Cellmid Limited
Suite 1802, Level 18,
15 Castlereagh Street
Sydney NSW 2000
Australia
ABN 69 111 304 119
T: +61 2 9221 6830
F: +61 2 9221 8535
E: info@cellmid.com.au
W: www.cellmid.com.au
2016 Annual Report
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Contents
Chairman’s Letter
CEO Report
Directors’ Report
Corporate Governance Statement
Annual Financial Report
Additional Information for Listed Entities
Corporate Directory
4
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Cellmid Limited (ASX:CDY)
Annual Report
ABN 69 111 304 119
Suite 1802, Level 18
15 Castlereagh Street
Sydney NSW 2000
Australia
T: +61 2 9221 6830
F: +61 2 9221 8535
E: info@cellmid.com.au
W: www.cellmid.com.au
Chairman’s
Letter
Dear Shareholders,
It is my pleasure to present to you the 2016 Annual
Report.
The Company has continued to make good progress
in both the midkine-related and consumer health
operating divisions, as evidenced by strong revenue
growth across all segments. The consumer health
division (Advangen) has shown revenue growth of
65%, with especially strong sales in Japan. With
the expansion of both the product range and the
distribution footprint, we remain confident of further
strong growth in the current year.
The midkine (MK) division was streamlined during
the year with the formation of separate subsidiary
companies Lyramid and Kinera, focusing on target
indications for midkine antibodies (Lyramid) and
protein (Kinera) respectively. While progress in
the commercialisation of the MK antibody and
protein assets continues to be driven by highly
cost effective collaborations with a wide range
of scientists and laboratories around the world,
these dedicated subsidiaries, each with a clear
therapeutic development focus, provide increased
flexibility for the Company in the challenge of
funding the ambitious clinical development plans.
In April this year, the Company co-hosted its fourth
successful Midkine Symposium. The range and
quality of our MK collaborations is clearly evidenced
by the results presented at this invitation only
meeting in Budapest, Hungary. I recommend to
shareholders the interviews with some of our key
collaborators which we released on the ASX late
in June. Important new results presented at the
meeting have contributed to our commercialisation
focus for MK antibodies on fibrosis, chronic kidney
disease and associated conditions; and for MK
protein on heart failure and chronic heart conditions.
The Company’s strong MK patent portfolio underpins
the diagnostic and therapeutic initiatives around
midkine. There were two important additions to the
patent portfolio during the year. In late November
2015, a Japanese patent was granted for the use
of MK to prevent and treat hair loss, and to promote
and enhance hair growth; an important addition to
the Company’s hair growth asset portfolio. Around
the same time, a key US antibody patent was
granted entitled “Antibody recognising C-Domain
of midkine with claims in important disease areas
such as cancer, inflammation and autoimmunity.
Also with regard to the patent portfolio, a patent
application was filed to secure the intellectual
property for the application of the Company’s
antibodies in bone therapy. This application followed
collaborative research in Germany showing for
the first time that treatment with a MK antibody
accelerated bone fracture healing in an aged rodent
model of the condition.
As with last year, developments in our consumer
health division
(Advangen) have continued to
gain pace. Advangen has established itself as a
market leader in clinically validated topical hair
loss treatments, having developed a novel range
of hair growth products based on the Company’s
4 Cellmid 2016 Annual Report
proprietary FGF5 inhibitor technology. Marketing of
the products on TV and digital media in Australia
started in earnest during the year. With the launch in
June of the evolis® Professional range of anti-aging
hair care products for salons, we expect to see
significant penetration of this important market
sector.
Internationally, sales grew strongly in Japan, with
one month sales in April delivering a record net
revenue in excess of $558,000. And shortly after
the end of the financial year, the Company was
successful in securing a distribution partnership
with Colour Collective, a well-credentialed Dallas
based specialist in the launch of high end hair
brands in the USA. This important US partnership
is expected to significantly accelerate the route to
this US$3.5 billion hair loss market. The road ahead
for Advangen is indeed an exciting one.
Further details on all the significant developments
referred to above can be found in the report of our
CEO, Maria Halasz.
important additions
There have been
to our
professional team during the year. In July 2015, Dr
Bryce Vissel, a leading researcher then at the Garvan
Institute, was appointed to Chair the Company’s
important Scientific Advisory Board, in which role he
has made a significant contribution to developing the
clinical strategy for MK. (Dr Vissel was in May this
year appointed as Professor of Neurosciences at the
University of Technology, Sydney, a recognition of his
outstanding research credentials).
In July 2015, Dr Fintan Walton, founder and CEO of
UK based corporate advisory firm PharmaVentures
Ltd, joined the board, bringing to it his invaluable
33 years’ experience in the global pharmaceutical
and biotechnology sector. Also in July 2015, Bruce
Gordon, with 35 years of audit and corporate
finance experience, joined the board. Since their
appointment the directors have been actively
contributing to the strategic direction of the
Company.
The strong performance of the businesses in the
year in review bears witness to the exceptional
work, dedication and professionalism of our small
but highly committed team at Cellmid, ably led
by CEO Maria Halasz. While the company has
continued to grow its businesses and substantially
met its planning milestones, the only disappointing
note is that the Company’s share price has not
reflected its successes.
I take this opportunity to thank all shareholders for
their support throughout the year.
David King
Chairman
Cellmid 2016 Annual Report 5
CEO
Report
Dear Shareholders,
It is my pleasure to report to you on this 2016 financial year,
a period of strategic developments and growth for Cellmid.
Sales records have been broken by our talented team and
important milestones met.
exceeding revenue expectations. In Australia, Advangen
International performed to expectation after a reduced
advertising budget, which was redirected towards an early
USA product roll out.
In a critical strategic milestone, Cellmid transitioned from a
single operational entity, to three wholly owned subsidiaries.
Lyramid Limited and Kinera Limited have been set up to
develop our midkine (MK) intellectual property in a number of
clinical indications including chronic kidney disease, cancer
and ischemic conditions of the heart and brain. Advangen
Limited is the holding company for the development and sale
of our FGF5 inhibitor hair loss products globally.
The dedicated subsidiaries, Lyramid, Kinera and Advangen,
have clear therapeutic and commercial focus, hence present
targeted investment opportunities for specialist investors.
The subsidiaries have their own product development and
cost centres improving transparency in preparation for such
investment. They are eligible for funding from venture capital,
government or private investment otherwise not available to
Cellmid. Investment directly into these subsidiaries will also
limit dilution while Cellmid shareholders will benefit from the
potential upside.
The financial performance of the company was the best yet,
as sales revenue increased in Australia and Japan to a record
$3,120,367. For the first time in any full financial year our
Japanese subsidiary, Advangen Inc., has become profitable
Overall sales revenue has increased 171% since acquisition
of Advangen Inc. Following the 2015 commercial launch in
Australia we sold almost $1.5 million of evolis® products,
wholesale, representing just under $3 million in retail sales
value. As far as pharmacy hair loss products are concerned
we have definitely arrived and are second only to Regain®, a
30-year-old brand with big pharma ownership.
The financial performance since 2014 is summarised in Table 1
below. Whilst the strong revenue growth is obvious during the
period it is also important to note that we have continued to
build value in our midkine portfolio through increased research
and development. This value is currently not recognised by
the markets, however once our midkine therapeutics enter
clinical development this is expected to change.
We continued to improve our income/expenditure ratio from
38% in 2014 to 57% in 2016. We continue to rely less and
less on new issues of securities, and more on revenue for our
activities and that includes research and development (R&D)
expenditure incurred in Lyramid and Kinera.
With the new corporate structure in place we expect to improve
clarity on the performance of our subsidiaries. Our target is
TabLe 1: FinanCiaL ResuLTs 2014-2016
FY2014
FY2015
FY2016
sinCe
aCQuisiTiOn
Total revenue*
Sales Revenue
Midkine revenue
$ 1,898,037
$ 2,930,518
$ 4,571,599
$ 1,150,931
$ 1,842,804
$ 3,120,367
$ 1,009,188
$ 99,263
$ 205,390
R&D tax credit/grants
$ 747,106
$ 998,451
$ 1,121,562
Total expenditure
R&D spending*
Current assets
$ 5,023,890
$ 6,301,547
$ 8,098,979
$ 1,660,236
$ 2,196,558
$ 2,492,360
$ 4,499,891
$ 4,173,616
$ 5,131,104
Revenue/expenditure
38%*
47%
57%
141%
171%
61%
50%
14%
*Excluding the one off license fee from Pacific Edge Limited
6 Cellmid 2016 Annual Report
to achieve profitability for our consumer health businesses in
the various regions, like Advangen Inc., in Japan, which has
become profitable three years after its acquisition.
On the capital raising front, we placed 133,333,333 shares
at 3 cents each to sophisticated investors, and raised $4
million, in August 2015. In addition to increasing revenues the
Company has been deploying this capital prudently increasing
the underlying net assets.
We continue to leverage our MK reagents, including the
MK protein, antibodies and MK-ELISA, to access research
capabilities with global experts in a number of therapeutic
fields, including glioblastoma, kidney disease, bone healing,
cardiovascular research and programs in various inflammatory
conditions. These high value research collaborations would
simply be impossible without our MK assets.
LYRaMiD Limited – MK antibody and diagnostic
Programs
Several of our pre-clinical collaborations delivered results
this financial year, some of which are yet to be published.
Significantly, MK’s mechanism of action was further elucidated
through these important findings.
Professor Guillermo Valesco’s group at Complutense
University in Madrid has been working on a large in vitro
and preclinical study. Early results showed efficacy for two
of Cellmid’s antibodies in cannabinoid resistant glioblastoma
cell lines supressing their growth. These antibodies have been
further tested in animal models of the disease and results are
due to be released in FY2017. The results will be instructive for
Cellmid’s further clinical plans and commercial collaborations.
Dr Astrid Liedert at the University of Ulm completed her bone
fracture healing study using Cellmid’s N-terminal binding
antibodies and has been able to demonstrate enhanced bone
fracture healing in ovariectomised mice. These in vivo studies
mimic the biology of osteoporosis in postmenopausal women
and are representative of the delayed bone healing that occurs
in this population. This data added to previous findings where
Dr Liedert has shown improved bone healing using Cellmid’s
N-terminal binding antibodies in otherwise healthy mouse.
Important further work is currently planned on the basis of this
study with research collaborators in Australia.
The year has been significant for not only delivering study
results
that brought clarity on MK biology, structure,
mechanism of action and clinical utility, we have also engaged
with senior researchers and opinion leaders in a number of
disease indications.
