Annual
Report
for the year ended 30 June 2019
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 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
04
18
20
21
22
23
24
41
42
47
Chairman’s
Report
Dear Shareholders
Adherium, a company with 17 years of experience in
adherence technologies, continues to be uniquely
positioned to address the global respiratory digital
health opportunity. The US remains a key target market,
where our digital health technology has broad coverage
of asthma and COPD medicines at an estimated 80%
of the market. With our commercial partners, we also
understand the opportunity across the globe as we
work on market access and reimbursement in other
geographies including the UK, Japan and China.
Globally, healthcare systems are undergoing
unprecedented strain, driven by aging populations,
pollution, and a rise in chronic diseases that are pushing
healthcare costs ever higher. Simply put, healthcare
systems have to do more for less. As exemplified by the
US, and being explored in other markets, there is a
move from the traditional “fee-for-service” healthcare
reimbursement model to one based on value-based
pricing. This change requires the remote patient
monitoring technology that Adherium has today, the
Hailie™ solution. Examples of this recent shift are new US
remote patient monitoring codes established in January
2019, which can provide a reimbursement to healthcare
providers of up to US$115 per patient per month. This
provides an ethical and financial incentive for adoption
of digital health technologies such as Adherium’s Hailie™.
These market drivers strongly align with our current value
proposition and future roadmap, which we are now fully
positioned to take advantage of.
In order to take advantage of market changes and
deliver on the value potential Adherium can bring, in
December 2018 the Adherium Board took measures to
restructure the company in order to accelerate global
deployment and commercial success. This was in light of
the growing acknowledgment by payers globally of the
value digital health brings, most notably in the US. I am
pleased that significant progress has been made toward
commercial growth while delivering current operations
and commercial obligations with an organization
headcount that has remained consistent since.
We continue to extend our Hailie™ sensor market
coverage. Earlier this year, the U.S. Food and Drug
Administration (FDA) granted 510(k) clearance for
over-the-counter (OTC) sales of our Hailie™ sensors for
asthma and COPD inhalers using Advair® and Flovent®
in the Diskus® format (known as Seretide® and Flixotide®
Accuhaler® outside of the US), and Spiriva® in the
Handihaler® format. In addition, we have successfully
completed FDA and ISO 13485 audits with no significant
findings arising.
As previously noted, our Hailie™ mobile patient app and
physician platform have been completely reconcepted,
with our strategic partner Arthur D. Little (ADL) and their
Digital Practice. Adherium’s platform is now globally
scalable and adopts standards which make integration
with customer platforms easier. Our approach to flexible
integration has been met with positive feedback in
comparison to our competitors in the field.
U.S. Food and Drug
Administration (FDA) granted
510(k) clearance for over-
the-counter (OTC) sales
of our Hailie™ sensors for
asthma and COPD inhalers
using Advair® and Flovent®
in the Diskus® format (known
as Seretide® and Flixotide®
Accuhaler® outside of the
US), and Spiriva® in the
Handihaler® format.
2
Annual Report 2019 Adherium Ltd The US remains a key target market, where
our digital health technology has broad
coverage of asthma and COPD medicines
at an estimated 80% of the market.
To take advantage of new mechanisms in the US,
Adherium has partnered with Summatix, an emerging
Class II regulated digital health platform, to take
advantage of proprietary features related to digital health
data monetization, compliance and reimbursement
models. We see our collaboration with Summatix as being
an important differentiator with our commercial partners
in the US and we are excited to be working on the US
opportunity together.
My personal thanks to Jeremy Curnock Cook as interim
Managing Director and Dr Bill Hunter as Executive Director
for supporting the business development for no additional
remuneration, and to all the Board in foregoing 50% of
their director fee cash payments. Thank you also to the
Adherium team, who whilst now operating with a smaller
number, have continued to deliver the pace of progress
required to reposition the company for commercial
growth.
I would also like to thank our shareholders who have
continued to support Adherium over the last year,
including those who participated in the recent $1.8 million
convertible note facility, and I welcome the new investors
in that facility and new shareholders through the year to
the Adherium opportunity.
Thomas Lynch
Non-executive Chairman
In “rest-of-world” Adherium is also now taking advantage
of changes to digital health reimbursement. We have
completed our investigation of software readiness in
China, which requires specialist knowledge in order
to manage differences in infrastructure and data
requirements, as well as to understand differences in
local market customer experience. We are in the process
of obtaining sensor device marketing access in China,
where Adherium is assisted by the Free Trade Agreement
between China and New Zealand, as well as our Asia
based manufacturing partner which also has local sites
in China. In addition, we are exploring software readiness
and integration options in Japan, and health system
reimbursement for our Hailie™ solution in the UK.
We are excited by our recent initiatives in the US, with
several emerging commercial collaborations, where we
are collectively working through reimbursement. With
our emerging partners, we believe there is significant
and growing value in the Adherium business. Adherium’s
closest competitor, Propeller Health, was acquired earlier
this year by ResMed for $220 million. With our customers
and partners, we can see a route over the next 12-18
months to realising the value in our business, especially
when taking into account new reimbursement incentives,
our R&D roadmap and the emerging commercial
partnerships which are now starting to take shape.
3
Annual Report 2019 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 2019, 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 63.
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. Until recently
he was 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 Jeremy Curnock Cook, MA. Age 70.
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.
Dr William Hunter, MD. Age 56.
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.
4
Annual Report 2019 Adherium Ltd
Mr Bruce McHarrie, B.Com, FCA, GAICD. Age 61.
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 79.
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.
Mr Bryan Mogridge BSc, ONZM, FNZIOD. Age 73.
