appointment. The letter summarises the board policies and terms, including remuneration, relevant to the office
of director.
Non-Executive Directors receive a fee which is inclusive of fees for chairing or participating on board committees. They
do not receive performance-based pay. Non-Executive Directors’ fees and payments are reviewed annually by the
board. The Non-Executive Chairman’s fees are determined independently of the fees of Non-Executive Directors based
on comparative roles in the external market. Non-Executive Chairman and Director fees were approved at the 2016
Annual General Meeting at $100,000 per annum for the Non-Executive Chairman (previously $80,000 per annum) and
$50,000 for each Non-Executive Director (previously $40,000 per annum). Legislative superannuation contributions are
also paid where applicable.
A Non-Executive Director may be paid fees or other amounts as the board determines where a Director performs ser-
vices outside the scope of the ordinary duties of a Director. The Company may reimburse Non-Executive Directors for
their expenses properly incurred as a Director or in the course of office.
15
Annual Report 2018 Adherium Ltd
(f) Details of remuneration of key management personnel
Remuneration for the year
ended 30 June 2018
Short Term Benefits
Post Employment Benefits
Share-based Payments
Salaries & Fees
$
Cash Bonus
$
Insurance
& Other
$
Superannuation
$
Value of Options/
Loan Funded Shares5
$
Performance Related
Remuneration
Fixed
Remuneration
$
Directors’ remuneration
Thomas Lynch
Jeremy Curnock Cook
William Hunter
Bruce McHarrie
John Mills
Bryan Mogridge
Sub-total Directors
Executives’ remuneration
Arik Anderson
David Allinson 1
Garth Sutherland
Mark Licciardo 2
Rob Turnbull
Ross Bradding 3
Timothy Marcotte 4
Sub-total executives
Total key management personnel
100,000
50,000
50,000
50,000
50,000
50,000
350,000
515,903
42,992
259,017
43,372
212,721
37,621
172,501
1,284,127
1,634,127
-
-
-
-
-
-
-
128,976
-
161,785
-
41,421
41,383
-
373,565
373,565
-
-
-
-
-
-
-
31,331
-
-
-
-
-
19,454
50,785
50,785
-
-
-
4,750
4,750
-
9,500
-
-
16,865
-
7,601
2,370
-
26,836
36,336
1. David Allinson was appointed Chief Financial Officer on 22 May 2018.
2. A company of which Mr Licciardo is a director received these fees from the Company for company secretarial and corporate governance
consulting services.
3. Ross Bradding resigned as Chief Operating Officer on 31 August 2017. The value of Share-Based Payments represents the reversal related to the
cancellation on resignation of Loan Funded Shares previously awarded under the Employee Share Plan.
4. Timothy Marcotte was appointed Chief Financial Offer 11 September 2017 and resigned 31 January 2018.
5. The fair values of options and loan funded shares are calculated at the date of grant using a Black-Scholes pricing model and allocated to each reporting period
in accordance with vesting. The values noted represent the portion of the fair value of the options or loan funded shares allocated to the reporting period.
Remuneration for the year ended
30 June 2017
Short Term Benefit
Post Employment Benefits
Share-based Payments
Total
$
112,375
56,188
56,188
60,938
60,938
56,188
402,815
684,020
43,484
461,736
43,372
273,984
59,722
191,955
1,758,273
2,161,088
Total
$
92,200
52,767
52,767
56,963
56,963
52,767
13,333
377,760
44,181
377,028
240,146
44,628
292,705
998,688
1,376,448
12,375
6,188
6,188
6,188
6,188
6,188
43,315
7,810
492
24,069
-
-
12,241
(21,652)
22,960
66,275
$
12,200
6,100
6,100
6,100
6,100
6,100
42,700
19,165
21,652
27,125
67,942
110,642
-
-
-
$
11%
11%
11%
10%
10%
11%
20%
1%
40%
20%
33%
-
-
$
13%
12%
12%
11%
11%
12%
-
-
-
26%
9%
26%
89%
89%
89%
90%
90%
89%
80%
99%
60%
100%
80%
67%
100%
$
87%
88%
88%
89%
89%
88%
100%
100%
74%
91%
100%
74%
80,000
46,667
46,667
46,667
46,667
46,667
13,333
326,668
44,181
264,474
212,130
44,628
207,801
773,214
-
-
-
-
-
-
-
-
-
79,342
-
-
49,983
129,325
129,325
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,196
4,196
-
-
8,392
-
14,047
6,364
-
7,796
28,207
36,599
Salaries & Fees
$
Cash Bonus
$
Insurance
& Other
$
Superannuation
$
Value of Options/
Loan Funded Shares5
Performance Related
Remuneration
Fixed
Remuneration
Directors’ remuneration
Thomas Lynch 1
Jeremy Curnock Cook
William Hunter
Bruce McHarrie
John Mills
Bryan Mogridge
Doug Wilson 1
Sub-total Directors
Executives’ remuneration
Arik Anderson 2
Garth Sutherland 2
Ross Bradding 3
Mark Licciardo 4
Rob Turnbull
Sub-total executives
Total key management personnel
1,099,882
1. Doug Wilson resigned 1 September 2016. At that time Thomas Lynch was appointed a Director and Chairman.
2. Arik Anderson joined Adherium as Chief Executive Officer on 8 June 2017. At that time, former Chief Executive Officer,
Garth Sutherland, transitioned to the role of Founder.
3. Ross Bradding joined Adherium as Chief Operating Officer on 1 August 2016.
4. A company of which Mr Licciardo is a director received these fees from the Company for company secretarial and corporate governance consulting services.
5. The fair values of options and loan funded shares are calculated at the date of grant using a Black-Scholes pricing model and allocated to each reporting period
in accordance with vesting. The values noted represent the portion of the fair value of the options or loan funded shares allocated to the reporting period.
16
Annual Report 2018 Adherium Ltd
Directors’ remuneration
Thomas Lynch
Jeremy Curnock Cook
William Hunter
Bruce McHarrie
John Mills
Bryan Mogridge
Sub-total Directors
Executives’ remuneration
Arik Anderson
David Allinson 1
Garth Sutherland
Mark Licciardo 2
Rob Turnbull
Ross Bradding 3
Timothy Marcotte 4
Sub-total executives
Total key management personnel
Directors’ remuneration
Thomas Lynch 1
Jeremy Curnock Cook
William Hunter
Bruce McHarrie
John Mills
Bryan Mogridge
Doug Wilson 1
Sub-total Directors
Executives’ remuneration
Arik Anderson 2
Garth Sutherland 2
Ross Bradding 3
Mark Licciardo 4
Rob Turnbull
Sub-total executives
Total key management personnel
1,099,882
128,976
31,331
161,785
41,421
41,383
-
-
-
373,565
373,565
19,454
50,785
50,785
$
100,000
50,000
50,000
50,000
50,000
50,000
350,000
515,903
42,992
259,017
43,372
212,721
37,621
172,501
1,284,127
1,634,127
$
80,000
46,667
46,667
46,667
46,667
46,667
13,333
326,668
44,181
264,474
212,130
44,628
207,801
773,214
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
79,342
49,983
129,325
129,325
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
4,750
4,750
9,500
16,865
7,601
2,370
26,836
36,336
4,196
4,196
8,392
14,047
6,364
7,796
28,207
36,599
(f) Details of remuneration of key management personnel
Remuneration for the year
ended 30 June 2018
Short Term Benefits
Post Employment Benefits
Share-based Payments
Salaries & Fees
Cash Bonus
Superannuation
Insurance
& Other
Value of Options/
Loan Funded Shares5
$
12,375
6,188
6,188
6,188
6,188
6,188
43,315
7,810
492
24,069
-
12,241
(21,652)
-
22,960
66,275
Performance Related
Remuneration
$
Fixed
Remuneration
$
11%
11%
11%
10%
10%
11%
20%
1%
40%
-
20%
33%
-
89%
89%
89%
90%
90%
89%
80%
99%
60%
100%
80%
67%
100%
Total
$
112,375
56,188
56,188
60,938
60,938
56,188
402,815
684,020
43,484
461,736
43,372
273,984
59,722
191,955
1,758,273
2,161,088
1. David Allinson was appointed Chief Financial Officer on 22 May 2018.
2. A company of which Mr Licciardo is a director received these fees from the Company for company secretarial and corporate governance
consulting services.