Early in FY2016 we appointed Professor Bryce Vissel to
Chair Cellmid’s Scientific Advisory Board. At the time of his
appointment Dr Vissel was the Head of the Neurodegenerative
Diseases research group at the Garvan Institute of Medical
Research as well as Conjoint Senior Lecturer at St Vincent’s
Clinical School, Faculty of Medicine, University of NSW. In May
2016, Dr Vissel was appointed Professor of Neurosciences at
the University of Technology Sydney, currently leading a team
of scientists in a world class research initiative in regenerative
medicine, including Alzheimer’s and Parkinson’s disease,
spinal cord disorders and neuropsychiatric conditions.
Professor Vissel has made a significant contribution to Cellmid
since joining as Chair of the Company’s Scientific Advisory
Board in 2015. He has been instrumental in the development
of the research and development strategy for MK, crystallised
within two of the Company’s wholly-owned subsidiaries,
Lyramid and Kinera.
In addition to the therapeutic development, several MK
diagnostic collaborations reported results in FY2016. Clinical
collaboration with Cellmid’s nephrologist adviser, Dr Victoria
Campbell, showed early evidence that MK may be an important
marker of chronic kidney disease. This collaboration involves
several clinical centres in Australia and is expected to continue
supporting the nephropathy related therapeutic work.
Cellmid currently has three commercial deals with diagnostic
companies; the Pacific Edge Limited license for bladder
cancer, the Celera-Quest license for lung cancer, and supply
and license agreement with Fujikura Kasei. It is important to
note that Cellmid spends no funds on this business other than
maintaining the patents, whilst all of these agreements have
delivered revenue to the Company.
Cellmid signed a license agreement with Pacific Edge Limited
in 2010 for the use of MK as one of the biomarkers in their
bladder cancer test (Cxbladder®). Pacific Edge commenced
sales using its CLIA1 registered Pennsylvania labs in 2013,
and have since launched other products (CxBladder® Triage
and CxBladder® Monitor) in its bladder cancer detection,
prognostic and disease management suite.
1 Clinical Laboratory Improvement Amendment, CLIA, sets standards and issues certificates for clinical laboratory
testing in the United States. It is administered by the US Centre for Medicare and Medical Devices, CMS
Cellmid 2016 Annual Report 7
CEO Report
Continued
Pacific Edge increased its operating revenue from $1.9
million in 2015 to $4.9 million in 2016 (162% increase). This
growth was assisted by a number of provider agreements for
Cxbladder® including Veteran’s Administration and the Centre
for Medicare and Medicaid in the USA.
MK contributes, as one of five markers, to the performance of
Cxbladder® in clinical studies with 100% sensitivity and 85%
specificity in late stage bladder cancer. With reimbursement
and strong clinical performance, CxBladder® is becoming
a feasible replacement to cystoscopy, a painful urethral
endoscopy.
Cellmid signed a license agreement with Celera-Quest in
October 2009 enabling Celera-Quest to include MK as
one of the biomarkers in a lung cancer diagnostic test. The
license covers using MK for the early diagnosis, prognosis,
disease monitoring and management of lung cancer. Cellmid
received an upfront payment at the time of signing and the
license provides for a further milestone payment at the time of
regulatory clearance for the lung cancer test, and royalties to
be paid semi-annually once the product is sold.
It is worthwhile to note that developing accurate diagnostic
tests takes many years and a significant investment often
exceeding tens of millions of dollars. Celera-Quest has been
conducting clinical studies and published these in scientific
journals since the signing of the license, however, Cellmid
has not received a report during FY2016 on the progress
of this program. There has been no change to the license
agreement and Cellmid will continue to seek an update from
Celera-Quest.
Fujikura Kasei exercised its option to license Cellmid’s MK
diagnostic patents for Japan in 2014 and has been actively
progressing the assay development on its latex platform.
Concurrently, the MK cancer diagnostic clinical study is
ongoing and Cellmid has been assisting in the development
work. Fujikura Kasei is using their latex based MK assay,
which is expected to suit commercial production due to its
low cost and has wide acceptability in pathology laboratories.
KineRa LiMiTeD – MK program for the treatment of
ischemic conditions
Kinera has been set up to commercially exploit Cellmid’s
patents for the treatment and prevention of ischemia related
tissue injury by using the MK protein as therapeutic agent.
MK’s potential as a cell protectant in tissues under stress as
well as in wound healing has been demonstrated previously in
8 Cellmid 2016 Annual Report
several animal studies and the Kinera team has been actively
developing a clinical path for the drug.
The process development for the GMP manufacture of MK
was originally carried out by Lonza using expression by
Pichia pastoris. This has since been successfully scaled
up by Kinera’s planned GMP manufacturing partner.
Pharmacokinetic studies confirmed availability of biologically
active MK in multiple species and pharmacodynamic and
toxicity studies are expected once funding is secured for the
program.
aDVanGen LiMiTeD - strong revenue growth in FY2016
Advangen Limited was set up to commercialise Cellmid’s FGF5
inhibitor and MK hair loss technologies after the acquisition of
Advangen Inc., Japan in May 2013. Since then, revenue in the
business increased by 171% and Advangen Japan became
profitable in FY2016.
Advangen currently sells its products, under the brands evolis®,
Jo-Ju® and Lexilis®, primarily in Japan and Australia, and has
been negotiating partnership and distribution agreements in
other countries. Revenue growth is expected to continue from
existing markets, however the most significant upside is likely
to result from the launch of the evolis® brand in the US and
other markets.
Advangen relies on sophisticated technology to remain at
the cutting edge of hair science. Its products inhibit FGF5,
a naturally occurring protein that has been recognised as
the key regulator of the human hair cycle. An overexpression
of FGF5 causes hair follicles to enter a phase where the
hair falls out. Cellmid, through its wholly owned subsidiary,
Advangen, is the first and still the only company in the world
with a clinically validated FGF5 inhibitor hair growth product
on the market.
We have been able to improve on the seasonal variations
in our product sales and in FY2016 only 58% of our sales
came from the second half of the year, compared with
FY2015 when 70% of the total sales occurred during the last
six months. Whilst there is a distinct seasonality for hair loss
product sales on the market, we have been able to manage
this and even out sales with well-planned campaigns.
aDVanGen inC. – The Japanese business became
profitable in FY2016 on the back of $2.15 million in
revenue
The Advangen sales staff has been fully trained and accredited
during the FY2016, as hair specialists, in preparation for the
launch.
Our Japanese Managing Director, Koichiro Koike, and his
team achieved outstanding sales results exceeding their
targets for FY2016. Not only they delivered sales growth but
improved profitability.
Broadening the existing distribution channels has been one of
the key objectives for the Japanese business in FY2016. As a
result, we now have five sales channels including TV shopping,
retail, salon, website and private label. We have increased
sales in each of the channels with the most significant revenue
coming from TV shopping through the company’s alliance
with QVC. Sales from TV shopping have almost doubled since
FY2015.
FY2016 was the first full year for Advangen Inc. with QVC,
the largest TV shopping channel in Japan. During the year we
captured around 25,000 customers, some of them becoming
our loyal, repeat purchase clients.
For our wholesale business a 70% gross margin remains
the target for FY2017, even in private label, where we have
commenced discussions with potential new partners during
the year.
Japan has also been important as a launching pad for some
of the export discussions in markets including China. Several
potential distribution partnerships are under negotiation in
these markets, focused on the products with existing import
permits and branded Jo-Ju® and Lexilis®.
Advangen’s Japanese team has focused resources on building
sales in the TV shopping channel QVC, and developing the
business plan for an evolis® concept store. Website sales have
also increased, but these represented a very small component
of the total revenue in FY2016. There is significant growth
opportunity in this channel which will be further explored
during FY2017.
aDVanGen inTeRnaTiOnaL – increased australian
sales and ready for the usa launch
In Australia, the main sales channel remained pharmacy in
FY2016, whilst our website sales increased steadily through
digital and social marketing to contribute to the $812K sales
(excluding GST).
In addition to the team representing the brand to general
practitioners, a contract pharmacy sales force serviced pharmacies
from September 2015 to coincide with a national advertising
campaign launched at the same time. This campaign was cut
back significantly in October 2015 and the funds redirected to the
preparation for the USA launch of the evolis® brand.
Concurrently, a number of USA distribution channels and
arrangements were evaluated and a partnership was formed
with Colour Collective in July 2016, a firm specialising in the
launch of hair products, providing momentum to the most
significant commercial opportunity for Advangen globally.
The halt in advertising meant that by November 2015 we
revised down Australian internal sales projections for FY2016,
hence the increase of almost 30% in sales was a great result.
In a significant long term investment for the business we have
successfully transitioned the contract pharmacy sales force
and built our own dedicated team of professionals during
the last quarter of FY2016 which has started to show results
through increased sell-through, better product education and
greater brand awareness in pharmacies.
The évolis® Professional range was launched into salons in
June 2016 to enthusiastic reception. The products will be
tested in the market during the first half of FY2017 and a full
commercial launch planned subsequently.
The majority of the Japanese sales, 95%, came from just four
products in FY2016; two tonics and two shampoos. Launching
new products, such as eyelash and eyebrow growth lotions,
represent yet another significant growth opportunity in Japan.
The evolis® Professional haircare range addresses anti-aging,
volume and colour protection in addition to hair loss. Once
launched nationally, the range is expected to contribute
significantly to the Australian revenues.
Perhaps even more significant in the medium term, the
Japanese business plan also includes an evolis® concept
store, with an expected launch date in the second half of
FY2017. Products sold at the store will be fully aligned with
the US évolis® branded lotions, shampoos and conditioners.
Website sales increased during the year markedly, especially
after investing into a small in-house digital marketing team.
Trial campaigns launched during the last quarter of FY2016
illustrated the power of social and digital marketing and we will
continue to build on this momentum in FY2017.
Cellmid 2016 Annual Report 9
CEO Report
Continued
During the 2016 financial year we have spent significant
resources on developing our US products. We have
reformulated and reduced alcohol content in our tonics to
make them more market friendly in the USA. We have added
organic, natural anti-oxidants to cater for scalp health and
created vegan and gluten free alternatives for those increasing
number of discerning customers that demand these qualities
in their products.
The USA hair loss market is estimated at US$3.5 billion
annually and growing. The most significant topical products
have minoxidil as active ingredient. Minoxidil has been tested
in clinical trials, but it is recommended mostly for men, due to
some of the unwanted side effects. Advangen has an exciting
opportunity with evolis®, which is also clinically proven, but
can be used safely by women with hair loss and/or hair quality
concerns.