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 Chairperson of
BUPA ANZ, Thinxstra and SeaDragon Limited, and a director of Mainfreight and Clearspan. Until recently he was also
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 Arik Anderson, BSc was an Executive Director until his resignation on 1 February 2019.
5
Annual Report 2019 Adherium Ltd Joint Company Secretaries
Mr Rob Turnbull, B.Com, CA. Age 52.
General Manager 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 almost 20 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.
Mr Mark Licciardo, B.Bus (Acc), GradDip CSP, FCSA, FCIS, FAICD. Age 55.
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.
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
17
7
17
17
17
17
17
14
7
16
10
17
8
16
-
-
-
-
6
6
6
-
4*
-
-
6
3
6
2
-
2
-
-
2
2
1
-
2
-
-
2
2
*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 2019 as noted:
Committee
Audit & Risk
Nomination & Remuneration
Membership
Bruce McHarrie (Chair), Non-Executive Director
John Mills, Non-Executive Director
Bryan Mogridge, Non-Executive Director
Bryan Mogridge (Chair), Non-Executive Director
Jeremy Curnock Cook, Executive Director
Thomas Lynch, Non-Executive Director
John Mills, Non-Executive Director
The committees’ Charters are available on the Company’s website.
6
Annual Report 2019 Adherium Ltd 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 2019 was $11,794,000.
No dividends were paid, declared or recommended during the year ended 30 June 2019.
Review of Operations
The second half of fiscal 2019 has been about refocussing the Adherium business in order to scale commercially. In early
December 2018 the Board announced a reorganization to create a smaller, simpler, more dynamic operational structure,
and from it has developed discrete programs with partners in line with scaling commercially. This reshaping of the business
saw the discontinuation of a number of non-core activities, including the “direct-to-consumer” offering. The focus is now
on overseeing development of enterprise solutions and supporting our current and new customers’ growth with Hailie™
(formerly Smartinhaler™) sensors and related software.
Adherium’s Hailie™ mobile patient app and physician platform has now been completely reconcepted, with strategic
partner Arthur D. Little (ADL) and their Digital Practice. The ADL team have led the ground-up development of the next
generation Hailie™ platform using a leading and globally scalable architecture model. This architecture leverages
cloud-first, horizontally scalable and serverless design and is constructed using a microservices architecture with platform-
agnostic languages. The Company believes the platform fully meets health regulatory compliance needs (including ISO
13485, HIPPA, GDR). Further, integration with customer platforms extending commercial deployment opportunities has
now been made easier as the reconcepted platform is interoperable and meets emerging HL7/FHIR standards (enabling
integration with EHR and other healthcare platforms) and can be easily “white-labelled” for customer-branding.
Importantly, the new architecture will enable Adherium to quickly enter markets that have stringent data protection
regulation, by ensuring that data stays in the geographical boundaries as per regulatory requirements.
Revenue to 30 June 2019 was $2,779,000, compared with $5,867,000 in fiscal 2018. The reduction was due largely to a
significant level of innovative product design and engineering service revenue of $4,049,000 in the prior year, compared
with $1,280,000 in the current period. In addition, while sensor sale volume increased from 27,000 in the prior year to
28,000 in fiscal 2019, revenue declined from $1,818,000 to $1,499,000 due largely to promotional pricing as part of
Adherium’s direct-to-consumer channel launch in calendar 2018. This promotional pricing also impacted gross margin on
sensor sales.
Research and development activities for the year ended 30 June 2019 amounted to $5,120,000 compared with $4,447,000
in the prior year. The increase was predominantly associated with the above-noted re-architecture of the Hailie™ mobile
patient app and physician platform, but activities also included:
• Multiple clearances by the US FDA for “over-the-counter” (OTC) sales in the US. These included Adherium’s
Hailie™ range of sensors for use with GSK’s Advair® Diskus®, Flovent Diskus®, Flixotide Accuhaler®, and
Seretide Accuhaler®, Boehringer Ingelheim’s Spiriva® Handihaler®, and AstraZeneca’s Bevespi® medication.
These clearances from the US FDA add to Adherium’s existing range of OTC cleared sensors and increase
coverage to an estimated 80% of US asthma and COPD medications.
• Successful completion of US FDA and ISO 13485:2016 audits, with no significant findings arising.
• Continuing development of Hailie™ sensors, most recently to incorporate advanced diagnostic capabilities.
Sales and marketing costs were $3,028,000 in the year to 30 June 2019, compared with $3,687,000 in the prior year.
The first half of fiscal 2019 predominantly related to the US focussed direct-to-consumer channel activities, and in
the second half attention has been focussed on programmes with payers and providers in the US as well as territory
pharmaceutical marketing companies. The rollout of our Hailie™ technology continues to gather pace through
commercial deployments based on our new platform with customers around the world. Adherium is also supporting new
clinical trials in Europe, expected to launch in the second half of calendar 2019.
7
Annual Report 2019 Adherium Ltd
Administration expenses reduced from $5,412,000 in 2018 to $4,345,000 in 2019 as a result of the reorganisation and the
resultant reduction in corporate staff and rationalisation of overhead. Non-cash costs included asset depreciation and
amortisation expense of $413,000 (2018: $310,000), and fixed asset write-offs associated with office closures in the re-
organisation of $270,000 (2018: nil).
Adherium ended fiscal 2019 with cash of $763,000. Subsequent to year end, the Company completed negotiations for a
secured funding facility with major shareholders and new investors, receiving commitments for $1.8 million, and the ASX
provided a waiver enabling participation by certain related parties. The terms of the funding and the ASX waiver were
announced to the market on 22 August 2019, and can be found on the Company’s website at www.adherium.com.