3. Ross Bradding resigned as Chief Operating Officer on 31 August 2017. The value of Share-Based Payments represents the reversal related to the
cancellation on resignation of Loan Funded Shares previously awarded under the Employee Share Plan.
4. Timothy Marcotte was appointed Chief Financial Offer 11 September 2017 and resigned 31 January 2018.
5. The fair values of options and loan funded shares are calculated at the date of grant using a Black-Scholes pricing model and allocated to each reporting period
in accordance with vesting. The values noted represent the portion of the fair value of the options or loan funded shares allocated to the reporting period.
Remuneration for the year ended
30 June 2017
Short Term Benefit
Post Employment Benefits
Share-based Payments
Salaries & Fees
Cash Bonus
Superannuation
Insurance
& Other
$
Value of Options/
Loan Funded Shares5
$
12,200
6,100
6,100
6,100
6,100
6,100
-
42,700
-
19,165
21,652
-
27,125
67,942
110,642
Performance Related
Remuneration
$
Fixed
Remuneration
$
13%
12%
12%
11%
11%
12%
-
-
26%
9%
-
26%
87%
88%
88%
89%
89%
88%
100%
100%
74%
91%
100%
74%
Total
$
92,200
52,767
52,767
56,963
56,963
52,767
13,333
377,760
44,181
377,028
240,146
44,628
292,705
998,688
1,376,448
1. Doug Wilson resigned 1 September 2016. At that time Thomas Lynch was appointed a Director and Chairman.
2. Arik Anderson joined Adherium as Chief Executive Officer on 8 June 2017. At that time, former Chief Executive Officer,
Garth Sutherland, transitioned to the role of Founder.
3. Ross Bradding joined Adherium as Chief Operating Officer on 1 August 2016.
4. A company of which Mr Licciardo is a director received these fees from the Company for company secretarial and corporate governance consulting services.
5. The fair values of options and loan funded shares are calculated at the date of grant using a Black-Scholes pricing model and allocated to each reporting period
in accordance with vesting. The values noted represent the portion of the fair value of the options or loan funded shares allocated to the reporting period.
17
Annual Report 2018 Adherium Ltd
(g) Service agreements
Joint Company Secretary - Mr Mark Licciardo
Mr Licciardo currently provides company secretarial and corporate governance services under a service arrangement
between the Company and Merton Corporate Services Pty Ltd, a company associated with Mr Licciardo. The current
arrangement has no predetermined termination date, with each party having the right to terminate the arrangement by
giving ninety days’ notice in writing to the other party.
Other key management personnel of the Group
Remuneration and other terms of employment for other key management personnel of the Group are formalised in
employment agreements which specify the components of remuneration, benefits and notice periods. Participation in the STI
and LTI plans is subject to the board’s discretion. Other major provisions of the agreements relating to remuneration are set
out below:
Name
Term of
Agreement
Notice Period
Base Salary 2
Termination
Payments 3
Arik Anderson, Group Chief Executive Officer
No fixed term 1 month by Company;
3 months by executive
US$400,000
6 months
David Allinson, Chief Financial Officer
Garth Sutherland, Founder
Rob Turnbull, VP Finance & Business Services
(Chief Financial Officer until 11 September 2017)
No fixed term
No fixed term
No fixed term
Nil 1
NZ$300,000
3 months 1
NZ$280,000
2 months 1
NZ$230,000
Nil
6 months
2 months
1. The notice period applies without cause equally to either party unless otherwise stated.
2. Base salaries quoted are annual as at 30 June 2018; they are reviewed annually by the Nomination and Remuneration Committee.
3. Base salary payable if the Group terminates employees with notice, and without cause (e.g. for reasons other than unsatisfactory performance).
(h) Details of share and option based compensation
Options over ordinary shares of the Company
All options over ordinary shares issued by the Company are exercisable on a one-for-one basis, and any shares issued
on exercise are fully paid and rank pari passu with existing ordinary shares.
During the period to 30 June 2018 and to the date of this report:
• 519,714 options over ordinary shares were exercised by Garth Sutherland. The options had a value of $41,438 at
the time of exercise.
Loan funded Employee Share Plan
The board has established the loan funded Adherium Employee Share Plans (Plans). Offers of allocations under the
plans were made to, and acceptances received from, key management personnel during the year ended 30 June 2018
as follows:
Name
Grant date
Arik Anderson
Tim Marcotte 1
David Allinson
8 November 2017
8 November 2017
1 June 2018
Number
of shares
1,500,000
600,000
600,000
Loan funded
purchase price
at $0.50
per share
Loan
maturity date
Fair value
of award
$750,000
8 November 2022
$300,000
8 November 2022
$300,000
1 June 2023
$12,455
$1,265
$10,129
1. This award was cancelled following Timothy Marcotte’s resignation on 31 January 2018.
All awards vest one third annually over three years of continued employment from the grant date. After vesting the
participant may take title to the shares by repaying to the Company the proportion of the loan related to those shares.
The fair value of the awards of loan funded shares are calculated at the date of grant using a Black-Scholes pricing
model, which are being allocated over the vesting periods as share based compensation.
18
Annual Report 2018 Adherium Ltd
(i)
Equity instruments held by key management personnel
Shareholdings
The numbers of ordinary shares in the Company held during the year to 30 June 2018 by each director and other key
management personnel of the Group, including their personally related parties, are set out below:
Name
Balance at the start
of the year
Purchases
Other changes
during the period
Balance at the end
of the year
Thomas Lynch
Jeremy Curnock Cook
William Hunter
Bruce McHarrie
John Mills
Bryan Mogridge
Arik Anderson
David Allinson
Garth Sutherland
Ross Bradding
Mark Licciardo
Rob Turnbull 2
600,000
380,000
300,000
300,000
340,000
9,613,023
-
-
11,869,055
459,145
-
559,645
400,000 1
-
500,000 1
164,853 1
56,000 1
243,082 1
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000 3
600,000 3
519,714 4
(459,145) 5
-
-
1,000,000
380,000
800,000
464,853
396,000
9,856,105 2
1,500,000
600,000
12,388,769
-
-
559,645
1. On-market purchase.
2. Ordinary shares held jointly with the VP Finance & Business Services in their capacity as trustees of the Company’s Employee Share Plan.
At 30 June 2018 7,813,023 ordinary shares were held in this capacity.
3. Award of loan funded shares under the Company’s Employee Share Plan.
4. Exercise of options to acquire ordinary shares.
5. Cancellation on resignation of loan funded shares previously awarded under the Company’s Employee Share Plan.
(j) Other transactions with key management personnel
There were no other transactions with Directors or other key management personnel.
End of audited Remuneration Report.
This report is made in accordance with a resolution of the directors.
Thomas Lynch
Non-Executive Chairman
Sydney
28 September 2018
19
Annual Report 2018 Adherium Ltd
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Adherium Limited for the year ended 30 June 2018, I declare that to
the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Adherium Limited and the entities it controlled during the period.