In Australia significantly more products are sold to women
than men in pharmacies and online. If a similar trend is
observed in the USA the market could be several times that of
the minoxidil based products. It will also be instructive for our
global ambitions for the brand.
its advertising agency,
Advangen’s contract with
Ikon
Communications, has been the subject of a dispute during
FY2016. The dispute arose during October 2015 as a result of
several irregularities detected in Ikon’s conduct. Furthermore,
in our view, they have delivered a totally unsatisfactory
advertising campaign.
According to our expert advice the ads produced by Ikon
missed the creative brief and campaign objective entirely and
some of the ads booked were inappropriate for the target
audience of 35 plus women.
As soon the irregularities were detected all advertising activity
was stopped with Ikon. The numerous attempts to resolve
the dispute yielded no success and Ikon commenced legal
proceedings on 22 July 2016. As we are now in legal dispute,
we are not able to provide any further details other than a
vigorous defence and cross-claim has since been filed.
Since our relationship with Ikon has ended, we have been
working with a fully transparent advertising agency who
has delivered very successful campaigns including two
appearances at Studio 10 and a national advertising program
featuring brand ambassador Paula Duncan.
The results achieved during FY2016 in Australia and in Japan
demonstrate our strong capabilities that will underpin the launch
of evolis® in global markets, most immediately in the USA.
10 Cellmid 2016 Annual Report
PaTenT PORTFOLiO uPDaTe
Cellmid has the most significant intellectual property assets
related to MK worldwide. At the time of writing this report the
patent portfolio includes 83 patents in 20 patent families, 69
granted patents, 7 applications under examination and 7 new
filings. The patents cover the use of MK and anti-MK agents
for therapeutic purposes in a number of diseases, the use of
MK as a diagnostic marker in cancer and other disorders and
the Company’s novel FGF5 inhibitors.
Two new patents have been granted during the period. The
Japanese Patent Office granted the application relating to the
use of MK for the treatment of hair loss in November 2015.
This adds significantly to the value of our hair loss assets
and provides a pipeline opportunity in our drug development
portfolio.
The US patent entitled “Antibody recognising C-Domain of
MK” was allowed in November 2015. The granted claims
provide broad coverage as they relate to antibodies and
antibody fragments which bind to the important functional
C-domain of growth factor MK. This is an important patent
as it gives the Company clear, exclusive rights to develop MK
antibodies unencumbered by competition. Cellmid’s patent
coverage for its therapeutic antibodies now extends across
cancer, inflammatory and autoimmune diseases, multiple
sclerosis and surgical adhesion.
4th MiDKine sYMPOsiuM – the place for ideas and
innovation on MK
In what has become the pre-eminent biennial scientific
meeting amongst MK researchers the 4th Midkine Symposium
was held in April 2016 in Budapest, Hungary. Previously held
in Sydney in 2010, Istanbul in 2012 and Kyoto in 2014, the
Budapest meeting attracted scientists, representatives from
some of our commercial partners and well known industry
figures from ten countries.
The symposia are significant for several reasons, not the least
as these, as far as we know, are the only meetings organised
by a company with independent scientists researching a
single disease target. It represents unparalleled collaboration
between industry and scientists from universities and research
institutes, bridging the divide between the two far ends of
medical innovation for better clinical outcomes.
As our MK programs are approaching clinical development
the meeting reached consensus that an adaptive pathway for
clinical validation should be available for MK antibodies. In
general terms the adaptive development pathway is based
on three principles. Firstly, it allows for iterative development
starting with a restricted patient population then expanding
the patient numbers later. Conditional early approval then
leads to data generation from real use which is expected
to supplement clinical trial data. Finally, it will require early
involvement of patients and health technology assessment
bodies in discussions on a medicine’s development.
This would be particularly applicable for using MK based
therapies in areas of high unmet medical need where it is
difficult to collect data via traditional routes and where large
clinical trials would mean that patients who are unlikely to
respond would be unnecessarily exposed. This approach
builds on regulatory processes already in place within the
existing legal framework, so would fit in with requirements
of most regulatory agencies. The
for MK
therapies is that it would allow faster route to patients and
commercialisation.
importance
In addition to practical assessment of a clinical path for
MK therapies, several presentations were made under
confidentiality during the working sessions. Emerging evidence
was presented on MK’s importance in inter-organ signalling
in a number of diseases. This means that targeting MK is
one of the very few novel approaches for the management
of complex metabolic and cardiovascular diseases including
chronic kidney disease. Studies on MK biology, mechanism of
action and clinical utility were also presented, with promising
data on the therapeutic potential of Cellmid’s own drug
candidates.
Dr Ulrich Grabmaier from Ludwig Maximilians University in
Munich presented his work on Cellmid’s C and N-terminal
binding MK antibodies in a mouse model of myocarditis
for their ability to attenuate disease. N-terminal binding
MK antibodies showed marked efficacy in the model not
only pointing to a novel potential clinical application in
myocarditis but also demonstrating the difference in the
mechanism of action between the two MK antibodies.
This important information on MK biology is instructive for
future studies and further collaboration is expected with the
Munich based group.
Professor Guillermo Velasco from Complutense University in
Madrid, Spain has shown tumour suppressing ability for two
of Cellmid’s MK antibodies in glioblastoma cell lines resistant
to cannabinoid treatment. Further work is approaching
completion on Cellmid’s C and N-terminal binding antibodies
in animal models of the disease.
Cellmid’s N-terminal binding MK antibody enhanced bone
fracture healing in ovariectomised mice in an in vivo study
conducted by Dr Astrid Liedert from the University of Ulm in
Germany. The model mimics the biology of osteoporosis in
post-menopausal women and representative of the delayed
bone healing that occurs in this population. This work has
since been published by Dr Liedert in PLoS One.
Professor Xu Wang from Arizona State University and Dr
Pedro Nieto of University of Autonoma in Madrid presented
new insights into the structure of MK’s binding with
glycosaminoglycans (GAGs) and how it may affect biological
function. Further collaboration is expected with both groups.
Whilst focused mainly on MK therapies, human diagnostic
work was presented by three separate groups showing further
understanding on MK levels in urine in prostate and bladder
cancer, as well as in patients with acute and chronic kidney
disease. Cellmid’s clinical adviser, Dr Victoria Campbell has
shown early evidence that MK may be an important marker of
chronic kidney disease.
In what has been a truly rewarding year we closed FY2016
with total revenue of $4.6 million (up 55%) and ready to launch
into the biggest consumer market in the world with our FGF5
inhibitor hair growth products. Our Australian pharmacy
business is gaining strong momentum and our Japanese
subsidiary is on track for another year of growth after becoming
profitable in FY2016. Our MK assets are primed for the clinic,
and we have crystallised a funding strategy that provides a
pathway to make this possible.
Our Chairman, Dr David King, has been instrumental with
his support and guidance through this challenging year. The
strong strategic input from our new board members, Dr Fintan
Walton, Bruce Gordon, and the Chair of our Scientific Advisory
Board, Professor Bryce Vissel, was important in delivering
progress in our various businesses. Our dedicated Cellmid
team, having doubled during the year, has also shown stellar
performance.
We thank you, our shareholders, for your support as we
deliver on our business and corporate objectives.
Maria Halasz
CEO and Managing Director
Cellmid 2016 Annual Report 11
Directors’
Report
The Directors present their report, together with the financial statements of the Group, being Cellmid Limited (“the Company”)
and the entities it controlled, for the financial year ended 30 June 2016.
1. GeneRaL inFORMaTiOn
information on Directors
The names, qualifications, experience and special responsibilities of each person who has been a Director during the year
and to the date of this report are:
Dr David King
Qualifications
Experience
Chairman (non-executive)
PhD in Seismology, Australian National University, Fellow of The Australian Institute
of Company Directors, Fellow of the Australian Institute of Geoscientists.
Experience as Chairman, Executive and Non-executive Director in high growth
companies, across a variety of sectors, and particularly in governance issues in
publicly listed companies.
Interest in shares and options
Shares: 22,500,000 indirectly held.
Special responsibilities
Options: 11,250,000 (Expiry: 23 October 2016, exercisable at $0.034 each)
indirectly held.
Options: 4,000,000 (Expiry: 19 November 2018, exercisable at $0.06 each)
indirectly held.
Member of the Audit Committee and member of the Nomination and Remuneration
Committee
Other directorships in listed
entities held in the previous
three years
Current directorships Galilee Energy Limited and African Petroleum Corporation.
Previous directorships – Robust Resources Limited, Republic Gold Limited and
Tengri Resources Limited.
Ms Maria Halasz
Qualifications
Experience
Managing Director (Chief executive Officer)
MBA, BSc in Microbiology, University of Western Australia, Graduate of the
Australian Institute of Company Directors.
22 years experience in biotechnology working in executive positions in private and
public biotechnology firms, then managing investment funds and later holding senior
positions in corporate finance specialising in life sciences.
Interest in shares and options
Shares: 1,554,375 directly held.
Shares: 12,000,000 directly held in voluntary escrow.
Shares: 10,668,225 indirectly held.
Options: 1,500,000 (Expiry: 23 October 2016, exercisable at $0.034 each)
indirectly held.
Options: 5,000,000 (Expiry: 15 June 2017, exercisable at $0.032 each)
indirectly held.
Special responsibilities
Managing Director and Chief Executive Officer
Other directorships in listed
entities held in the previous
three years
None
12 Cellmid 2016 Annual Report
Mr bruce Gordon
Qualifications
Experience
Director (non-executive) (appointed 1 July 2015)
BA, Macquarie University, Fellow of The Institute of Chartered Accountants Australia
and New Zealand, Fellow of The Australian Institute of Company Directors.
An audit and corporate finance specialist, and an experienced finance professional
with a career spanning more than 35 years advising and providing financial services
to private and publicly listed companies as well as subsidiaries of large multinationals.
Interest in shares and options
Shares: 500,000 indirectly held.
Special responsibilities
Other directorships in listed
entities held in the previous
three years
Other
Options: 2,000,000 (Expiry: 19 November 2018, exercisable at $0.06 each)
indirectly held.
Chairman of the Audit Committee and member of the Nomination and Remuneration
Committee
None
Former partner of BDO East Coast Partnership, resigned on 30 June 2014. Both
Cellmid Limited and BDO East Coast Partnership have confirmed that Mr Gordon’s
appointment satisfies the independence requirements of the Corporations Act.
Dr Fintan Walton
Director (non-executive) (appointed 21 July 2015)
Qualifications
Experience
PhD, Genetics, Trinity College Dublin.
Founder and CEO of PharmaVentures Ltd, a UK based corporate advisory firm
that provides advice on all aspects of corporate transactions, business brokering,
mergers and acquisitions and licensing deals to a diversified global network.
Interest in shares and options
Shares: 300,000 directly held.