Significant Changes in the State of Affairs
As noted, the Board undertook a reorganisation during the year to create a smaller, simpler, more dynamic operational
structure. There have otherwise been no significant changes in the state of affairs of the Group during the financial year
ended 30 June 2019.
Events since the end of the Financial Year
Subsequent to the balance sheet date, Adherium received subscription commitments from existing shareholders and new
investors for $1.8 million of secured debt notes (2019 Notes) to be issued by the Company. The 2019 Notes contain terms for
their conversion into ordinary shares and options over ordinary shares which are subject to approval by shareholders at
the next general meeting. Until conversion, the 2019 Notes are secured by charges over the assets of the Company and its
wholly owned New Zealand subsidiary.
There are no other 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 Chairman's Report on pages 2 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 2019 is:
Director
T Lynch
J Curnock Cook
W Hunter
B McHarrie
J Mills
B Mogridge
Ordinary Shares
Options over Ordinary Shares
1,000,000
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.
8
Annual Report 2019 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
$0.134039
$0.134039
$0.134039
$0.134039
$0.134039
$0.134039
Outstanding at 30 June 2019
416,654
173,238
217,214
542,952
1,039,428
259,857
173,238
2,822,581
416,654
173,238
217,214
542,952
1,039,428
259,857
173,238
2,822,581
31 March 2020
31 March 2020
30 November 2020
16 December 2020
1 January 2021
24 March 2021
31 March 2022
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 2019.
Details of fully paid ordinary shares issued on exercise of options in the year to 30 June 2019 are contained in the
accompanying consolidated financial statements.
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.
9
Annual Report 2019 Adherium Ltd 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 2019 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.
10
Annual Report 2019 Adherium Ltd
Remuneration Report (Audited)
The Directors present the Group’s 2019 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 2019.
(i) Non-Executive and Executive Directors
•
•
•
•
•
•
•
Thomas Lynch
Non-Executive Chairman (appointed 1 September 2016)
Jeremy Curnock Cook
Executive Director (appointed on incorporation 17 April 2015)
William Hunter
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)
Arik Anderson
Executive Director (appointed 29 November 2017; resigned 1 February 2019)
and Group CEO (appointed 9 June 2017; ended 11 January 2019)
(ii) Other key management personnel
•
•
•
Rob Turnbull
Mark Licciardo
Joint Company Secretary (appointed 21 August 2015) and General Manager (VP Finance
& Business Services until 13 December 2018)
Joint Company Secretary (appointed 10 May 2016)
David Allinson
Chief Financial Officer (appointed 22 May 2018; ended 31 December 2018)
(iii) Changes since the end of the reporting period
In the period after 30 June 2019 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.
11
Annual Report 2019 Adherium Ltd
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;
(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 or her 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.
12
Annual Report 2019 Adherium Ltd
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.
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, executives and staff 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 participant
receives no benefit from unvested shares where the related loan is not repaid.
Participation in the Plans is at the board’s discretion and staff 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 2019 the Group
incurred a loss after tax of $11,794,000 (6.8 cent loss per share). In the year to 30 June 2019 the Company’s shares traded
between 2.2 and 12.0 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 2019.
(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.
13
Annual Report 2019 Adherium Ltd
(f) Details of remuneration of key management personnel
Remuneration for the year
ended 30 June 2019
Short Term Benefits
Post-Employment Benefits
Share-based Payments
Performance
Salaries & Fees
$
Cash Bonus
$
Insurance
& Other
$
Superannuation
$
Severance
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 Anderson1
David Allinson2
Garth Sutherland3
Mark Licciardo4
Rob Turnbull
Sub-total executives
Total key management personnel
100,000
50,000
50,000
50,000
50,000
50,000
350,000
398,896
219,934
295,455
24,4204
231,721
1,170,426
1,520,426
-
-
-
-
-
-
-
199,373
18,988
80,414
-
55,045
353,820
353,820
-
-
-
-
-
-
-
96,279
1,175
-
-
-
97,454
97,454
-
-
-
3,760
3,760
-
7,520
-
-
12,713
-
8,603
21,316
28,836
1. Arik Anderson’s employment as Chief Executive Officer ended on 11 January 2019.
2. David Allinson’s employment as Chief Financial Officer ended on 31 December 2018.
3. Garth Sutherland’s employment as Founder ended on 17 March 2019.
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
6. The negative value of Share-Based Payments represents the reversal related to the cancellation on resignation of Loan Funded Shares previously
to the reporting period.
awarded under the Employee Share Plan.
Remuneration for the year ended 30
June 2018
Short Term Benefits
Post Employment Benefits
Share-based Payments
Performance
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 Allinson1
Garth Sutherland
Mark Licciardo2
Rob Turnbull
Ross Bradding3
Timothy Marcotte4
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
$
-
-
-
-
-
-
-
-
-
-
296,996
138,809
435,805
435,805
$
5,323
2,661
2,661
2,661
2,661
2,681
18,628
(7,810)6
(492)6
(47,797)6
-
4,636
(51,463)
(32,835)