Scott Walsh
Partner
PricewaterhouseCoopers
Sydney
28 September 2018
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
20
Annual Report 2018 Adherium Ltd Financial
Statements
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 to the Consolidated Financial Statements
21
Annual Report 2018 Adherium Ltd Consolidated Statement of Profit or Loss and
Other Comprehensive Income for the year ended 30 June 2018
Notes
June 2018
$000
June 2017
$000
Continuing Operations
Sales
Cost of sales
Gross profit
Grants income
Manufacturing support
Research and development costs
Sales and marketing costs
Administrative expenses
Operating loss
Interest income
Interest expense
Finance income (cost) - net
Loss before income tax
Income tax expense
Loss for the period attributable to equity holders
Other comprehensive income
Items that may be reclassified subsequently to profit or loss when
certain conditions are met: Foreign exchange differences on
translation of foreign operation
Other comprehensive income for the period, net of tax
Total comprehensive loss for the period
Total comprehensive loss attributable to:
Equity holders of Adherium Limited
5
5
5
7
5,867
(1,099)
4,768
503
(1,364)
(4,447)
(3,687)
(5,412)
(9,639)
301
-
301
2,347
(1,186)
1,161
409
(1,179)
(4,242)
(3,312)
(6,260)
(13,423)
613
-
613
(9,338)
(12,810)
-
-
(9,338)
(12,810)
(615)
(615)
22
22
(9,953)
(12,788)
(9,953)
(12,788)
Basic and diluted loss per share
8
(5.4) cents
(7.6) cents
The accompanying notes form part of the financial statements.
22
Annual Report 2018 Adherium Ltd Consolidated Statement of Financial Position as at 30 June 2018
Notes
June 2018
$000
June 2017
$000
ASSETS
Current assets
Cash and cash equivalents
Short term cash investments
Trade and other receivables
Inventories
Prepayments
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Income received in advance
Total current liabilities
EQUITY
Share capital
Accumulated deficit
Other reserves
Total equity
Total liabilities & equity
The accompanying notes form part of the financial statements.
9
10
11
12
13
14
12,118
427
1,205
509
281
22,779
-
826
726
78
14,540
24,409
515
266
417
265
15,321
25,091
2,511
-
2,511
2,382
4
2,386
15
74,349
74,278
(35,158)
(25,820)
(26,381)
(25,753)
12,810
15,321
22,705
25,091
23
Annual Report 2018 Adherium Ltd
Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
Share
Capital
Accumulated
Deficit
Share &
Option
Compensation
Reserve
Foreign
Currency
Translation
Reserve
Merger
Reserve
$000
$000
$000
$000
$000
Total
Equity
$000
Equity as at 1 July 2016
66,720
Loss for the period
Other comprehensive
income
Total comprehensive loss
Transactions with owners:
-
-
-
Ordinary shares issued
8,023
Share issue costs
Shares issued on option
exercise
Share and option grants
for services
(511)
46
-
(13,010)
(12,810)
-
(12,810)
-
-
-
-
Equity as at 30 June 2017
74,278
(25,820)
Loss for the period
Other comprehensive
income
Total comprehensive loss
Transactions with owners:
Shares issued on option
exercise
Share and option grants for
services
-
-
-
71
-
(9,338)
-
(9,338)
-
-
632
650
(27,535)
27,457
-
-
-
-
-
-
478
1,110
-
-
-
-
(13)
-
22
22
-
-
-
-
-
-
-
-
-
-
-
(12,810)
22
(12,788)
8,023
(511)
46
478
672
(27,535)
22,705
-
(615)
(615)
-
-
-
-
-
-
-
(9,338)
(615)
(9,953)
71
(13)
Equity as at 30 June 2018
74,349
(35,158)
1,097
57
(27,535)
12,810
The accompanying notes form part of the financial statements.
24
Annual Report 2018 Adherium Ltd Consolidated Statement of Cash Flows
for the year ended 30 June 2018
Notes
June 2018
$000
June 2017
$000
Cash flows from operating activities:
Receipts from customers
Receipts from grants
Interest received
Resident withholding tax refunded (paid)
Payments to employees
Payments to suppliers
Net cash provided from (used in) operating activities
Cash flows from investing activities:
Purchase of short term cash investments
Purchase of property, plant and equipment
Purchase of software
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from the issue of shares
Proceeds from the exercise of options
Payment of capital raising costs
Net cash provided from financing activities
Net increase (decrease) in cash
Cash at the beginning of the year
Effect of exchange rate changes on cash balances
Cash at the end of the year
Reconciliation with loss after income tax:
Loss after income tax
Non-cash items requiring adjustment:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share and option compensation expense
Foreign exchange (gain)
Changes in working capital:
Trade and other receivables
Inventories
Trade and other payables
Income received in advance
5,363
570
299
15
(8,014)
(8,057)
(9,824)
(408)
(325)
(169)
(902)
-
71
-
71
(10,655)
22,779
(6)
12,118
2,363
506
601
(9)
(6,333)
(8,709)
(11,581)
-
(362)
(202)
(564)
8,023
46
(511)
7,558
(4,587)
27,211
155
22,779
(9,338)
(12,810)
212
98
(13)
(633)
(582)
185
251
(4)
234
36
478
(74)
80
(303)
875
(97)
15
15
9
12
13
Net cash provided from (used in) operating activities
(9,824)
(11,581)
The accompanying notes form part of the financial statements.
25
Annual Report 2018 Adherium Ltd Notes to the financial statements for the year ended 30 June 2018
1. General Information
Adherium Limited (the Company or Adherium) is a company domiciled in Australia. The address of the Company’s
registered office is Collins Square, Tower Four, Level 18, 727 Collins Street, Melbourne, VIC 3008. The consolidated
financial statements of the Company as at and for the year ended 30 June 2018 comprise the Company and its
subsidiaries (together referred to as the Group and individually as Group entities). The Group is a for-profit entity and
primarily develops, manufactures and supplies digital health technologies which address sub-optimal medication use
and improve health outcomes in chronic disease.
The separate financial statements of the parent entity, Adherium Limited, have not been presented within this
financial report as permitted by the Corporations Act 2001.
The consolidated financial statements were authorised for issue by the Board on 28 September 2018. The Board has the
power to amend and reissue the consolidated financial statements.
2. Basis of Presentation
This general purpose consolidated financial report for the twelve months ended 30 June 2018 has been prepared in
accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards
Board and the Corporations Act 2001.
The consolidated financial statements have been prepared on a going concern basis, meaning the Group has the
intention to continue its business for the foreseeable future.
As of June 30, 2018, the Group had net cash of $12,118,000 (2017: $22,779,000) and recorded a loss before tax of
$9,338,000 (2017: 12,810,000) and operating cash outflows of $9,824,000 (2017: $11,581,000) for the year then ended.
The Directors have approved forecasts that indicate the Group can manage its operating requirements beyond 12
months from the date of authorization of these financial statements. The directors considered the achievability of the
assumptions underlying the forecast, and as with any forecast, there are uncertainties within the assumptions required to
meet the Group’s expectations. Whether the Group can:
• continue to raise additional capital until the company is supported by cash flows from operations;
• secure sufficient cash flows from new revenue streams; and
• execute plans to reduce costs,
represent material uncertainties that cast significant doubt over the Group’s ability to continue as a going concern
and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.
Despite these uncertainties, the Directors are of the view that the company will be successful in the above matters and
accordingly have adopted the going concern basis for the preparation of the financial report.
(a) Compliance with International Financial Reporting Standards
These consolidated financial statements comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
(b) Historical cost convention
These financial statements have been prepared under the historical cost convention as modified by
certain policies below.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s
functional currency.
(d) Critical accounting estimates
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The Company makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are addressed below.