Special responsibilities
Options: 2,000,000 (Expiry: 19 November 2018, exercisable at $0.06 each)
directly held
Member of the Audit Committee and member of the Nomination and Remuneration
Committee
Other directorships in listed
entities held in the previous
three years
None
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
Company secretary
Mrs aliceson Rourke
appointed 1 november 2015
Qualifications
Experience
B.Com, University of Wollongong, Graduate Diploma of Applied Corporate
Governance, Member of The Institute of Chartered Accountants Australia and New
Zealand.
Experienced Chartered Accountant and Company Secretary. Extensive experience
in all aspects of public company finance, administration and governance including
listings on the Australian Stock Exchange, public capital raisings, and capital
restructures, mergers and acquisitions.
Cellmid 2016 Annual Report 13
Directors’ Report
Continued
Company secretary
Mrs Lucy Rowe
Qualifications
Experience
Ceased 1 november 2015
BA, University of Sydney, Grad. Dip Legal Studies, University of New South Wales
and PS146 Securities Advisor Accreditation.
Mrs Rowe worked in the financial services sector until 2005 when she joined New
Guinea Energy Ltd. Since its incorporation has held various roles including Investor
Relations Manager and Company Secretary until August 2015.
Principal activities and significant changes in nature of activities
The principal activities of the Group during the financial year were:
• The development and commercialisation of diagnostic and therapeutic products for the management of diseases such
as cancer and various chronic inflammatory conditions by targeting midkine (Midkine Businesses Lyramid and Kinera);
and;
•
the development and sale of over the counter (OTC) treatments to alleviate excessive and abnormal hair loss and re-
establish the natural hair growth cycle (Consumer Health Business)
There were no significant changes in the nature of the Group’s principal activities during the financial year.
2. OPeRaTinG ResuLTs anD ReVieW OF OPeRaTiOns FOR THe YeaR
Operating results
The consolidated loss for the Group increased by 4.84% to $3,498,916 after providing for income tax (2015: $3,337,348
loss). This was primarily due to an increase in product development expenditure for the Group’s US product range,
manufacturing costs for the new évolis® Professional products and an increase in sales and marketing activity. Total
revenue and other income increased by 76.32% to $3,489,546 for the reporting period, not including the R&D tax credit
of $1,121,562. In 2015 total revenue and other income was $1,979,111 and an R&D tax credit of $988,451 was received.
Review of operations
The Group closed a successful FY2016 for the Consumer Health Business in Australia and Japan and commenced product
development for the USA market. In Australia, it has increased its pharmacy distribution and broadened its product offerings
including new products for the professional and salon market. Japanese distribution channels have grown from hair salon
and direct marketing to include television shopping channel (QVC Japan) and various retail channels.
Further development milestones have been achieved in the Group’s midkine related businesses, Lyramid and Kinera, with
the completion of the first ever toxicology study with a midkine (MK) inhibitor, the Group’s humanised antibody CAB102. Cell
line and process development have been completed in a non-GMP environment, and CAB102 was produced in sufficient
quantities for single and multi-dose toxicology studies. The Group continued its clinical planning for its CAB102 and MK
protein human studies.
i. Consumer Health business – increased distribution and sales growth in australia and Japan
The Consumer Health Business was set up to commercialise over the counter hair growth products based on the FGF5
inhibition technology developed by Advangen Inc. (Japan). With the acquisition of Advangen Inc. (Japan) in May 2013,
the Group became the owner of global rights for the technology.
14 Cellmid 2016 Annual Report
In Australia the Group has developed a new évolis® Professional branded salon range with 13 SKUs (Stock Keeping
Units). The range includes anti-aging, damage protection and colour protection products, all with the Group’s proprietary
FGF5 inhibitors. The Group transitioned all previous FGF5 inhibitor brands to the evolis® professional brand in Australia.
In Japan the Group’s sales increased significantly as a result of several television shopping campaigns and broadening
retail channels.
Global business development activities increased during the period and the Group is currently engaged in distribution
and licensing discussions with potential partners in several territories. In preparation for entry into overseas markets, the
Group has invested significant funds into product development activities and completed the product offerings for the
USA, where it formed a distribution partnership with Colour Collective after the closing of the reporting period.
ii. Midkine businesses, Lyramid and Kinera
Progress in preclinical product development and manufacturing
During the reporting period the Group set up two wholly-owned subsidiary companies to exploit its MK intellectual
property, Lyramid and Kinera.
Lyramid is responsible for the commercialisation of the Group’s anti-MK antibody portfolio with a focus on inflammatory
conditions, fibrosis and cancer. Kinera is focused on developing therapeutics for ischemic conditions of the heart and
brain. The Group has expanded on a number of its research collaborations including the program with Complutense
University and the bone healing program with Ulm University.
iii MK Diagnostic Program
The Groups licensee, Pacific Edge Limited continued to make significant progress towards commercialisation of
their CxBladder® bladder cancer test during the reporting period. Fujikura Kasei, the Group’s second licensee has
progressed to clinical development of its latex based diagnostic test with the Group’s MK antibodies and other diagnostic
partnerships and internal diagnostic programs are continuing.
a) Pacific edge Limited – continued commercialisation of Cxbladder® in the usa with MK as one of the
biomarkers
The Group signed a license agreement with Pacific Edge Limited in 2010 for the use of the Group’s MK marker as one
of the biomarkers in CxBladder®, a bladder cancer diagnostic test. In FY2014 the Group received a milestone payment
after the launch of the test in the USA.
In FY2015 the Group received its first royalty on sales of $67,778 and received a further royalty of $155,287 in FY2016.
Pacific Edge advised that they also commenced South East Asian activities in addition to sales in the USA.
b) Celera-Quest license
The Group signed a license agreement with Celera-Quest in October 2009 for the use of MK in their lung cancer
diagnostic test. The Group received an upfront payment at the time of signing, and a milestone payment may become
payable by Celera-Quest at the time of regulatory clearance and royalties on sales. During the reporting period Celera-
Quest has not given the Group a formal report on their activities.
Pursuant to the license agreement Celera-Quest had until 31 October 2014 to commercialise their lung cancer blood
test with MK included on an exclusive basis. After that date the Group has the right to terminate exclusivity at any time,
however Celera-Quest will maintain their ability to use MK on a non-exclusive basis. The Group did not exercise its right
to terminate Celera-Quest’s exclusivity during the reporting period, and received no further update from Celera-Quest
on the program during FY2016.
Cellmid 2016 Annual Report 15
Directors’ Report
Continued
c) Fujikura Kasei option to license
The Group signed an Option to License Agreement with Fujikura Kasei for the exclusive supply of the Group’s proprietary
MK antibodies for validation in Fujikura’s latex diagnostic platform in FY2013. The agreement provided that Fujikura will
proceed to exercise its option to license subject to reaching the minimum 500 picogram/ml limit of detection. The
validation program was completed successfully and Fujikura Kasei exercised its option to license in FY2014. Since then
Fujikura Kasei has continued development of their latex diagnostic test and has continued its clinical studies. The Group
is actively assisting Fujikura Kasei to complete clinical validation of its diagnostic test.
intellectual property update
The Group has a large and valuable patent portfolio which consists of 76 patents across 16 patent families. Of these, 62
patents have been granted, 12 filed or under examination, one in PCT (Patent Cooperation Treaty) and one in provisional
filing stage. The Group has received two new grants during the reporting period and one new patent was filed. The
Japanese patent office granted the Group’s application for its MK patent for the treatment of hair loss in November 2015.
The Group’s US patent entitled “Antibody recognising C-Domain of MK” was granted in October 2015.
3. FinanCiaL ReVieW
Financial position
The net assets of the Group at 30 June 2016 were $4,690,050 ($3,773,909 at 30 June 2015) while current assets increased
to $5,131,104 ($4,173,616 at 30 June 2015). The Directors believe that the Group is in a stable financial position in order
to carry out its current operations.
4. OTHeR iTeMs
significant changes in state of affairs
There have been no significant changes in the state of affairs of the entities in the Group during the year.
Dividends paid or recommended
The Company has not paid or declared any dividends during the financial year (2015: Nil).
events since the end of the financial year
On 20 July 2016, the Group announced that it has entered into a distribution partnership with Colour Collective for the US
launch of its evolis®, branded hair care products. The US distribution partnership will provide the Group with an accelerated,
direct route to the sales channels that have proven successful in Australia and Japan during the Group’s proof of concept
rollout. These include e-commerce and sampling channels for rapid consumer acquisition, home shopping networks and
high-end retail stores. USA sales are expected to commence in 2016 through e-commerce channels with distribution to
high-end retail and other direct consumer opportunities to follow in 2017.
On 22 July 2016, the Group announced that Ikon Communications Pty Ltd (Ikon) had filed a claim for $939,055 pursuant
to the services agreement entered into between Advangen International Pty Ltd (Advangen) and Ikon on the 15 June
2015. Advangen intends to vigorously defend its position that Ikon has breached the services agreement, failed to provide
certain services at all or adequately and engaged in misleading and dishonest conduct that has caused the Group loss and
damage. Advangen intends to file a cross claim for payments made for services not provided or properly provided by Ikon
and seek security for costs.
16 Cellmid 2016 Annual Report
Apart from the matters noted above, no other matters or circumstances have arisen since the end of the financial year which
significantly affected or could significantly affect the operations of the Group, the results of those operations, or the state of
affairs of the Group in future financial years.
Likely developments and expected results of operations
The Group is focused on developing both its Consumer Health and MK related businesses in the coming year. Maximizing
market penetration for the Groups’ FGF5 inhibitor hair loss products in Australia and internationally will be the focus of the
Consumer Health business. The Group will also continue to progress its midkine assets in its dedicated wholly owned
subsidiaries, Lyramid and Kinera.
environmental regulations
The Group’s operations are not regulated by any significant environmental law of the Commonwealth or of a state or territory
of Australia or Japan.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on
behalf of the Group for all or part of those proceedings.
indemnification and insurance of officers and auditors
During the financial year, the Group paid a premium to insure the Directors and officers of the Group.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the
officers in connection with such proceedings. This does not include such liabilities (other than legal costs) that arise from
conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information
to gain advantage for them or someone else or to cause detriment to the Company. It is not possible to apportion the
premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
During or since the end of the financial year, the Group has given an indemnity or entered into an agreement to indemnify,
or paid or agreed to pay insurance premiums in favour of its Directors as follows:
• a right to access certain Board papers of the Group during the period of their tenure and for a period of seven years after
that tenure ends;
• subject to the Corporations Act 2001, an indemnity in respect of liability to persons other than the Company and its
related bodies corporate, that they may incur while acting in their capacity as an officer of the Company or a related
body corporate, except for specified liabilities where that liability involves a lack of good faith or is for legal costs for
defending certain legal proceedings; and
•
the requirement that the Group maintain appropriate directors’ and officers’ insurance for the officer.