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
Total
$
105,323
52,661
52,661
56,421
56,421
52,661
376,148
983,734
239,605
479,594
24,420
300,005
2,027,358
2,403,506
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
$
5%
5%
5%
5%
5%
5%
19%
8%
7%
-
20%
$
11%
11%
11%
10%
10%
11%
20%
1%
40%
20%
33%
-
-
95%
95%
95%
95%
95%
95%
81%
92%
93%
100%
80%
89%
89%
89%
90%
90%
89%
80%
99%
60%
100%
80%
67%
100%
1. David Allinson was appointed Chief Financial Officer on 22 May 2018.
2. A company of which Mr Licciardo is a director received the 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.
14
Annual Report 2019 Adherium Ltd
(f) Details of remuneration of key management personnel
Remuneration for the year
ended 30 June 2019
Directors’ remuneration
Thomas Lynch
Jeremy Curnock Cook
William Hunter
Bruce McHarrie
John Mills
Bryan Mogridge
Sub-total Directors
Executives’ remuneration
Arik Anderson1
David Allinson2
Garth Sutherland3
Mark Licciardo4
Rob Turnbull
Sub-total executives
Total key management personnel
Directors’ remuneration
Thomas Lynch
Jeremy Curnock Cook
William Hunter
Bruce McHarrie
John Mills
Bryan Mogridge
Sub-total Directors
Executives’ remuneration
Arik Anderson
David Allinson1
Garth Sutherland
Mark Licciardo2
Rob Turnbull
Ross Bradding3
Timothy Marcotte4
Sub-total executives
Total key management personnel
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
199,373
18,988
80,414
-
55,045
353,820
353,820
96,279
1,175
97,454
97,454
$
-
-
-
-
-
-
-
-
-
-
161,785
41,421
41,383
373,565
373,565
128,976
31,331
19,454
50,785
50,785
100,000
50,000
50,000
50,000
50,000
50,000
350,000
398,896
219,934
295,455
24,4204
231,721
1,170,426
1,520,426
$
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
-
-
-
-
-
-
-
3,760
3,760
7,520
12,713
8,603
21,316
28,836
$
-
-
-
-
-
-
-
-
4,750
4,750
9,500
16,865
7,601
2,370
26,836
36,336
Short Term Benefits
Post-Employment Benefits
Share-based Payments
Performance
Salaries & Fees
Cash Bonus
$
Insurance
& Other
Superannuation
$
Severance
$
Value of Options/
Loan Funded Shares5
$
Total
$
Performance Related
Remuneration
$
Fixed
Remuneration
$
-
-
-
-
-
-
-
296,996
-
138,809
-
-
435,805
435,805
5,323
2,661
2,661
2,661
2,661
2,681
18,628
(7,810)6
(492)6
(47,797)6
-
4,636
(51,463)
(32,835)
105,323
52,661
52,661
56,421
56,421
52,661
376,148
983,734
239,605
479,594
24,420
300,005
2,027,358
2,403,506
5%
5%
5%
5%
5%
5%
19%
8%
7%
-
20%
95%
95%
95%
95%
95%
95%
81%
92%
93%
100%
80%
1. Arik Anderson’s employment as Chief Executive Officer ended on 11 January 2019.
2. David Allinson’s employment as Chief Financial Officer ended on 31 December 2018.
3. Garth Sutherland’s employment as Founder ended on 17 March 2019.
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.
6. The negative 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.
Remuneration for the year ended 30
June 2018
Short Term Benefits
Post Employment Benefits
Share-based Payments
Performance
Salaries & Fees
Cash Bonus
Superannuation
Insurance
& Other
$
Value of Options/
Loan Funded Shares5
$
Total
$
Performance Related
Remuneration
$
Fixed
Remuneration
$
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
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
11%
11%
11%
10%
10%
11%
20%
1%
40%
-
20%
33%
-
89%
89%
89%
90%
90%
89%
80%
99%
60%
100%
80%
67%
100%
1. David Allinson was appointed Chief Financial Officer on 22 May 2018.
2. A company of which Mr Licciardo is a director received the 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.
15
Annual Report 2019 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
Rob Turnbull, (VP Finance & Business Services
until 13 December 2018)
No fixed term
2 months 1
NZ$241,500
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 2019; 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.
No options over ordinary shares were exercised during the period to 30 June 2019 and to the date of this report.
Loan funded Employee Share Plan
The board has established the loan funded Adherium Employee Share Plans (Plans).
All awards under the Plans 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.
There were no offers of allocations under the Plans to key management personnel during the year ended 30 June 2019.
16
Annual Report 2019 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 2019 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
Mark Licciardo
Rob Turnbull 1
1,000,000
380,000
800,000
464,853
396,000
9,856,105
1,500,000
600,000
12,388,769
-
559,645
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,500,000) 2
(600,000) 2
(521,367) 2
-
-
1,000,000
380,000
800,000
464,853
396,000
9,856,105 1
-
-
11,867,4023
-
559,645
1. Ordinary shares held jointly with the General Manager in their capacity as trustees of the Company’s Employee Share Plan. At 30 June 2019
7,813,023 ordinary shares were held in this capacity.
2. Cancellation at employment end of loan funded shares previously awarded under the Company’s Employee Share Plan.
3. Holding as at date employment ended.
(j) Other transactions with key management personnel
Transactions with directors or other key personnel are set out in note 17 of the accompanying Group financial statements for
the year ended 30 June 2019.
End of audited Remuneration Report.
This report is made in accordance with a resolution of the directors.
Thomas Lynch
Non-Executive Chairman
Melbourne
27 September 2019
17
Annual Report 2019 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 2019, 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
27 September 2019
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.
18
Annual Report 2019 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
19
Annual Report 2019 Adherium Ltd Consolidated Statement of Profit or Loss and
Other Comprehensive Income for the year ended 30 June 2019
Notes
June 2019
$000
June 2018
$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
2,779
(1,133)
1,646
279
(1,293)
(5,120)
(3,028)
(4,345)
(11,861)
71
(4)
67
5,867
(1,099)
4,768
503
(1,364)
(4,447)
(3,687)
(5,412)
(9,639)
301
-
301
(11,794)
(9,338)
-
-
(11,794)
(9,338)
(99)
(99)
(615)
(615)
(11,893)
(9,953)
(11,893)
(9,953)
Basic and diluted loss per share
8
(6.8) cents
(5.4) cents
The accompanying notes form part of the financial statements.