26
Annual Report 2018 Adherium Ltd
(i)
Impairment of non-current assets
The Company reviews annually whether any property, plant and equipment have suffered any
impairment in accordance with the accounting policy stated in note 3.10. In making this assessment,
the extent of the likely future use of these assets is required to be estimated in determining if their
value is impaired at the balance sheet date. The Company evaluates indicators of impairment,
including expected future demand for devices, in relation to each type of asset at the balance sheet date.
(ii) Recognition of deferred tax assets
As at 30 June 2018, the Company has not recognised as an asset tax losses which could be offset
against future taxable profits. These tax losses would only be recognised to the extent that it is
expected that there will be future taxable profits and such losses will be available in the future (after
shareholder continuity tests) to offset those future taxable profits. The Company has considered
its future expected profitability and shareholder continuity and has concluded that sufficient certainty
does not yet exist to recognise these tax losses as an asset.
(e) Rounding of amounts
The Company has applied the relief available to it under ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191. Accordingly, amounts in the consolidated financial statements
and Directors’ Report have been rounded to the nearest $1,000.
3. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all periods presented, unless otherwise stated.
3.1 Principles of consolidation:
The consolidated financial statements incorporate all of the assets, liabilities and results of Adherium
Limited and all subsidiaries. Subsidiaries are all entities over which the Group has control. The Group
controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to direct the activities of the entity. A list of the
subsidiaries is provided in note 20. All intercompany transactions are eliminated. The assets and liabilities
of Group companies whose functional currency is not Australian dollars are translated into Australian
dollars at the period-end exchange rate. The revenue and expenses of these companies are translated
into Australian dollars at rates approximating those at the dates of the transactions. Exchange differences
arising on this translation are recognised in the foreign currency translation reserve. On disposal or partial
disposal of an entity, the related exchange differences that were recorded in equity are recognised in the
income statement as part of the gain or loss on sale.
3.2 Segment Reporting
The Company has considered the requirements for segmental reporting as set out in AASB 8: Operating
Segments. The standard requires that operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker. The chief operating decision-maker
has been identified as the Chief Executive Officer. The Company has determined that one segment exists
for the Company’s Hailie™ (formerly known as Smartinhaler™) business.
3.3 Foreign currency translation
(a) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income.
(b) Group Companies
The financial results and position of foreign operations whose functional currency is different from
the Group’s presentation currency is translated as follows:
• Assets and liabilities are translated at period end exchange rates prevailing at that reporting date.
•
• Retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Income and expenses are translated at average exchange rates for the period.
3.4 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts
receivable for goods supplied, stated net of discounts, returns and taxes. The Company recognises revenue
when the amount of revenue can be reliably measured; when it is probable that future economic benefits will
flow to the entity; and when specific criteria have been met for each of the Company’s activities,as described
below. Amounts received from customers in accordance with contractual sales terms before these revenue
recognition criteria are met are deferred and recorded as Income Received in Advance until such time as the
criteria for recognition as revenue are met.
27
Annual Report 2018 Adherium Ltd
(a) Sales of devices
The Company manufactures and sells a range of inhaled medication monitoring devices and
related equipment. Sales of products are recognised when they have been delivered to the
customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the
products. Delivery does not occur until the products have been shipped to the specified location,
and either the customer has accepted the products in accordance with the sales contract, the
acceptance provisions have lapsed or the Company has objective evidence that all criteria for
acceptance have been satisfied. No element of financing is deemed present as the sales are made
with a credit term of 30-60 days.
(b) Sales of licences and subscriptions to software
The Company sells licences and subscriptions to its device customers to enable access to data collected by
purchased devices. Revenue is recognised in the accounting period to which the licence or subscription relates.
(c) Grants
Grants received for research and development are recognised in the Statement of Comprehensive
Income when the requirements under the grant agreement have been met. Any grants for which the
requirements under the grant agreement have not been completed are carried as liabilities until all
the conditions have been fulfilled.
(d) Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
3.5 Research and development
Research costs include direct and directly attributable overhead expenses for product invention and
design. Research costs are expensed as incurred.
When a project reaches the stage where it is reasonably certain that future expenditure can be
recovered through the process or products produced, development expenditure is recognised as a
development asset within Intangible Assets when:
•
•
•
•
a product or process is clearly defined and the costs attributable to the product or process can be
identified separately and measured reliably;
the technical feasibility of the product or process can be demonstrated;
the existence of a market for the product or process can be demonstrated and the Company
intends to produce and market the product or process;
adequate resources exist, or their availability can be reasonably demonstrated to complete the
project and market the product or process.
In such cases the asset is amortised from the commencement of commercial production of the product
to which it relates on a straight-line basis over the years of expected benefit. Research and
development costs are otherwise expensed as incurred.
3.6 Employee benefits
(a) Wages, salaries and annual leave
Liabilities for wages and salaries, bonuses and annual leave expected to be settled within 12
months of the reporting date are recognised in accrued liabilities in respect of employees’ services
up to the reporting date and are measured at the amounts expected to be paid when the liabilities
are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and
measured at the rates paid or payable.
(b) Share-based payments
The Company operates equity-settled share and option plans and awards certain employees,
directors and consultants shares and options, from time to time, on a discretionary basis. The fair
value of the services received in exchange for the grant of the options is recognised as an expense
with a corresponding increase in the share and option compensation reserve over the vesting
period. The total amount to be expensed over the vesting period is determined by reference to the
fair value of the options at grant date. At each balance sheet date, the Company revises its
estimates of the number of options that are expected to vest and become exercisable. It recognises
the impact of the revision of original estimates, if any, in the Statement of Comprehensive Income,
and a corresponding adjustment to equity over the remaining vesting period.
3.7 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
28
Annual Report 2018 Adherium Ltd
3.8
Income Tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the Statement of
Comprehensive Income, except to the extent that it relates to items recognised in directly in equity. In this
case, the tax is also recognised directly in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries where the company generated taxable income.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilised.
3.9 Goods and Services Tax (GST)
The Statement of Comprehensive Income has been prepared so that all components are stated
exclusive of GST. All items in the balance sheet are stated net of GST, with the exception of receivables
and payables, which include GST invoiced.
3.10
Impairment of non-financial assets
Assets that are subject to amortisation and depreciation are reviewed whenever events or changes
in circumstances indicate that the carrying amount of the assets may not be recoverable. The carrying
amount of an asset is considered impaired when its recoverable amount is less than its carrying value.
In that event, a loss is recognised in the the Statement of Profit & Loss and Other Income based on the
amount by which the carrying amount exceeds the recoverable amount.
3.11 Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other
short term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
3.12 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost,
less provision for impairment.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off. A provision for impairment is established when there is objective evidence
that the Company will not be able to collect all amounts due according to the original terms of receivables.
3.13
Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is determined using the first-in,
first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct
labour, other direct costs and related production overheads (based on normal operating capacity). It
excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of
business, less applicable variable selling expenses.
3.14 Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation and any impairments
recognised. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Company and the cost of the item can be measured reliably. All other repairs and maintenance
are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.
Depreciation is determined principally using the diminishing value method to allocate their cost, net of
their residual values, over their estimated useful lives, as follows:
Manufacturing tooling equipment
Computer equipment
Office furniture, fixtures & fittings
4 years
2 years
4 years
29
Annual Report 2018 Adherium Ltd
3.15
Intangible assets
(a) Intellectual property
Costs in relation to protection and maintenance of intellectual property are expensed as incurred.
Acquired patents, trademarks and licences have finite useful lives and are carried at cost less
accumulated amortisation and impairment losses. Amortisation is calculated using the straight line
method to allocate the cost over the anticipated useful lives, which are aligned with the unexpired
patent term or agreement over trademarks and licences.