No liability has arisen under these indemnities as at the date of the report.
There is no indemnity cover in favour of the auditor of the Group during the financial year.
non-audit services
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Group is important and relevant where the nature of the services provided does not
compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for
Professional Accountants set by the Accounting Professional and Ethical Standards Board. There were no additional
services provided by BDO during the year.
Cellmid 2016 Annual Report 17
Directors’ Report
Continued
siC class order 98/100 rounding of amounts
The Company is an entity to which ASIC Class Order 98/100 applies and, accordingly, amounts in the financial statements
and Directors’ report have been rounded to the nearest dollar, unless otherwise indicated.
Meetings of Directors
Five meetings of the Directors were held during the financial year. Attendances by each Director during the year were as
follows:
Directors’ Meetings
audit Committee
number
eligible to
attend
number
attended
number
eligible to
attend
number
attended
nomination and
Remuneration Committee
number
eligible to
attend
number
attended
5
5
5
5
5
5
5
5
4
-
4
4
4
4*
4
4
-
-
-
-
-
-
-
-
Dr David King
Ms Maria Halasz
Mr Bruce Gordon
Dr Fintan Walton
* by invitation
shares under option
Unissued ordinary shares of the Company under option at the date of this report are as follows:
Listed options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
expiry date
exercise Price
23 October 2016
15 November 2016
15 June 2017
14 August 2017
1 August 2018
1 August 2018
1 August 2018
19 November 2018
19 November 2018
$
$
$
$
$
$
$
$
$
0.034
0.030
0.032
0.034
0.040
0.050
0.060
0.060
0.031
number under
option
290,542,770
3,971,962
5,000,000
1,440,000
4,000,000
4,000,000
10,000,000
11,500,000
500,000
330,954,732
No shares were issued on the exercise of options during the financial year ended 30 June 2016. No further shares have
been issued on exercise of options since 30 June 2016.
12,000,000 shares are held in escrow and unpaid at 30 June 2016 (2015: 12,000,000 shares). 600,000 options lapsed
during the financial year ended 30 June 2016 (2015: 14,602,006 options).
5. ReMuneRaTiOn RePORT (auDiTeD)
The remuneration report details the key management personnel remuneration agreements for the Group in accordance with
the requirements of the Corporations Act 2001 and its regulations.
18 Cellmid 2016 Annual Report
The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations
Act 2001.
The key management personnel of the Group for the year consisted of the following Directors of Cellmid Limited:
name of Director
Dr David King
Mr Bruce Gordon
Dr Fintan Walton
Ms Maria Halasz
Position
Date appointed
Date Ceased
Non-executive Chairman
18 January 2008
Non-executive Director
Non-executive Director
CEO and Managing Director
1 July 2015
21 July 2015
14 April 2007
Current
Current
Current
Current
Principles used to determine the nature and amount of remuneration
The performance of the Group depends on the quality of its Directors and executives.
To prosper, the Group must attract, motivate and retain highly skilled Directors and executives. To this end, the Group
embodies the following principles in its remuneration framework:
• provide competitive rewards to attract high calibre executives; and
• establish appropriate performance hurdles in relation to variable executive remuneration.
The Board assesses the appropriateness of the nature and amount of remuneration of Directors and senior managers of
the Group on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring
maximum stakeholder benefit from the retention of a high quality Board and executive team.
Group performance and link to remuneration
No performance based bonus or incentive payments are in place, however Maria Halasz has loan shares that are conditional
on key milestones being achieved. These milestones are detailed in the equity-based compensation section of this
remuneration report.
The Nomination and Remuneration Committee is of the opinion that the continued improved results can be attributed in
part to the adoption of performance based compensation and is satisfied that this improvement will continue to increase
shareholder wealth if maintained over the coming years.
The table below details the last five years earnings and total shareholders return.
Revenue
EBITDA
EBIT
$
2016
$
2015
$
2014
$
2013
$
2012
3,388,902
1,969,363
1,150,931
541,649
132,826
(3,169,853)
(3,202,134)
(2,165,345)
(2,341,372)
(2,702,954)
(3,331,466)
(3,333,472)
(2,277,485)
(2,358,006)
(2,714,373)
Loss after income tax
(3,498,916)
(3,337,348)
(1,480,836)
(1,541,307)
(1,972,483)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
Share price at financial year end
Total dividends declared
Basic earnings per share
$
2016
0.03
-
(0.38)
$
2015
0.03
-
(0.43)
$
2014
0.02
-
(0.21)
$
2013
0.02
-
(0.27)
$
2012
0.02
-
(0.46)
Cellmid 2016 Annual Report 19
Directors’ Report
Continued
Remuneration structure
In accordance with best practice corporate governance, the structure of Non-executive Director and senior executive
remuneration is separate and distinct.
non-executive Director remuneration
Objective
The Board seeks to set aggregate remuneration at a level that provides the Group with the ability to attract and retain
Directors of the highest calibre, while incurring costs that are acceptable to shareholders.
Structure
Each Non-executive Director receives a fixed fee for being a Director of the Group.
The Constitution and the ASX Listing Rules specify that the maximum aggregate remuneration of Non-executive Directors
shall be determined from time to time by a general meeting of shareholders. At the general meeting of shareholders in
2005, the maximum amount was set at $300,000 per annum. In 2016, the Group paid Non-executive Directors a total of
$222,757 ($175,925 in 2015).
The amount of aggregate remuneration sought to be approved by shareholders and the fixed fees paid to Directors are
reviewed annually. The Board considers fees paid to Non-executive Directors of comparable companies when undertaking
the review.
executive remuneration
Objective
The Group aims to reward executives with a level and mix of remuneration commensurate with their position and
responsibilities within the Group and so as to:
•
reward executives for Group and individual performance against targets set by reference to appropriate benchmarks;
• align the interests of executives with those of shareholders; and
• ensure total remuneration is competitive by market standards.
Structure
A policy of the Board is the establishment of employment or consulting contracts with the Chief Executive Officer and
other senior executives. Remuneration consists of fixed remuneration under an employment or consultancy agreement and
may include long term equity-based incentives that are subject to satisfaction of performance conditions. Details of these
performance conditions are outlined in the equity-based payments section of this remuneration report. The equity-based
incentives are intended to retain key executives and reward performance against agreed performance objectives.
Fixed remuneration
The level of fixed remuneration is set so as to provide a base level of remuneration that is both appropriate to the position
and competitive in the market. Fixed remuneration is reviewed annually by the Board and the process consists of a review
of Group-wide and individual performance, relevant comparative remuneration in the market, and internal and (where
appropriate) external advice on policies and practices.
Senior executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash
and expense payment plans, such that the manner of payment chosen is optimal for the recipient without creating additional
cost for the Group.
20 Cellmid 2016 Annual Report
Remuneration policy and performance
Other than the Chief Executive Officer, Ms Halasz, none of the other executive’s remuneration is ‘at risk’ remuneration. Refer
below for further information on Ms Halasz’s remuneration.
Remuneration details for the year ended 30 June 2016
Details of the remuneration of the Directors and key management personnel of the Group (as defined in AASB 124 Related
Party Disclosures) and the highest paid executives of Cellmid are set out in the following tables.
short-term benefits
Long-term
benefits
Post-
employment
benefits
share-based
payments
Cash salary
fees
$
employee
entitlements
$
employee
entitlements
$
superannuation
Options
Total
$
$
$
65,000
50,000
47,182
-
-
-
-
-
-
-
-
6,175
-
-
6,175
27,200
13,600
13,600
54,400
98,375
63,600
60,782
222,757
2016
Directors
non-executive Directors
David King
Bruce Gordon
Fintan Walton
Total non-executive Directors
162,182
executive Directors and key management
Maria Halasz
400,000
562,182
26,401
26,401
13,762
13,762
38,000
44,175
73,667
551,830
128,067
774,587
short-term benefits
Long-term
benefits
Post-
employment
benefits
share-based
payments
Cash salary
fees
$
employee
entitlements
$
employee
entitlements
$
2015
Directors
non-executive Directors
David King
Graeme Kaufman
Martin Rogers
65,000
50,000
50,000
-
-
-
-
-
-
-
-
Total non-executive Directors
165,000
executive Directors and key management
Maria Halasz
400,000
565,000
23,961
23,961
12,511
12,511
superannuation
Options
Total
$
6,175
4,150
-
10,925
38,000
48,925
$
-
-
-
-
$
71,175
54,750
50,000
175,925
73,467
73.467
547,939
723,864
Mr Bruce Gordon was appointed as a Director on 1 July 2015 and Dr Fintan Walton was appointed as a Director on 21 July
2015. Mr Graeme Kaufman and Mr Martin Rogers resigned on 30 June 2015.
Cellmid 2016 Annual Report 21
Directors’ Report
Continued
KMP shareholdings
The number of shares held in the Company during the financial year by each Director and key management personnel of
Cellmid Limited, including their personally related parties, are set out below.
balance at
beginning of year
Received as part
of remuneration
Other
changes
balance at
end of year
22,500,000
23,270,000
500,000
-
22,500,000
22,500,000
-
5,155,700
-
-
-
-
-
-
-
-
-
952,600
-
22,500,000
24,222,600
500,000
300,000
300,000
-
770,000
-
-
22,500,000
23,270,000
-
5,155,700
2016
David King
Maria Halasz
Bruce Gordon
Fintan Walton
2015
David King
Maria Halasz
Graeme Kaufman
Martin Rogers
KMP option holdings
The number of options held in the company during the financial year by each Director and member of key management
personnel of Cellmid Limited, including their personally related parties, are set out below.
2016
David King
Maria Halasz
Bruce Gordon
Fintan Walton
2015
David King
Maria Halasz
Graeme Kaufman
balance at
beginning of
year
11,250,000
6,500,000
-
-
11,250,000
13,500,000
-
Martin Rogers
44,000,000
acquired
expired/
forfeited
Other
changes
balance at
end of year
Vested and
exercisable at
end of year
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,000,000)
-
-
4,000,000
15,250,000
15,250,000
-
6,500,000
6,500,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
-
-
-
-
11,250,000
11,250,000
6,500,000
6,500,000
-
-
44,000,000
44,000,000
22 Cellmid 2016 Annual Report
Relationship between remuneration policy and company performance
The proportion of remuneration linked to performance and the proportion that is fixed is as follows:
Fixed remuneration
at risk sTi
at risk LTi
2016
%
2015
%
2016
%
2015
%
2016
%
2015
%
100.00
86.65
100.00
100.00
-
-
100.00
86.59
-
-
100.00
100.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13.35
13.41
-
-
-
-
-
-
-
-
Directors
David King
Maria Halasz
Bruce Gordon
Fintan Walton
Graeme Kaufman
Martin Rogers
service agreements
The Chief Executive Officer, Maria Halasz, is an employee of the Group under an agreement signed on 21 September 2007.