20
Annual Report 2019 Adherium Ltd Consolidated Statement of Financial Position as at 30 June 2019
Notes
June 2019
$000
June 2018
$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
763
-
436
417
156
12,118
427
1,205
509
281
1,772
14,540
380
92
2,244
1,375
39
1,414
515
266
15,321
2,511
-
2,511
15
74,349
74,349
(46,952)
(35,158)
(26,567)
(26,381)
830
2,244
12,810
15,321
21
Annual Report 2019 Adherium Ltd
Consolidated Statement of Changes in Equity
for the year ended 30 June 2019
Share
Capital
Accumulated
Deficit
$000
$000
Equity as at 1 July 2017
74,278
(25,820)
Share &
Option
Compensation
Reserve
Foreign
Currency
Translation
Reserve
Merger
Reserve
$000
$000
Total
Equity
$000
672
(27,535)
22,705
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
-
Equity as at 30 June 2018
74,349
Loss for the period
Other comprehensive
income
Total comprehensive loss
Transactions with owners:
Share and option grants for
services
-
-
-
-
(9,338)
-
(9,338)
-
-
(35,158)
(11,794)
-
(11,794)
$000
1,110
-
-
-
-
(13)
1,097
-
-
-
-
(615)
(615)
-
-
57
-
(99)
(99)
-
-
-
-
-
(9,338)
(615)
(9,953)
71
(13)
(27,535)
12,810
-
-
-
-
(11,794)
(99)
(11,893)
(87)
-
(87)
-
Equity as at 30 June 2019
74,349
(46,952)
1,010
(42)
(27,535)
830
The accompanying notes form part of the financial statements.
22
Annual Report 2019 Adherium Ltd Consolidated Statement of Cash Flows
for the year ended 30 June 2019
Notes
June 2019
$000
June 2018
$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:
Short term cash investments maturing (deposited)
Purchase of property, plant and equipment
Purchase of software
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from the exercise of options
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
Fixed assets (gain) loss on disposal
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
Net cash provided from (used in) operating activities
The accompanying notes form part of the financial statements.
15
9
12
13
3,526
337
84
2
(7,555)
(8,201)
(11,807)
436
(325)
-
111
-
-
(11,696)
12,118
341
763
5,363
570
299
15
(8,014)
(8,057)
(9,824)
(408)
(325)
(169)
(902)
71
71
(10,655)
22,779
(6)
12,118
(11,794)
(9,338)
263
150
270
(88)
(510)
952
114
(1,203)
39
(11,807)
212
98
-
(13)
(633)
(582)
185
251
(4)
(9,824)
23
Annual Report 2019 Adherium Ltd Notes to the financial statements for the year ended 30 June 2019
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 2019 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 27 September 2019.
2. Basis of Preparation
This general purpose consolidated financial report for the twelve months ended 30 June 2019 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, 2019, the Group had net cash of $763,000 (2018: $12,118,000) and recorded a loss before tax of
$11,794,000 (2018: 9,338,000) and operating cash outflows of $11,807,000 (2018: $9,824,000) for the year then ended.
Subsequent to year end the Group has raised $1,800,000 from the issuance of secured debt notes that are due for
repayment on 31 January 2020 if not converted beforehand.
The Directors have approved cash flow forecasts. These forecasts indicate in order for the Group to meet its operating
requirements for the 12 months from the date of authorisation of these financial statements, the Group must raise
additional capital or alternative funding. The cash flow forecast indicates this additional funding would be required by
the end of calendar 2019.
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 raise
additional capital or alternative funding until the group is supported by cash flows from operations represents a
material uncertainty that casts significant doubt over the Group’s ability to continue as a going concern and therefore
whether it will be able to realise its assets and discharge its liabilities in the normal course of business. Despite this
uncertainty, the Directors are of the view that the company will be successful in raising additional capital or alternative
funding and accordingly have adopted the going concern basis for the preparation of this 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.
24
Annual Report 2019 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 2019, 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 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.
25
Annual Report 2019 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) 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.
(c)
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.
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.
26
Annual Report 2019 Adherium Ltd
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
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.
27
Annual Report 2019 Adherium Ltd
(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 Adoption of new and revised accounting standards
AASB 9 Financial instruments
In the current year, the Group has applied AASB 9 Financial Instruments and related amending Statements
which is effective for periods beginning on or after 1 January 2018. 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 transition provisions
of AASB 9 allow an entity not to restate comparatives, however there was no material impact on adoption of
this standard.
AASB 15 Revenue from contracts with customers
In the current year, the Group has applied AASB 15 Revenue and Contracts with Customers which is effective
for periods beginning on or after 1 January 2018. AASB 15 sets out a five step model for revenue recognition
with the core principle being for entities the recognise revenue to depict the transfer of goods or services to
customers in a way that reflects the consideration to which the entity expects to be entitled in exchange for
these goods and services. There was no material impact on adoption of this standard and no adjustment
made to current or prior periods.
3.22 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:
28
Annual Report 2019 Adherium Ltd
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 will apply this standard from 1 July 2019 but it will not have a material impact on the company.