(b) Acquired software
Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use
the specific software. These costs are amortised over their estimated useful lives (two to three years).
3.16 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method.
3.17 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
ordinary shares or options are deferred until the issue of the shares or options, and then shown in equity
as a deduction, net of tax, from the proceeds.
3.18 Financial assets
(a) Financial assets recognised in the Statement of Financial Position include cash and cash
equivalents, and trade and other receivables. The Company believes that the amounts reported for
financial assets approximate fair value.
(b) Financial assets: Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are included in current assets, except for maturities
greater than 12 months after the balance sheet date. These are classified as non-current assets.
The Company’s loans and receivables comprise “trade and other receivables” and “cash and cash
equivalents” in the Statement of Financial Position. Loans and receivables are measured at
amortised cost using the effective interest method less impairment.
3.19 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial
statements in the period in which the dividends are approved by the Company’s shareholders.
3.20 Comparative Information
Where necessary, certain comparative information has been reclassified in order to provide a more
appropriate basis for comparison.
3.21 New Accounting Standards for application in future periods
The following standards have been issued but are not yet effective and have not yet been adopted:
AASB 9 Financial instruments
AASB 9 Financial instruments addresses the classification, measurement and recognition of financial
assets and financial liabilities. It replaces all previous versions of AASB 9 and completes the project to
replace IAS 39 that relates to the classification and measurement of financial instruments. AASB 9 retains
but simplifies the mixed measurement model and establishes three primary measurement categories for
financial assets: amortised cost, fair value through other comprehensive income and fair value through profit
or loss. The basis of classification depends on the entity's business model and the contractual cash flow
characteristics of the financial asset. There is now a new expected credit losses model that replaces the
incurred loss impairment model used in IAS 39. For financial liabilities there were no material changes to
classification and measurement. AASB 9 relaxes the requirements for hedge effectiveness by replacing the
bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and
hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk
management purposes. Contemporaneous documentation is still required but is different to that currently
prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January
2018. Early adoption is permitted. The Company will adopt this standard from 1 July 2018 but it will not have
a material impact on the Company.
30
Annual Report 2018 Adherium Ltd
AASB 15 Revenue from contracts with customers
AASB 15 is effective for periods commencing on or after 1 January 2018. The standard addresses
recognition of revenue from contracts with customers and sets out a five step model for revenue
recognition with the core principle being for entities to recognise revenue to depict the transfer of goods
or services to customers in way that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. The Company will apply this standard from 1 July 2018. Initial
assessment of existing contracts has not indicated any material change to recognition of revenue. The
Group's treatment for customer contract arrangements will be assessed as new revenue generating
contracts are entered into.
AASB 16 Leases
AASB 16 replaces the AASB 117 Leases. Under AASB 16, a contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. Under AASB 117, a lessee was required to make a distinction between a finance lease
(on balance sheet) and an operating lease (off balance sheet). AASB 16 will require a lessee to
recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all
lease contracts. Included is an optional exemption for certain short-term leases and leases of low-
value assets; however, this exemption can only be applied by lessees. The standard is effective for
accounting periods beginning on or after 1 January 2019. The Company intends to apply this standard
from 1 July 2019 and has yet to assess its full impact.
There are no other standards, amendments, or interpretations to existing standards that have been issued
and yet to be adopted by the Company that are likely to have a material impact on the financial statements.
4. Segment Information
The chief operating decision maker is the Chief Executive Officer, who reviews financial information for the Company as
a whole. The information reviewed is prepared in the same format as included in the financial statements. The Company
has therefore determined that one reportable segment exists for the Company’s Hailie™ business.
(a) Geographic segment information
The Company operates predominantly from New Zealand, with some manufacturing also undertaken
by suppliers in Asia at which the Company locates equipment and tools:
Domicile of non-current assets
New Zealand and Australia
South-East Asian Countries
Other Countries
June 2018
$000
June 2017
$000
386
123
272
781
546
111
25
682
The Company sells its products and services domestically and internationally. Revenues by customer region of
domicile are:
Location of customer sales
New Zealand and Australia
Europe
North America
b) Major customers
Revenues are derived from major external customers as follows:
Major customers
Customer A group entities
Customer B group entities
June 2018
$000
June 2017
$000
109
5,708
50
5,867
462
1,829
56
2,347
June 2018
$000
5,621
11
June 2017
$000
1,762
303
31
Annual Report 2018 Adherium Ltd
5. Revenue
Income from continuing operations:
Device sales and monitoring services
New product design and engineering services
Grant income
Interest income
6. Expenses
June 2018
$000
June 2017
$000
1,818
4,049
503
301
6,671
2,347
-
409
613
3,369
Loss before income tax includes the following specific expenses:
June 2018
$000
June 2017
$000
Fees paid to PricewaterhouseCoopers for:
Audit of the financial statements
Fees paid to related pratices of PricewaterhouseCoopers:
- Fees in respect of grant review and interim report review
Total fees to PricewaterhouseCoopers
Depreciation and amortisation
Directors’ remuneration
- Fees
- Share based compensation
Total Directors’ remuneration
Employee benefits expense
- Wages and salaries
- Share based compensation
Total employee benefits expense
Foreign exchange (gain) loss
Operating lease costs
87
54
141
310
360
43
403
8,315
(56)
8,259
(633)
465
-
131
131
270
335
43
378
6,787
416
7,203
(74)
459
32
Annual Report 2018 Adherium Ltd 7.
Income tax
Current tax
Deferred tax
Income tax expense
Numerical reconciliation of income tax expense to prima facie tax
payable (receivable):
Loss before income tax
Tax calculated at domestic tax rates
Tax effects of:
Expenses not deductible for tax purposes
Under (over) provision in prior year
Deferred tax assets not recognised (note 16)
Income tax expense
The weighted average applicable tax rate was 33% (2017: 29%).
8. Earnings per share
June 2018
$000
June 2017
$000
-
-
-
(9,338)
(3,076)
(10)
(25)
3,111
-
-
-
-
(12,810)
(3,697)
139
(84)
3,642
-
Basic loss per share is based upon the weighted average number of outstanding ordinary shares. For all periods
presented, the Company’s potentially dilutive ordinary share equivalents (being the Options set out in note 15) have an
anti-dilutive effect on loss per share and, therefore, have not been included in determining the total weighted average
number of ordinary shares outstanding for the purpose of calculating diluted loss per share.
June 2018
$000
June 2017
$000
Profit (loss) after income tax attributable to equity holders
(9,338)
(12,810)
Weighted average shares outstanding (basic)
173,440,493
169,431,030
Weighted average shares outstanding (diluted)
Basic and diluted loss per share
173,440,493
(5.4) cents
169,431,030
(7.6) cents
33
Annual Report 2018 Adherium Ltd 9. Cash and cash equivalents
Cash at bank and on hand
Deposits at call
10. Trade and other receivables
Trade receivables and accruals
Grant income accrued
GST and other taxes receivable
Security deposits
11. Inventories
Raw materials and components
Finished goods
June 2018
$000
400
11,718
12,118
June 2017
$000
138
22,641
22,779
June 2018
$000
June 2017
$000
975
117
72
41
1,205
449
203
135
39
826
June 2018
$000
June 2017
$000
218
291
509
277
449
726
The cost of inventories recognised as an expense and included in 'cost of sales' amounted to $956,000
(2017: $591,000).