Under the terms of this contact:
• Ms Halasz may resign from her position and thus terminate this contract by giving six months’ written notice. On
resignation any unvested options will be forfeited.
• The Group may terminate the employment agreement by providing six months’ written notice or providing payment in
lieu of the notice period (based on the fixed component of Ms Halasz’s remuneration).
• The Group may terminate the contract at any time without notice if serious misconduct has occurred. Where termination
with cause occurs, the CEO is only entitled to that portion of remuneration which is fixed, and only up to the date of
termination. On termination with cause, any unvested options will immediately be forfeited.
• Ms Halasz’s employment agreement provides for issuing performance incentives subject to the discretion of the Board.
During the 2016 financial year there has been no performance incentive issued to Ms Halasz.
Cellmid 2016 Annual Report 23
Directors’ Report
Continued
equity-based compensation
Details of the options granted as remuneration to those key management personnel and executives during the year:
share-based payments
no.
$
$
%
Options Granted
& Vested in
2016
Value of
options at
grant date
Value of shares
expensed in
2016
Proportion
of
remuneration
Directors
David King 1
Maria Halasz 2
Bruce Gordon 1
Fintan Walton 1
share-based payments
Directors
David King
Maria Halasz 2
Graeme Kaufman
Martin Rogers
4,000,000
27,200
-
2,000,000
2,000,000
-
13,600
13,600
27,200
73,667
13,600
13,600
27.65
13.35
21.38
22.37
Options Granted
& Vested in
2015
Value of
options at
grant date
Value of shares
expensed in
2015
Proportion
of
remuneration
no.
-
-
-
-
$
-
-
-
-
$
-
%
-
73,467
13.41
-
-
-
-
1. On 19 November 2015, 8,000,000 unlisted options were granted to Directors under the Cellmid Limited and Controlled Entities
Employee Incentive Plan and as approved by shareholders at the annual general meeting on 12 November 2015. The options have an
exercise price of $0.06 per share, and expire three years from the date of grant with no performance or vesting conditions attached to
the options.
The fair value at the date of grant is independently determined using a Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, the impact on dilution, the share price at grant date and the expected price volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The fair value of the options at the date of grant was $54,400.
No equity-based compensation in the form of options over ordinary shares were issued during the year ended 30 June 2015.
2. On 25 November 2013, 12,000,000 loan shares were granted to Maria Halasz in three equal tranches under the Cellmid Limited and
Controlled Entities Employee Incentive Plan and as approved by shareholders at the annual general meeting on 22 November 2013.
Ordinary shares were issued under the arrangement funded by a limited recourse loan with the following vesting conditions attached:
Tranche
Vesting date
shares
Vesting condition
1
2
3
25/11/2016
4,000,000
25/11/2016
4,000,000
25/11/2016
4,000,000
Shares will vest at any time before the vesting date when the Group’s
operating revenue reaches a total of $4,000,000 over any consecutive
12 months. The fair value at the date of grant was $73,200.
The conditions in relation to this tranche have been met.
Shares will vest at any time before the vesting date subject to the first
patient being recruited into the Group’s planned midkine antibody trial.
The fair value at the date of grant was $73,200.
Shares will vest at any time before the vesting date subject to the signing
of one of the following agreements for the Group’s consumer health
products in a territory outside of Australia and Japan:
(a) a diagnostic or therapeutic licence; or
(b) a distribution agreement.
The fair value at the date of grant was $73,300.
The conditions in relation to this tranche have been met.
The effect of the arrangement is akin to an option. The value of the shares at the date of grant was $0.0183 per share.
24 Cellmid 2016 Annual Report
Loans to Directors and other members of key management personnel
There were no loans to Directors or other members of key management personnel during or since the end of the
financial year.
This concludes the remuneration report which has been audited.
auditor’s independence declaration
The auditor’s independence declaration in accordance with section 307C of the Corporations Act 2001 for the year ended
30 June 2016 has been received and can be found on page 68 of the financial report.
This director’s report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of
Directors.
Director
Dr David King
Dated this 30th day of August 2016
Cellmid 2016 Annual Report 25
Corporate
Governance statement
The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, Cellmid
Limited and its Controlled Entities (‘the Group’) have adopted a corporate governance framework and practices to ensure
they meet the interests of shareholders.
The Australian Securities Exchange Corporate Governance Council’s Corporate Governance Principles and
Recommendations – 3rd edition (‘the ASX Principles’) are applicable for financial years commencing on or after 1 July
2014, consequently for the Group’s 30 June 2016 year end. As a result, the Group has chosen to publish its Corporate
Governance Statement on its website rather than in this Annual Report.
The Corporate Governance Statement and governance policies and practices can be found in the corporate governance
section of the Company’s website at http://www.cellmid.com.au.
The Group’s Corporate Governance Statement incorporates the disclosures required by the ASX Principles under the
headings of the eight core principles. All of these practices, unless otherwise stated, were in place for the full
reporting period.
26 Cellmid 2016 Annual Report
Annual Financial
Report
Contents
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Independent Audit Report
Auditor's Independence Declaration under Section 307C of the Corporations Act 2001
Additional Information for Listed Public Companies
Corporate Directory
29
30
31
32
33
64
66
68
69
72
Cellmid 2016 Annual Report 27
Statement of
Profit or Loss and Other
Comprehensive income
For the year ended 30 June 2016
Revenue
Other revenue
Other income
Consolidated
Note
3
3
3
2016
$
2015
$
3,120,367 1,842,804
268,535 126,559
1,222,206 998,199
4,611,108 2,967,562
Less expenditure
Manufacturing sales expense
Advertisement and marketing expense
Bad debts expense
Consultancy expense
Conference and meetings expense
Communication expense
Depreciation and amortisation expense
Employee benefits expense
Finance costs
Loss on foreign exchange
Occupancy expense
Professional fees
Research and development expense
Share-based compensation
Subscription expense
Travel expense
Other expenses
Loss before income tax expense
Income tax expense
Loss for the year after income tax
Other comprehensive income, net of income tax
Items that will be reclassified to profit or loss when specific conditions are met
Exchange differences on translating foreign controlled entities
Total comprehensive income for the year
4
5
Loss for the year attributable to:
Owners of Cellmid Limited
Total comprehensive income for the year attributable to:
Owners of Cellmid Limited
(1,219,849)
(1,976,282)
(6,411)
(222,337)
(207,436)
(84,248)
(161,613)
(2,240,356)
(195,914)
-
(214,568)
(315,933)
(354,881)
(176,123)
(96,007)
(273,710)
(353,311)
(3,487,871)
(11,045)
(3,498,916)
(671,698)
(411,455)
(18,890)
(181,037)
(44,674)
(98,561)
(131,338)
(2,140,147)
(27,809)
(8,441)
(210,584)
(164,754)
(1,302,009)
(82,990)
(84,507)
(235,304)
(487,349)
(3,333,985)
(3,363)
(3,337,348)
461,342 89,062
(3,248,286)
(3,037,574)
(3,498,916)
(3,337,348)
461,342
(3,037,574)
89,062
(3,248,286)
earnings per share for loss attributable to the owners of Cellmid Limited
Basic earnings per share (cents)
Diluted earnings per share (cents)
8
8
(0.38)
(0.38)
(0.43)
(0.43)
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
Cellmid 2016 Annual Report 29
Statement of
Financial Position
As at 30 June 2016
asseTs
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTaL asseTs
LiabiLiTies
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Employee provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Employee provisions
Loans and borrowings
TOTAL NON-CURRENT LIABILITIES
TOTaL LiabiLiTies
neT asseTs
eQuiTY
Issued capital
Reserves
Accumulated losses
TOTaL eQuiTY
Consolidated
2016
$
2015
$
Note
9
10
11
12
13
14
15
16
17
17
16
18
19
2,686,329
1,582,899
298,339
618,647
2,009,792
1,727,460
136,644
244,610
5,131,104
4,173,616
69,017
74,989
2,214,693
1,898,942
2,283,710
1,973,931
7,414,814
6,147,547
1,434,443
1,004,343
802,177
223,001
1,070,639
206,836
2,459,621
2,281,818
68,336
62,549
196,807
265,143
29,271
91,820
2,724,764
2,373,638
4,690,050
3,773,909
32,426,826
28,701,311
2,542,799
1,853,257
(30,279,575)
(26,780,659)
4,690,050
3,773,909
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
30 Cellmid 2016 Annual Report
Statement of
Changes in equity
For the year ended 30 June 2016
issued
Capital
$
General
Reserve
$
note
share
based
Payments
Reserve
$
Foreign
Currency
Translation
Reserve
$
accumulated
Losses
$
Total equity
$
Consolidated
balance at 1 July 2015
28,701,311
(131,941)
1,860,777
124,421
(26,780,659)
3,773,909
Loss for the year after income tax
Other comprehensive income
19
Total comprehensive income
for the year, net of tax
Transactions with equity
holders
Share based payments
Shares issued during the year
– net of transaction costs
Equity value of loan – net of
transaction costs
19
18
19
-
-
-
-
3,725,515
-
-
-
-
-
-
52,077
-
-
-
-
(3,498,916)
(3,498,916)
461,342
-
461,342
461,342
(3,498,916)
(3,037,574)
176,123
-
-
-
-
-
-
-
-
176,123
3,725,515
52,077
balance at 30 June 2016
32,426,826
(79,864)
2,036,900
585,763
(30,279,575)
4,690,050
Consolidated
balance at 1 July 2014
27,401,832
(131,941)
1,801,787
35,359
(23,443,311)
5,663,726
Loss for the year after income tax
Other comprehensive income
Total comprehensive income
for the year, net of tax
Transactions with equity
holders
Share based payments
Shares issued during the year
– net of transaction costs
Shares issued during the year
– other
-
-
-
19
18
19
100,000
1,175,479
24,000
-
-
-
-
-
-
-
-
-
-
(3,337,348)
(3,337,348)
89,062
-
89,062
89,062
(3,337,348)
(3,248,286)
82,990
-
(24,000)
-
-
-
-
-
-
182,990
1,175,479
-
balance at 30 June 2015
28,701,311
(131,941)
1,860,777
124,421
(26,780,659)
3,773,909
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Cellmid 2016 Annual Report 31
Statement of
Cash Flows
For the year ended 30 June 2016
CasH FLOWs FROM OPeRaTinG aCTiViTies
Receipts from customers
Payments to suppliers and employees
Interest received
Grant income
Finance costs
Consolidated
2016
$
2015
$
Note
3,803,555
1,599,534
(7,402,022)
(5,729,738)
39,509
1,121,562
(111,316)
27,296
988,451
(8,907)
net cash used in operating activities
20
(2,548,712)
(3,123,364)
CasH FLOWs FROM inVesTinG aCTiViTies
Purchase of non current assets
net cash (used in) / provided by investing activities
CasH FLOWs FROM FinanCinG aCTiViTies
Proceeds from issue of shares (net of share issue costs)
Proceeds from Loans and borrowings
Repayments of Loans and borrowings
net cash provided by financing activities
Net (decrease) / increase in cash and cash equivalents held
Cash and cash equivalents at beginning of financial year
Effect of exchange rate changes
(32,928)
(32,928)
(60,929)
(60,929)
3,725,515
962,800
1,175,479
1,099,910
(1,044,009)
-
3,644,306
2,275,389
1,062,666
1,582,899
40,764
(908,904)
2,501,753
(9,950)
Cash and cash equivalents at end of financial year
9
2,686,329
1,582,899
The above Statement of Cashflows should be read in conjunction with the accompanying notes.