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 2019
$000
June 2018
$000
235
173
64
472
386
123
272
781
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
Asia
b) Major customers
Revenues are derived from major external customers as follows:
Major customers
Customer A group entities
Customer B group entities
5. Revenue
Income from continuing operations:
Sensor sales and monitoring services
New product design and engineering services
Grant income
Interest income
June 2019
$000
June 2018
$000
2
2,753
14
10
2,779
109
5,708
50
-
5,867
June 2019
$000
2,704
-
June 2018
$000
5,621
11
June 2019
$000
June 2018
$000
1,499
1,280
279
71
3,129
1,818
4,049
503
301
6,671
29
Annual Report 2019 Adherium Ltd
6. Expenses
Loss before income tax includes the following specific expenses:
June 2019
$000
June 2018
$000
88
40
12
140
413
358
19
377
6,036
(106)
5,930
(510)
422
87
-
54
141
310
360
43
403
8,315
(56)
8,259
(633)
465
June 2019
$000
June 2018
$000
-
-
-
(11,794)
(3,771)
24
222
3,525
-
-
-
-
(9,338)
(3,076)
(10)
(25)
3,111
-
Fees paid to PricewaterhouseCoopers for:
Audit of the financial statements
Interim report review
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
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 32% (2018: 33%).
30
Annual Report 2019 Adherium Ltd 8. Earnings per share
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 2019
$000
June 2018
$000
Profit (loss) after income tax attributable to equity holders
(11,794)
(9,338)
Weighted average shares outstanding (basic)
173,896,088
173,440,493
Weighted average shares outstanding (diluted)
Basic and diluted loss per share
173,896,088
(6.8) cents
173,440,493
(5.4) cents
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 2019
$000
June 2018
$000
145
618
763
400
11,718
12,118
June 2019
$000
June 2018
$000
287
72
34
43
436
975
117
72
41
1,205
June 2019
$000
June 2018
$000
194
223
417
218
291
509
The cost of inventories recognised as an expense and included in 'cost of sales' amounted to $977,000
(2018: $956,000).
31
Annual Report 2019 Adherium Ltd 12. Property, plant and equipment
Manufacturing
Equipment
Computer
Equipment
Fixtures
& Fittings
Office
Equipment
$000
$000
$000
$000
499
(355)
144
144
129
-
(115)
(6)
152
608
(456)
152
152
189
(7)
(133)
5
206
809
(603)
206
174
(90)
84
84
64
(3)
(62)
(4)
79
217
(138)
79
79
29
(12)
(49)
-
47
248
(201)
47
188
(23)
165
165
127
-
(29)
(6)
257
307
(50)
257
257
51
(188)
(74)
10
56
182
(126)
56
34
(10)
24
24
9
(1)
(6)
1
27
43
(16)
27
27
100
(22)
(35)
1
71
122
(51)
71
As at 1 July 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
Movements in the year
ended 30 June 2019
Opening net book value
Additions
Disposals
Depreciation
Foreign currency translation
Closing net book value
As at 30 June 2019
Cost
Accumulated depreciation
Net book value
32
Total
$000
895
(478)
417
417
329
(4)
(212)
(15)
515
1,175
(660)
515
515
369
(229)
(291)
16
380
1,361
(981)
380
Annual Report 2019 Adherium Ltd 13. Intangible assets
As at 1 July 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
Movements in the year ended 30 June 2019
Opening net book value
Additions
- External costs
Disposals
Amortisation
Foreign currency translation
Closing net book value
As at 30 June 2019
Cost
Accumulated amortisation
Net book value
Software
$000
Total
$000
313
(48)
265
265
111
(2)
(98)
(10)
266
421
(155)
266
266
-
(34)
(150)
10
92
388
(296)
92
313
(48)
265
265
111
(2)
(98)
(10)
266
421
(155)
266
266
-
(34)
(150)
10
92
388
(296)
92
33
Annual Report 2019 Adherium Ltd 14. Trade and other payables
Trade payables
Accruals
Employee benefits
15. Share capital
Share capital as at 1 July 2017
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 2018
Cancellation of share plan shares
Share capital as at 30 June 2019
June 2019
$000
June 2018
$000
914
93
368
1,375
877
211
1,423
2,511
Ordinary Shares
$000
171,849,192
3,032,072
(1,554,329)
946,997
174,273,932
(7,258,581)
167,015,351
74,278
-
-
71
74,349
-
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.
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contract
Life (years)
Exercisable
Weighted
Average
Exercise
Price
Weighted
Average
Share Price
at Exercise
4,395,401
$ 0.1083
2.8
4,395,401
$
0.1083
-
$
-
(946,997)
$ 0.0752
$
0.16
Outstanding at
30 June 2018
3,448,404
-
-
-
$
$
$
$
-
0.1163
2.1
3,448,404
$
0.1163
-
-
(625,823)
$ 0.0752
2,822,581
$
0.1254
1.4
2,822,581
$
0.1254
Exercise
price range
$0.075268 –
0.134039
Outstanding
at 1 July 2017
Granted
Exercised
Lapsed
Granted
Exercised
Lapsed
Outstanding at
30 June 2019
34
Annual Report 2019 Adherium Ltd
There were no options granted in the year ended 30 June 2019 (2018: nil). The Company has no legal or constructive
obligation to repurchase or settle the options in cash.
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.