34
Annual Report 2018 Adherium Ltd 12. Property, plant and equipment
Manufacturing
Equipment
Computer
Equipment
Fixtures
& Fittings
Office
Equipment
$000
$000
$000
$000
As at 1 July 2016
Cost
Accumulated depreciation
Net book value
Movements in the year
ended 30 June 2017
Opening net book value
Additions
Disposals
Depreciation
Foreign currency translation
Closing net book value
As at 30 June 2017
Cost
Accumulated depreciation
Net book value
Movements in the year
ended 30 June 2018
Opening net book value
Additions
Disposals
Depreciation
Foreign currency translation
Closing net book value
As at 30 June 2018
Cost
Accumulated depreciation
Net book value
402
(197)
205
205
101
-
(158)
(4)
144
499
(355)
144
144
129
-
(115)
(6)
152
608
(456)
152
90
(38)
52
52
88
(2)
(52)
(2)
84
174
(90)
84
84
64
(3)
(62)
(4)
79
217
(138)
79
40
(5)
35
35
152
(5)
(18)
1
165
188
(23)
165
165
127
-
(29)
(6)
257
307
(50)
257
10
(4)
6
6
24
-
(6)
-
24
34
(10)
24
24
9
(1)
(6)
1
27
43
(16)
27
Total
$000
542
(244)
298
298
365
(7)
(234)
(5)
417
895
(478)
417
417
329
(4)
(212)
(15)
515
1,175
(660)
515
35
Annual Report 2018 Adherium Ltd 13. Intangible assets
As at 1 July 2016
Cost
Accumulated amortisation
Net book value
Movements in the year ended 30 June 2017
Opening net book value
Additions
- External costs
Amortisation
Foreign currency translation
Closing net book value
As at 30 June 2017
Cost
Accumulated amortisation
Net book value
Movements in the year ended 30 June 2018
Opening net book value
Additions
- External costs
- Disposals
Amortisation
Foreign currency translation
Closing net book value
As at 30 June 2018
Cost
Accumulated amortisation
Net book value
14. Trade and other payables
Trade payables
Accruals
Employee benefits
36
Software
$000
Total
$000
43
(12)
31
31
270
(36)
-
265
313
(48)
265
265
111
(2)
(98)
(10)
266
421
(155)
266
43
(12)
31
31
270
(36)
-
265
313
(48)
265
265
111
(2)
(98)
(10)
266
421
(155)
266
June 2018
$000
June 2017
$000
877
211
1,423
2,511
1,020
196
1,166
2,382
Annual Report 2018 Adherium Ltd
15. Share capital
Share capital as at 1 July 2017
Ordinary share issued
Share issue costs
Shares issued in employee share plans
Cancellation of shares issued in
employee share plan
Shares issued on option exercise
Share capital as at 30 June 2017
Shares issued in employee share plans
Cancellation of share plan shares
Shares issued on option exercise
Share capital as at 30 June 2018
Ordinary Shares
$000
151,219,925
16,046,097
-
4,797,095
(708,383)
494,458
66,720
8,023
(511)
-
-
46
171,849,192
74,278
3,032,072
(1,554,329)
946,997
174,273,932
-
-
71
74,349
(a) Ordinary Shares
The ordinary shares have no par value and all ordinary shares are fully paid-up and rank equally as to
dividends and liquidation, with one vote attached to each fully paid ordinary share.
(b) Employee incentive plans
Adherium Employee Share Option Plan (Adherium ESOP)
Prior to the Company's initial public offering and listing it operated an option plan for employees. No further
issue of options under the Adherium ESOP are contemplated.
Exercise
price range
$0.075268 –
0.134039
Outstanding
at 30 June 2016
Granted
Exercised
Lapsed
Outstanding at
30 June 2017
Granted
Exercised
Lapsed
Outstanding at
30 June 2018
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contract
Life (years)
Exercisable
Weighted
Average
Exercise
Price
Weighted
Average
Share Price
at Exercise
5,063,097
-
(494,458)
$
$
$
0.1049
3.5
5,063,097
$
0.1049
-
0.0931
(173,238)
$ 0.0752
4,395,401
$ 0.1083
2.8
4,395,401
$
0.1083
-
$
-
(946,997)
$ 0.0752
-
$
-
3,448,404
$ 0.1083
2.8
4,395,401
$
0.1083
$
0.1609
$
0.16
There were no options granted in the year ended 30 June 2018 (2017: nil). The Company has no legal or constructive
obligation to repurchase or settle the options in cash.
37
Annual Report 2018 Adherium Ltd
Adherium Employee Share Plans (Adherium ESP)
The Company operates employee share plans for employees, directors and consultants within the Group.
Participants are invited by the Board of Directors and those who accept an offer of ESP shares are provided with
an interest free loan from the Company to finance the whole of the purchase of the ESP shares they were invited to
apply for (ESP Loan). The ESP Loans are provided to participants on a non-recourse basis and upon vesting must be
repaid in order to remove trading restrictions on vested ESP shares. The term of the ESP Loan is five years, however
participants may forfeit their ESP shares if they do not repay the ESP Loan or leave the Company. Awards typically
vest one third annually over a three-year period, and are subject to restriction until vesting conditions are met.
The assessed weighted average fair value at grant date of the awards made during the 2018 financial period is 1.3
cents per award (2017: 6.3 cents per award). The awards were priced using a Black-Scholes option pricing model
that takes into account the exercise price, the term of the award, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the award.
The following awards have been made under the Adherium ESP:
Grant date
Shares granted
Issue price
Vested as at
30 June 2018
Restricted as at
30 June 2017
Share price
at grant date
16 May 2016
23 August 2016
8 November 2016
23 December 2016
2,755,811
356,072
2,621,367
1,152,136
8 November 2017
3,680,997
20 February 2018
1 June 2018
300,000
1,478,712
16. Deferred Income Tax
$0.50
$0.50
$0.50
$0.50
$0.50
$0.50
$0.50
1,837,206
118,691
873,789
306,097
558,287
-
-
2,755,811
356,072
2,621,367
1,152,136
3,680,997
300,000
1,478,712
$0.50
$0.48
$0.35
$0.26
$0.08
$0.08
$0.12
Movements
Deferred tax asset (liability) at the beginning of the year
Credited (charged) to the income statement (note 7)
Change in unrecognised deferred tax assets
Deferred tax asset (liability) at the end of the year
June 2018
$000
June 2017
$000
-
3,111
(3,111)
-
-
3,642
(3,642)
-
38
Annual Report 2018 Adherium Ltd The movement in deferred income tax assets and liabilities during the period is as follows:
Deferred tax assets (liabilities)
Provisions
and accruals
Intangible
assets
Convertible
notes
$000
$000
$000
As at 30 June 2016
Credited (charged) to the income statement
Effect of exchange rate changes
Change in unrecognised deferred tax assets
As at 30 June 2017
Credited (charged) to the income statement
Effect of exchange rate changes
Change in unrecognised deferred tax assets
-
(26)
-
26
-
(19)
(4)
23
-
147
1
(148)
-
82
(8)
(74)
As at 30 June 2018
-
-
-
-
-
-
-
-
-
-
-
Tax
losses
$000
-
3,521
(11)
Total
$000
-
3,642
(10)
(3,510)
(3,632)
-
-
3,048
(15)
3,111
(27)
(3,033)
(3,084)
-
-
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related
tax benefit through future taxable profits is probable, or to the extent that they can be set off against deferred income
tax liabilities. The Company did not recognise deferred income tax assets of $7,884,000 (2017: $4,851,000) in respect of
losses amounting to $25,850,000 (2017: $16,821,000) that can be carried forward against future taxable income. The
Company also did not recognise further deferred income tax assets of $405,000 (2017: $355,000) in respect of other
timing differences amounting to $1,441,000 (2017: $1,262,000).