32 Cellmid 2016 Annual Report
Notes to the
Financial statements
Contents
1. Summary Of Significant Accounting Policies
2. Parent Entity Information
3. Revenue And Other Income
4. Loss For The Year
5.
6.
Income Tax
Interests Of Key Management Personnel (“KMP”)
7. Auditor’s Remuneration
8. Earnings Per Share
9. Cash And Cash Equivalents
10. Trade And Other Receivables
11.
Inventories
12. Other Assets
13. Plant And Equipment
14.
Intangible Assets
15. Trade And Other Payables
16. Loans And Borrowings
17. Employee Provisions
18.
Issued Capital
19. Reserves
20. Cash Flow Information
21. Events After The Reporting Period
22. Related Party Transactions
23. Financial Risk Management
24.
Interests In Subsidiaries
25. Segment Information
26. Commitments
27. Contingent Liabilities And Contingent Assets
28. Share-Based Payments
34
44
45
45
46
47
47
48
48
49
50
50
50
51
51
51
52
52
54
55
55
56
56
59
60
62
62
63
Cellmid 2016 Annual Report 33
Notes to the Financial Statements
Continued
1. suMMaRY OF siGniFiCanT aCCOunTinG POLiCies
statement of compliance
Cellmid Limited is a public company, listed on the Australian Stock Exchange, limited by shares and incorporated and
domiciled in Australia.
The financial statements are general purpose financial statements that have been prepared in accordance with Australian
Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) and the
Corporations Act 2001, as appropriate for for profit oriented entities. These financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”).
The financial statements cover Cellmid Limited as a Group, consisting of Cellmid Limited and the entities it controlled at the
end of, or during the year.
The financial statements were authorised for issue by the directors on 30th August 2016.
basis of Preparation
Historical Cost Convention
The financial statements have been prepared on an accruals basis and are based on historical costs, except for certain
non-current assets and financial instruments that are measured at re-valued amounts or fair values, as explained in the
accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for
assets. All amounts are presented in Australian dollars, unless otherwise noted.
Critical Accounting Estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in Note 1(w).
Parent Entity Information
In accordance with the Corporations Act 2001, these financial statements present the results of the Consolidated Group
only. Supplementary information about the parent entity is included in Note 2.
new, revised or amending accounting standards and interpretations adopted
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the Group.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities
The Group has applied AASB 2012-3 from 1 July 2014. The amendments add application guidance to address
inconsistencies in the application of the offsetting criteria in AASB 132 ‘Financial Instruments: Presentation’, by clarifying
the meaning of ‘currently has a legally enforceable right of set-off’; and clarifies that some gross settlement systems may be
considered to be equivalent to net settlement.
34 Cellmid 2016 Annual Report
new, revised or amending accounting standards and interpretations adopted (continued)
AASB 2013-3 Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets
The Group has applied AASB 2013-3 from 1 July 2014. The disclosure requirements of AASB 136 ‘Impairment of Assets’
have been enhanced to require additional information about the fair value measurement when the recoverable amount of
impaired assets is based on fair value less costs of disposal. Additionally, if measured using a present value technique, the
discount rate is required to be disclosed.
AASB 2014-1 Amendments to Australian Accounting Standards (Parts A to C)
The Group has applied Parts A to C of AASB 2014-1 from 1 July 2014.
These amendments affect the following standards:
AASB 2 ‘Share-based Payment’: clarifies the definition of ‘vesting condition’ by separately defining a ‘performance condition’
and a ‘service condition’ and amends the definition of ‘market condition’;
AASB 3 ‘Business Combinations’: clarifies that contingent consideration in a business combination is subsequently measured
at fair value with changes in fair value recognised in profit or loss irrespective of whether the contingent consideration is
within the scope of AASB 9;
AASB 8 ‘Operating Segments’: amended to require disclosures of judgements made in applying the aggregation criteria
and clarifies that a reconciliation of the total reportable segment assets to the entity’s assets is required only if segment
assets are reported regularly to the chief operating decision maker;
AASB 13 ‘Fair Value Measurement’: clarifies that the portfolio exemption applies to the valuation of contracts within the
scope of AASB 9 and AASB 139;
AASB 116 ‘Property, Plant and Equipment’ and AASB 138 ‘Intangible Assets’: clarifies that on revaluation, restatement of
accumulated depreciation will not necessarily be in the same proportion to the change in the gross carrying value of the asset;
AASB 124 ‘Related Party Disclosures’: extends the definition of ‘related party’ to include a management entity that provides
KMP services to the entity or its parent and requires disclosure of the fees paid to the management entity.
(a) Going concern
The Directors have prepared the financial statements on a going concern basis, which contemplates continuity of normal
business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
The cash flow forecast for the next twelve months prepared by management indicates that the Group will have sufficient
cash assets to be able to meet its debts as and when they become due.
(b) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Cellmid Limited (“the
Company”) as at 30 June 2016 and the results of all subsidiaries for the year then ended. Cellmid Limited and its subsidiaries
together are referred to in these financial statements as the Group.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group 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. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Cellmid 2016 Annual Report 35
Notes to the Financial Statements
Continued
(b) Principles of consolidation (continued)
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses
incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises
the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in
profit or loss.
(c) segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision makers, who are responsible for allocating resources and assessing performance of the
operating segments, is the Board of Directors.
(d) Revenue and other income recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable and after taking into account
any trade discounts and volume rebates allowed.
Revenue from the sale of products is recognised at the point of delivery as this corresponds to the transfer of significant risks
and rewards of ownership of the products and the cessation of all involvement in those products.
Interest revenue is recognised as interest accrues using the effective interest rate method.
Royalties are recognised on a straight-line basis over the period of the agreement.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises
as expenses the related costs for which the grants are intended to compensate, but not before the receipt of the grant is
relatively certain.
(e) income tax
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the
national income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and adjustments recognised for prior periods where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled. Their measurement also reflects the manner in which management
expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is
probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
36 Cellmid 2016 Annual Report
(e) income tax (continued)
Current tax assets and liabilities are offset only where a legally enforceable right of set off exists and it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur.
Deferred tax assets and liabilities are offset where:
a. a legally enforceable right of set off exists; and
b. they relate to the same taxation authority on either the same taxable entity or different taxable entities which intend to
settle simultaneously.
(f) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are reported within short-
term borrowings in current liabilities in the consolidated statement of financial position.
(g) Trade and other receivables
Receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment.
Collectability of 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 Group will not be able to collect all amounts
due according to the original terms of receivables.
(h) inventories
Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct
materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of
normal operating capacity. Costs are assigned on the basis of weighted average costs. Costs of purchased inventory are
determined after deducting rebates and realisable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated cost necessary to make the sale.
(i) Plant and equipment
Plant and equipment is measured at historical cost less accumulated depreciation and any accumulated impairment.
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 Group and the cost of the item
can be measured reliably. All other repairs and maintenance are charged to the statement of profit and loss and other
comprehensive income during the financial period in which they are incurred.
Depreciation
Depreciation is calculated on a straight line basis over the asset’s useful life to the Group commencing from the time the
asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the
lease or the estimated useful lives of the improvements.
Cellmid 2016 Annual Report 37
Notes to the Financial Statements
Continued
(i) Plant and equipment (continued)
The depreciation rates used for each class of asset are:
Class of asset
Furniture and fittings
Office equipment
Depreciation Rate
20%
6.7 - 33.33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing disposal proceeds with the carrying amount. These gains and
losses are included in the statement of profit or loss and other comprehensive income.
(j) intangible assets other than Goodwill
Patents and trademarks
Patents and trademarks have a finite life and are measured at cost less any accumulated amortisation and any impairment
losses. The Group has determined the useful life of the intangible assets at 20 years.
Research and development
Expenditure on research activities is recognised as an expense in the period in which is incurred.
Expenditure on development projects (relating to the design and testing of new or improved products) is capitalised as
intangible assets when it is probable that the project will be a success considering its commercial and technical feasibility
and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs
of materials, services, direct labour and an appropriate proportion of overheads. Development expenditures that do not
meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are
not recognised as an asset in a subsequent period.
(k) impairment of assets
At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The
assessment will include the consideration of external and internal sources of information. If such an indication exists, an
impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s
fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount
over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a re-valued amount in
accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116). Any impairment loss of a
re-valued asset is treated as a revaluation decrease in accordance with that other Standard.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash generating unit to which the asset belongs.
The Group undertakes a review and assesses potential impairment on a regular basis for all its intangible assets.
(l) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
Due to their short term nature they are measured at amortised cost and are not discounted.
38 Cellmid 2016 Annual Report
(m) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting
period.
(n) employee benefits
Provision is made for the Company’s liability for employee benefits arising from services rendered by employees up to the
end of the reporting period. In determining the liability, consideration is given to employee wage increases and the probability
that the employee may satisfy vesting requirements.
Short-term employee benefits
Liability for wages and salaries, including non-monetary benefits, annual leave, long service leave and accumulating sick
leave expected to be settled within 12 months of the reporting date are recognised in other payables 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.
Other long term employee benefits
Liability for annual leave and long service leave not expected to be settled within 12 months from the reporting date is
recognised in the provision for employee benefits and measured as the present value of expected future payments to
be made in respect of services provided by employees up to the reporting date, using the projected unit credit method.
Consideration is given to expected future wage and salary levels, of employee departures and period of service.
Retirement benefit obligations
Contributions for retirement benefit obligations are recognised as an expense as they become payable. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in the future payment is available. Contributions
are paid into the fund nominated by the employee.