There were no new awards under the Adherium ESP during fiscal 2019. The assessed weighted average fair value
at grant date of the awards made during the 2018 financial period is 1.3 cents per ESP share awarded. 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 and are on issue under the Adherium ESP:
Grant date
Shares granted
Issue price
Vested as at
30 June 2019
Restricted as at
30 June 2019
Share price
at grant date
16 May 2016
2,569,609
8 November 2016
2,100,000
23 December 2016
8 November 2017
243,628
173,277
$0.50
$0.50
$0.50
$0.50
2,569,609
1,400,000
162,418
115,518
-
700,000
81,210
57,759
$0.50
$0.35
$0.26
$0.08
16. Deferred Income Tax
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 2019
$000
June 2018
$000
-
3,525
(3,525)
-
-
3,111
(3,111)
-
35
Annual Report 2019 Adherium Ltd
The movement in deferred income tax assets and liabilities during the period is as follows:
Deferred tax assets (liabilities)
As at 1 July 2017
Credited (charged) to the income statement
Effect of exchange rate changes
Change in unrecognised deferred tax assets
As at 30 June 2018
Credited (charged) to the income statement
Effect of exchange rate changes
Change in unrecognised deferred tax assets
As at 30 June 2019
Provisions
and accruals
$000
Intangible
assets
$000
-
(19)
(4)
23
-
(32)
3
29
-
-
82
(8)
(74)
-
(6)
10
(4)
-
Tax
losses
$000
-
3,048
(15)
Total
$000
-
3,111
(27)
(3,033)
(3,084)
-
-
3,563
365
(3,928)
3,525
378
(3,903)
-
-
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 $11,812,000 (2018: $7,884,000) in respect of
losses amounting to $38,016,000 (2018: $25,850,000) that can be carried forward against future taxable income. The
Company also did not recognise further deferred income tax assets of $380,000 (2018: $405,000) in respect of other
timing differences amounting to $1,351,000 (2018: $1,441,000).
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 2019
$000
June 2018
$000
358
19
959
21
44
1,401
360
43
1,780
27
23
2,233
Directors
- fees and other legislated superannuation
- share and option compensation
CEO and management
- short-term benefits
- post-employment benefit contributions
- share based compensation
36
Annual Report 2019 Adherium Ltd
Key management personnel and their associates subscribed for share capital in the Company as follows:
June 2019
Ordinary Shares
June 2019
$000
June 2018
Ordinary Shares
June 2018
$000
-
-
-
-
519,714
519,714
39
39
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 2019
$000
June 2018
$000
Alecia Anderson Design
- Office design consultancy for office refurbishment
11
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 2019
$000
June 2018
$000
763
-
359
1,122
12,118
427
1,092
13,637
1,375
2,511
-
-
-
-
Total financial liabilities
1,375
2,511
(b) Risk management
The Company is subject to a number of financial risks which arise as a result of its activities.
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 $510,000 is included in results
for the period ended 30 June 2019 (2018: $633,000 gain).
37
Annual Report 2019 Adherium Ltd
The carrying amounts of foreign currency denominated assets and liabilities are as follows:
June 2019
$000
June 2018
$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
1,016
1,080
40
-
303
769
14
-
28
0
8,817
1,756
200
1
1,052
1,019
117
40
5
1
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 2019
$000
June 2018
$000
584
381
22
3
-
(713)
(465)
(27)
(3)
-
256
349
40
1
-
(313)
(426)
(49)
(1)
-
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.
38
Annual Report 2019 Adherium Ltd 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 A-2 credit rating (2018: 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 2019
$000
June 2018
$000
260
27
287
934
41
975
The Company is exposed to a concentration of credit risk as 91% of accounts receivable are with one counterparty
(2018: 96%). The customer has an external credit rating of A-2.
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 2019
Trade and other payables
As at 30 June 2018
Trade and other payables
Less than
3 months
$000
Between 3 months
and 1 year
$000
1,375
2,511
-
-
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.
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 2019. During the year
ended 30 June 2019 Adherium Limited recognised an impairment on the carrying value of its investments in and loans
to subsidiaries to record those at the Group carrying value. This resulted in an impairment charge of $5,748,000 (2018:
$48,146,000 impairment) The information presented here has been prepared using consistent accounting policies as
presented in Note 1.
39
Annual Report 2019 Adherium Ltd
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 2019
$000
Parent
June 2018
$000
107
4,080
4,187
300
-
300
3,887
74,349
(71,057)
595
3,887
(16,534)
(16,534)
10,643
10,117
20,760
251
-
251
20,509
74,349
(54,523)
683
20,509
(49,846)
(49,846)
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
21. Contingencies and commitments
June 2019
June 2018
100%
100%
100%
100%
100%
100%
100%
100%
The Company had no contingencies or commitments to purchase any property, plant or equipment at 30 June 2019 (2018: 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 2019
$000
June 2018
$000
74
-
-
74
364
572
-
936
Subsequent to the balance sheet date, Adherium received subscription commitments from existing shareholders and new
investors for $1.8 million of secured debt notes (2019 Notes) to be issued by the Company. The 2019 Notes contain terms for
their conversion into ordinary shares and options over ordinary shares which are subject to approval by shareholders at the
next general meeting. Until conversion, the 2019 Notes are secured by charges over the assets of the Company and its wholly
owned New Zealand subsidiary.
There are no other events occurring after the balance sheet date which require disclosure or adjustment in the financial
statements.
40
Annual Report 2019 Adherium Ltd
Directors’ Declaration
The Directors declare that the financial statements and notes set out on pages 20 to 40 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 2019 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 2019.
This declaration is made in accordance with a resolution of the Directors.
On behalf of the board.
Thomas Lynch
Non-Executive Chairman
Melbourne
27 September 2019
41
Annual Report 2019 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 2019 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 2019
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.
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.
42
Annual Report 2019 Adherium Ltd
Independent Auditor’s Report
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 (including Independence
Standards) (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.