17. Related party transactions
(a) Key management and personnel
The key management personnel include the directors of the Company, the CEO, and senior executives
responsible for the planning, directing and controlling of the Group’s activities. Compensation for this
group was as follows:
June 2018
$000
June 2017
$000
Directors
- fees and other legislated superannuation
- share and option compensation
CEO and management
- short-term benefits
- post-employment benefit contributions
- share based compensation
360
43
1,780
27
23
2,233
336
43
907
29
67
1,382
39
Annual Report 2018 Adherium Ltd
Key management personnel and their associates subscribed for share capital in the Company as follows:
June 2018
Ordinary Shares
June 2018
$000
June 2017
Ordinary Shares
June 2017
$000
519,714
519,714
$
39
39
150,000
150,000
20
20
$
Shares issued on
exercise of options
(b) Related parties
Transactions with related parties are on normal commercial terms and on conditions no more favourable than
those available to other suppliers.
June 2018
$000
June 2017
$000
Alecia Anderson Design
- Office design consultancy for office refurbishment
25
-
18. Financial instruments and risk management
(a) Categories of financial instruments
Financial assets
Loans and receivables classification:
Cash and cash equivalents
Short term investments
Trade and other receivables
Total financial assets
Financial liabilities
Measured at amortised cost:
Trade and other payables
Convertible notes – liability component
Measured at fair value:
Convertible notes – embedded conversion derivative
June 2018
$000
June 2017
$000
12,118
427
1,092
13,637
22,779
-
652
23,431
2,511
2,382
-
-
-
-
Total financial liabilities
2,511
2,382
(b) Risk management
The Company is subject to a number of financial risks which arise as a result of its activities.
40
Annual Report 2018 Adherium Ltd
Foreign exchange risk
During the normal course of business the Company enters into contracts with overseas customers or suppliers or
consultants that are denominated in foreign currency. As a result of these transactions there is exposure to fluctuations in
foreign exchange rates.
The Company does not utilise derivative financial instruments. It operates a policy of holding cash and cash equivalents
in the currency of near-term estimated future supplier payments, however it does not designate formal hedges and as
such remains unhedged against foreign currency fluctuations. A foreign exchange gain of $633,000 is included in results
for the period ended 30 June 2018 (2017: $166,000 gain).
The carrying amounts of foreign currency denominated assets and liabilities are as follows:
June 2018
$000
June 2017
$000
Assets
New Zealand Dollars
US dollars
UK pound
European euros
Liabilities
New Zealand Dollars
US dollars
UK pound
European euros
Hong Kong dollars
Japanese Yen
8,817
1,756
200
1
1,052
1,019
117
40
5
1
4.524
1,120
146
-
1,516
513
30
19
2
5
The following table details the Company’s sensitivity to a 10% increase and decrease in each of the currencies noted
against the Australian dollar as at the reporting date.
Decrease (increase) in loss after income tax
10% strengthening of Australian dollar against:
New Zealand Dollars
US dollars
UK pound
Hong Kong dollars
Japanese Yen
10% weakening of Australian dollar against:
New Zealand Dollars
US dollars
UK pound
Hong Kong dollars
Japanese Yen
June 2018
$000
June 2017
$000
256
349
40
1
-
(313)
(426)
(49)
(1)
-
768
48
38
-
1
(939)
(59)
(46)
-
(1)
41
Annual Report 2018 Adherium Ltd Cash flow and fair value interest rate risk
The Company is exposed to interest rate risk as it holds cash and cash equivalents (refer note 9).
Trade and other receivables and payables do not bear interest and are not interest rate sensitive.
The Company’s interest bearing financial assets bear interest at deposit rates for up to 90 days and accordingly any
change in interest rates would have an immaterial effect on reported loss after tax.
Credit risk
The Company incurs credit risk from transactions with trade receivables and financial institutions in the normal course of
its business. The credit risk on financial assets of the Company, which have been recognised in the statement of financial
position, is the carrying amount, net of any allowance for doubtful debts.
The Company does not require any collateral or security to support transactions with financial institutions or customers.
The counterparties used for banking activities are financial institutions with an AA- credit rating (2017: AA-) and the
Company assesses the credit quality of customers by taking into account their financial position, past experience and
other factors. The credit quality of trade receivables can be assessed by reference to external credit ratings (if available)
or to historical information about counterparty default rates:
Counterparties with external credit rating:
• AA-
Counterparties without external credit rating:
• existing customers (more than 6 months) with no defaults in the past
Total trade receivables
June 2018
$000
June 2017
$000
934
41
975
374
75
449
The Company is exposed to a concentration of credit risk as 96% of accounts receivable are with one counterparty
(2017: 83%). The customer has an external credit rating of AA-.
Liquidity risk
The table below shows the Company’s non-derivative financial liabilities by relevant maturity grouping based on the
remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
As at 30 June 2018
Trade and other payables
As at 30 June 2017
Trade and other payables
Less than
3 months
$000
Between 3 months
and 1 year
$000
2,511
2,382
-
-
Capital risk
The Company manages its capital to ensure that it is able to continue as a going concern. The capital structure of the
Company consists of cash and cash equivalents, and equity comprising issued capital, reserves and accumulated deficit.
Fair value estimation
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.
At 30 June 2016 the embedded conversion derivative with a fair value of $473,000 was classified as subject to recurring
fair value measurement within Level 3 of the hierarchy. There were no transfers between the fair value hierarchy levels in
2016 or 2017.
42
Annual Report 2018 Adherium Ltd
In the period to 30 June 2016, the Company performed its own estimate of the fair value of the embedded conversion
derivative recognised separately from the host convertible notes (see note 7) using a present value technique. The main
inputs to the valuation are the expected probability of the convertible notes converting and the discount rate used.
At initial recognition and 30 June 2016 a probability of 75% of the convertible notes converting was applied together
with a discount rate of 8.45%. A reasonably possible change at 30 June 2016 of plus or minus 5 percentage points to
the estimate of the probability of the notes converting would have led to an increase or decrease respectively in the
valuation of the derivative of $32,000. A reasonably possible change to the discount rate applied would not have a
material impact upon the valuation.
The Convertible Notes converted to shares in the Company immediately prior to its listing on the ASX in August 2015.
19. Parent entity information
The following details information related to the legal parent, Adherium Limited as at 30 June 2018. During the year
ended 30 June 2018 Adherium Limited recognised an impairment in the carrying value of its investments in subsidiaries
to record those investments at the Group carrying value. This resulted in an impairment charge of $48,146,000. The
information presented here has otherwise been prepared using consistent accounting policies as presented in Note 1.
Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Accumulated deficit
Reserves
Total equity
Statement of Profit and Loss and Comprehensive Income
Loss after tax
Total comprehensive loss
20. Interests in controlled entities
Parent
June 2018
$000
Parent
June 2017
$000
10,643
10,117
20,760
251
-
251
20,509
74,349
(54,523)
683
20,509
(49,846)
(49,846)
19,347
51,520
70,867
570
-
570
70,297
74,278
(4,677)
696
70,297
(3,295)
(3,295)
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in Note 3:
Name of Entity
Status
Country of incorporation
Percentage owned
Adherium (NZ) Limited
Adherium North America, Inc.
Adherium Europe Ltd
Nexus6 Limited
Operating
Operating
Operating
Dormant shell
New Zealand
United States
United Kingdom
New Zealand
June 2018
June 2017
100%
100%
100%
100%
100%
100%
100%
100%
43
Annual Report 2018 Adherium Ltd 21. Contingencies and commitments
The Company had no contingencies or commitments to purchase any property, plant or equipment at 30 June 2018 (2017: nil).
The following aggregate future non-cancellable minimum lease payments for premises have been committed to by the
Company, but not recognised in the financial statements.