Material uncertainty related to going concern
We draw attention to Note 2 of the Basis of Preparation within the financial report, which indicates the
Group incurred a net loss of $11,794,000 (2018: $9,338,000) and operating cash outflows of $11,807,000
(2018: $ 9,824,000) for the year ended 30 June 2019. As at 30 June 2019 the net cash balance was
$763,000.
As a result, the Group is dependent on raising additional capital or alternative funding, until it is
supported by cash flows from operations.
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 report 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
For the purpose of our audit we
used overall Group materiality
of $0.6 million, which
represents approximately 5% of
the Group’s losses before tax.
We applied this threshold,
together with qualitative
Our audit focused on where the
Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
Amongst other relevant topics,
we communicated the following
key audit matter to the Audit
and Risk Committee:
Revenue recognition
43
Annual Report 2019 Adherium Ltd
Independent Auditor’s Report
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
report as a whole.
We chose Group loss before 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
This is further described in the
Key audit matters section of our
report, except for the matter
which is described in the
Material uncertainty related to
going concern section.
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. Further, any commentary on the outcomes of a particular audit
procedure is made in that context.
In addition to the matters described in the Material uncertainty related to going concern section, we
have determined the matter described below to be the key audit matter to be communicated in our report.
Key audit matter
How our audit addressed the key audit matter
Revenue recognition
Refer to note 5 ($2,779,000)
During the year the Group has applied AASB 15
Revenue for Contracts with Customers (AASB 15)
as disclosed in Note 3.21.
Revenue recognition was a key audit matter due
to:
the complexity involved in applying AASB
15 for the first time
the significance of revenue to understanding
the financial results for users of the
financial report
We performed the following procedures, amongst
others:
Developed an understanding of and evaluated
the operating effectiveness of relevant key
revenue internal controls.
Assessed whether the Group’s new accounting
policies were in accordance with the
requirements of AASB 15.
For a sample of contracts for each material
revenue stream we:
Developed an understanding of the key
terms of the arrangement including
parties, term dates, background of
agreement, performance obligations and
payments to be made.
Considered the Group’s identification of
performance obligations and allocation of
selling prices to the performance
obligations.
44
Annual Report 2019 Adherium Ltd
Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
Considered whether the transaction price
was properly allocated using the
standalone selling price.
Evaluated the adequacy of the disclosures
made in note 4 and 5 in light of the
requirements of Australian Accounting
Standards.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 June 2019, 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
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 on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the 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.
45
Annual Report 2019 Adherium Ltd
Independent Auditor’s 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 11 to 17 of the directors’ report for the year
ended 30 June 2019.
In our opinion, the remuneration report of Adherium Limited for the year ended 30 June 2019 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
27 September 2019
46
Annual Report 2019 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 31 August 2019.
(a) Distribution of equity securities
Ordinary share capital
As at 31 August 2019 there were 174,031,986 ASX quoted ordinary shares held by 616 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
8,075
306,758
816,768
11,662,894
161,237,491
174,031,986
25
90
96
280
125
616
There were 257 shareholders holding less than a marketable parcel of ordinary shares at a price of $0.0270,
totalling 1,768,721 ordinary shares.
Unquoted options over ordinary shares
As at 31 August 2019 there were 2,822,581 options over ordinary shares held by 9 holders.
b) Twenty largest holders of quoted equity securities as at 31 August 2019
Ordinary Shares
Shareholders
One Funds Management Limited
HSBC Custody Nominees (Australia) Limited
K One W One Ltd
Adherium ESP Trustee Limited
HSBC Custody Nominees (Australia) Limited - A/C 2
Mr Garth Sutherland
Citicorp Nominees Pty Limited
JMID Pty Ltd
NZVIF Investments Limited
Road Response Australia Pty Ltd
JMID Pty Ltd
Mr Daniel Blackwood Ritchie
National Nominees Limited
Chag Pty Ltd
Peter Smith Superannuation Management Pty Ltd
Bennamon Pty Ltd
Mr James Robert Levien
Mogridge & Associates Ltd
Mr Carlsen Wilson Henry Marks + Mrs Edwina Mary Marks
Ross Alan Sutherland + Valerie Mary Sutherland +
Garth Campbell Sutherland
Number
25,217,915
22,106,654
10,990,860
10,303,149
9,352,786
9,174,885
6,197,552
6,000,000
4,483,383
4,385,440
4,000,000
2,614,454
2,604,884
2,550,000
2,297,169
2,168,000
1,400,000
1,394,289
1,150,000
1,072,517
%
14.49
12.70
6.32
5.92
5.37
5.27
3.56
3.45
2.58
2.52
2.30
1.50
1.50
1.47
1.32
1.25
0.80
0.80
0.66
0.62
Total top 20 holders of fully paid ordinary shares
129,463,937
74.39
47
Annual Report 2019 Adherium Ltd
(c) Substantial shareholders
In accordance with ASX Listing Rule 4.10.4, a listing of substantial holding notices provided to the Company and
released to the ASX are included below:
Substantial shareholders
Notification
Date
Ordinary Shares
Held
One Funds Management Limited
28/07/2016
25,217,915
FIL Limited
Mr Garth Sutherland
K One W One Ltd
I.G. Investment Management, Ltd and associates
JMID Pty Ltd
AstraZeneca PLC and its related bodies
13/02/2019
12,400,096
01/08/2016
12,388,769
26/07/2016
10,990,860
01/09/2015
07/06/2019
26/08/2015
9,535,000
8,997,000
8,079,720
87,609,360
(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.
Corporate Information
ASX code: ADR
Directors
Mr Thomas Lynch (Chair)
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
NZ Office
(Prinicipal Administrative Office)
Level 11, 16 Kingston 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