Not later than one year
Later than one year and not later than five years
Later than five years
22. Events occurring after balance date
June 2018
$000
June 2017
$000
364
572
-
936
373
973
-
1,346
There are no events occurring after the balance sheet date which require disclosure or adjustment in the financial statements.
44
Annual Report 2018 Adherium Ltd Directors’ Declaration
The Directors declare that the financial statements and notes set out on pages 22 to 44 in accordance
with the Corporations Act 2001:
(a) comply with Accounting Standards and the Corporations Regulations 2001, and other mandatory professional
reporting requirements;
(b) as stated in note 2, the consolidated financial statements also comply with International Financial Reporting
Standards; and
(c) give a true and fair view of the financial position of the consolidated entity as at 30 June 2018 and of its
performance for the financial year ended on that date.
In the Directors’ opinion there are reasonable grounds to believe that Adherium Limited will be able to pay its debts
as and when they become due and payable.
This declaration has been made after receiving the declarations required to be made by the Chief Executive Officer
and Chief Financial Officer to the Directors in accordance with sections 295A of the Corporations Act 2001 for the year
ended 30 June 2018.
This declaration is made in accordance with a resolution of the Directors.
On behalf of the board.
Thomas Lynch
Non-Executive Chairman
Sydney
28 September 2018
45
Annual Report 2018 Adherium Ltd
Independent Auditor’s Report
Independent auditor’s report
To the members of Adherium Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Adherium Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2018 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2018
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
46
Annual Report 2018 Adherium Ltd Independent Auditor’s Report
Material uncertainty related to going concern
We draw attention to Note 2 of the Basis of Preparation within the consolidated financial statements,
which indicates the Group incurred a net loss of $9,338,000 (2017: $12,810,000) and operating cash
outflow of $9,824,000 (2017: $ 11,581,000) during the year ended 30 June 2018.
The Group’s ability to continue as a going concern is dependent on whether the Group can continue to
raise additional capital until the company is supported by cash flows from operations, secure sufficient
cash flows from new revenue streams and execute plans to reduce costs.
These conditions along with other matters as set forth in Note 2, indicate that a material uncertainty
exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
Our audit focused on where
the directors made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
•
Except for the matter which is
described in the Material
uncertainty related to going
concern section, we have
determined that there are no
other Key audit matters to
communicate in our report.
•
•
For the purpose of our audit
we used overall Group
materiality of $466,000, which
represents approximately 5%
of the Group’s loss before
income tax.
• We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
47
Annual Report 2018 Adherium Ltd Independent Auditor’s Report
report as a whole.
• We chose Group loss before
income tax because, in our
view, it is the benchmark
against which the performance
of the Group is most
commonly measured.
• We utilised a 5% threshold
based on our professional
judgement, noting it is within
the range of commonly
acceptable thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Except for the matter which is described in the
Material uncertainty related to going concern section, we have determined that there are no Key
audit matters to communicate in our report.
Other information
The directors are responsible for the other information. The other information comprises Company
Overview, Chairman’s Statement, CEO’s Report, Directors’ Report (including Remuneration Report)
and Australian Securities Exchange Additional Information, included in the annual report for the year
ended 30 June 2018 but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
48
Annual Report 2018 Adherium Ltd Independent Auditor’s Report
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 12 to 19 of the directors’ report for the year
ended 30 June 2018.
In our opinion, the remuneration report of Adherium Limited for the year ended 30 June 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Scott Walsh
Partner
Sydney
28 September 2018
49
Annual Report 2018 Adherium Ltd Australian Securities Exchange Additional Information
Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as
follows. The shareholder information set out below was applicable as at 17 September 2018.
(a) Distribution of equity securities
Ordinary share capital
As at 17 September 2018 there were 174,273,932 ASX quoted ordinary shares held by 761 shareholders. All issued
ordinary shares carry one vote per share and carry the rights to dividends.
Range (size of holding)
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Number of
Ordinary Shares
Holders
9,080
358,113
1,105,637
15,159,647
157,641,455
174,273,932
25
103
129
359
145
761
There were 136 shareholders holding less than a marketable parcel of ordinary shares at a price of $0.085,
totalling 410,042 ordinary shares.
Unquoted options over ordinary shares
As at 17 September 2018 there were 3,448,404 options over ordinary shares held by 9 holders.
(b) Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Substantial shareholders
One Funds Management Limited
FIL Limited
Mr Garth Sutherland
K One W One Ltd
I.G. Investment Management, Ltd and associates
AstraZeneca PLC and its related bodies
Notification
Date
Ordinary Shares
Held
28/07/2016
29/07/2016
01/08/2016
25,217,915
16,726,595
12,388,769
26/07/2016
10,990,860
01/09/2015
26/08/2015
9,535,000
8,079,720
82,938,859
50
Annual Report 2018 Adherium Ltd (c) Twenty largest holders of quoted equity securities as at 17 September 2018
Ordinary Shares
Shareholders
HSBC Custody Nominees (Australia) Limited
One Funds Management Limited
K One W One Ltd
Mr Garth Sutherland
JP Morgan Nominees Australia Limited
AstraZeneca AB
Adherium ESP Trustee Limited
NZVIF Investments Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Bennamon Pty Ltd
Mogridge & Associates Ltd
Mr Arik Anderson
Doctor Iain Arthur McCormick
Popeye Investments Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 2
K M Fitzpatrick & Associates Pty Ltd
Ross Alan Sutherland + Valerie Mary Sutherland +
Garth Campbell Sutherland
Dr John Douglas Wilson
Mr Christopher Richard Brice
Number
26,232,470
25,217,915
10,990,860
10,794,885
8,606,771
8,079,720
7,013,023
4,483,383
3,856,748
2,604,884
2,168,000
1,743,082
1,500,000
1,353,919
1,206,060
1,107,807
1,077,000
1,072,517
1,039,428
1,000,001
%
15.05
14.47
6.31
6.19
4.94
4.64
4.02
2.57
2.21
1.49
1.24
1.00
0.86
0.78
0.69
0.64
0.62
0.62
0.60
0.57
Total top 20 holders of ordinary shares
121,148,473
69.52
(d) Voting Rights
On a show of hands, every shareholder present in person or by proxy holding stapled securities in the
Company shall have one vote and upon a poll each stapled security shall have one vote.
51
Annual Report 2018 Adherium Ltd Corporate Information
ASX code: ADR
Directors
Mr Thomas Lynch (Chair)
Mr Arik Anderson (Group CEO)
Mr Jeremy Curnock Cook
Dr William Hunter
Mr Bruce McHarrie
Prof John Mills
Mr Bryan Mogridge
Joint Company Secretaries
Mr Rob Turnbull
Mr Mark Licciardo
Registered Office
Collins Square, Tower 4
Level 18, 727 Collins St
Melbourne VIC 3000, Australia
+61 3 86575540
US Office
(Commercial Headquarters)
1800 Gateway Drive, Suite 150
San Mateo, CA 94404, USA
+1 650 446 8589
NZ Office
(Prinicipal Administrative Office)
Level 2, 204 Quay Street
Auckland 1010, New Zealand
+64 9 307 2771
Share Registry
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street
Abbotsford, Victoria 3067, Australia
Solicitors
K&L Gates
Level 25 South Tower
525 Collins Street
Melbourne VIC 3000, Australia
Auditors
PricewaterhouseCoopers
One International Towers, Watermans Quay,
Barangaroo NSW 2000, Australia
Website
www.adherium.com
www.hailie.com
Shareholder Enquiries
1300 850 505 (+61 3 9415 4000)
Shareholders requiring clarification of holdings,
or requesting changes of name or address should
contact Computershare Investor Services directly on
the above number. Shareholders wishing to create
an online account with Computershare should visit
https://www.investorcentre.com
www.adherium.com