(o) share-based payments
The fair value of options granted is recognised as a benefit expense with a corresponding increase in equity. The fair value is
measured at grant date and recognised over the period during which the Directors and executives become unconditionally
entitled to the options.
The fair value at grant date is determined using either the Binomial or Black-Scholes option pricing model that takes into
account the exercise price, the term of option, the impact of dilution, 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 option.
The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any non-
market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. The benefit expense recognised each period takes into account the most recent estimate.
Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to
share capital and the proceeds received, net of any directly attributable transaction costs, and are credited to share capital.
(p) equity settled compensation
The Group operates an employee share ownership plan. Share-based payments to employees are measured at the fair
value of the instruments issued and amortised over the vesting periods. Share-based payments to non-employees are
measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined
the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are
received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using either
a Binominal pricing or Black-Scholes option pricing model. The number of shares and options expected to vest is reviewed
Cellmid 2016 Annual Report 39
Notes to the Financial Statements
Continued
(p) equity settled compensation (continued)
and adjusted at the end of each reporting period such that the amount recognised for services received as consideration
for the equity instruments granted is based on the number of equity instruments that eventually vest.
Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to
share capital and the proceeds received, net of any directly attributable transaction costs, and are credited to share capital.
(q) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and
presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars 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 financial year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange
rates, which approximate the rate at the date of the transaction, for the period. All resulting foreign exchange differences are
recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed.
(r) Goods and services Tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the
amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).
Receivables and payable are stated inclusive of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the ATO is included with other receivables or payables in the consolidated statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from
customers or payments to suppliers.
(s) Financial instruments
Financial instruments are recognised when the entity becomes a party to the contractual provisions to the instrument and
are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit
or loss”, in which case transaction costs are recognised immediately as expenses in profit or loss.
Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost.
Loans and borrowings
Loans and borrowings are non-derivative financial liabilities with fixed or determinable payments that are not quoted in an
active market and are subsequently measured at amortised cost using the effective interest rate method. Gains or losses
are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.
Financial liabilities are derecognised when the contractual obligation is discharged, cancelled or expires.
40 Cellmid 2016 Annual Report
(s) Financial instruments (continued)
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition
less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference
between that initial amount and the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent
to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other
premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the
financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net
cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense
item in profit or loss.
(t) earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to owners of Cellmid Limited, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(u) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation
for the current financial year.
Where the Group has retrospectively applied an accounting policy, made a retrospective restatement of items in the financial
statements or reclassified items in its financial statements, an additional statement of financial position as at the beginning
of the earliest comparative period will be disclosed.
(v) new accounting standards for application in future periods
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the Group for the annual reporting period ended 30 June 2016. The Group’s assessment of
the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces
all previous versions of AASB 9 and completes the project to replace IAS 39 ‘Financial Instruments: Recognition and
Measurement’. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial
recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income
(‘OCI’). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity’s own
credit risk to be presented in OCI (unless it would create an accounting mismatch).
Cellmid 2016 Annual Report 41
Notes to the Financial Statements
Continued
(v) new accounting standards for application in future periods (continued)
New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk
management activities of the entity. New impairment requirements will use an ‘expected credit loss’ (‘ECL’) model to
recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial
instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The
standard introduces additional new disclosures. The Group will adopt this standard from 1 July 2018 but the impact of its
adoption is yet to be assessed by the Group.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2017. The standard provides a single
standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied)
to be identified, together with the separate performance obligations within the contract; determine the transaction price,
adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no
distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will
be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would
be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when
the service has been provided, typically for promises to transfer services to customers. For performance obligations
satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be
recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity’s statement of
financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity’s
performance and the customer’s payment. Sufficient quantitative and qualitative disclosure is required to enable users to
understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and
any assets recognised from the costs to obtain or fulfil a contract with a customer. The Group will adopt this standard from
1 July 2017 but the impact of its adoption is yet to be assessed by the Group.
(w) Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under
the circumstances.
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Estimated impairment of intellectual property
The Group tests annually whether intellectual property has suffered any impairment. The recoverable amounts of the
intellectual property have been determined based on reviewing the status of the research and development program,
progress on its patent applications and projected cash flow calculations. These calculations require the use of assumptions,
including estimating timing of cash flows, product development and availability of resources to exploit the assets.
42 Cellmid 2016 Annual Report
(w) Critical accounting estimates and judgements (continued)
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes
model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates
and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets
and liabilities within the next annual reporting period but may impact profit or loss and equity.
Provision for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision
is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and
specific knowledge of the individual debtor’s financial position.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the
provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that
affect inventory obsolescence.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously
estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or
written down.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each
reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal
or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Employee benefits provision
The liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and
measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting
date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and
inflation have been taken into account.
Cellmid 2016 Annual Report 43
Notes to the Financial Statements
Continued
2. PaRenT enTiTY inFORMaTiOn
The following information has been extracted from the books and records of the parent, Cellmid Limited, and has been
prepared on the same basis as the consolidated financial statements, except as disclosed below.
Investments in subsidiaries and intercompany loans are accounted for at cost in the financial statements of the parent entity.
statement Of Financial Position
ASSETS
Current assets
Non-current assets
Total Assets
LIABILITIES
Current liabilities
Non-current liabilities
Total Liabilities
EQUITY
Issued capital
Accumulated losses
Reserves
Total Equity
statement Of Profit Or Loss and Other Comprehensive income
Loss of the parent entity
Total comprehensive income
Contingent liabilities and contingent assets
Bank Guarantees
Consolidated
2016
$
2015
$
3,245,484
7,156,715
10,402,199
1,560,800
6,563,915
8,124,715
(1,324,282)
(1,709,264)
(68,071)
(61,467)
(1,392,353)
(1,770,731)
32,426,826
28,701,311
(25,505,957)
(24,208,104)
2,088,977
9,009,846
1,860,777
6,353,984
(1,297,853)
(1,297,853)
(2,225,519)
(2,225,519)
The parent entity has given bank guarantees as at 30 June 2016 of $65,829 (30 June 2015: $65,829) relating to the lease
of commercial office space.
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
On 30 June 2016, Cellmid Limited entered into a deed of cross guarantee to support the liabilities and obligations of four
of its wholly-owned subsidiaries, Advangen Limited, Advangen International Pty Ltd, Kinera Limited and Lyramid Limited.
By entering into the deed, the wholly-owned unlisted public entities have been relieved from the requirement to prepare
a financial report and Directors’ report under Class Order 98/1418 issued by the Australian Securities and Investments
Commission.
Apart from the items noted above the parent entity had no contingent liabilities or contingent assets at 30 June 2016.
Capital Commitments
The parent entity had no capital commitments at 30 June 2016 (Nil at 30 June 2015).
44 Cellmid 2016 Annual Report
3. ReVenue anD OTHeR inCOMe
Revenue from continuing operations
Revenue:
- Consumer health and sale of products
Other revenue:
- interest received
- licence fees and royalties
- other revenue
Total Revenue
Other income:
- Government grants
- Gain on foreign exchange
- Other income
Total other income
4. LOss FOR THe YeaR
Loss before income tax includes the following specific expenses:
Manufacturing sales expense
Finance costs
Defined contribution superannuation expense
Loss on foreign exchange
Rental expense on leased premises
Depreciation and amortisation expense
Research and development expense
Consolidated
2016
$
2015
$
3,120,367
1,842,804
39,509
27,296
205,390
99,263
23,636
-
268,535
126,559
3,388,902
1,969,363
1,121,562
988,451
95,972
6,140
4,672
3,608
1,222,206
998,199
Consolidated
2016
$
2015
$
(1,219,849)
(195,914)
(178,740)
-
(200,133)
(161,613)
(354,881)
(671,698)
(27,809)
(148,992)
(8,441)
(193,653)
(131,338)
(1,302,009)
Cellmid 2016 Annual Report 45
Notes to the Financial Statements
Continued
5. inCOMe TaX
(a) The major components of income tax expense comprise:
Income tax expense
Consolidated
2016
$
2015
$
(11,045)
(3,363)
(11,045)
(3,363)
(b) numerical reconciliation of income tax expense to accounting loss:
Loss for year before income tax expense
(3,487,871)
(3,333,985)
Prima facie tax benefit on loss from ordinary activities before income tax at 29.89%
(2015: 30.57)
(1,042,630)
(1,019,036)
add / (less) tax effect of:
- Share based payment
- Sundry items
- Research and development expenditure
- Research and development core technology expenditure
- Tax losses not brought to account
Income tax expense
52,837
46,743
562,650
(190,438)
559,793
(11,045)
54,897
52,160
756,006
(190,438)
343,048
(3,363)
The Group operates across two tax jurisdictions being Australia and Japan each with difference corporate tax rates. The
applied tax rate of 29.89% represents the average tax rate applicable to the Group for the financial year ended 30 June 2016.
(c) unused tax losses
Movements in unused tax losses
australia
Japan
$
$
Total
$
Carried forward unused tax losses at the beginning of the financial year
14,039,273
2,293,187
16,332,460
Current unused tax losses for which no deferred tax asset has been recognised
3,142,423
(124,905)
3,018,518
Prior period differences between tax calculation and income tax return
(138,207)
-
(138,207)
Carried forward unused tax losses at the end of the financial year
17,043,489
2,168,282
19,211,771
Notional tax rate
Potential future tax benefit
30.00%
35.64%
5,113,046
772,776
5,885,822
This income tax benefit arising from tax losses will only be realised if:
i.
the Group derives future assessable income of a nature and of an amount sufficient to enable the Group to benefit from
the deductions for the losses to be realised;
ii.
the Group continues to comply with the conditions for deductibility imposed by tax legislation; and
iii. no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses.
46 Cellmid 2016 Annual Report
6. inTeResTs OF KeY ManaGeMenT PeRsOnneL (“KMP”)
(a) Directors and key management personnel
The following persons were Directors or key management personnel of Cellmid Limited during the financial year:
Mr David King
(Non-Executive Chairman)
Ms Maria Halasz
(CEO and Managing Director)
Mr Bruce Gordon
(Non-Executive Director)
- appointed 1 July 2015
Dr Fintan Walton
(Non-Executive Director)
- appointed 21 July 2015
(b) Directors and key management personnel compensation
Refer to the remuneration report contained in the Directors’ report for details of the remuneration paid or payable to each
member of the Group’s key management personnel for the year ended 30 June 2016.
The totals of remuneration paid to KMP of the company and the Group during the year are as follows:
Short-term employment benefits
Long-term benefits
Post-employment benefits
Share-based payments
7. auDiTOR’s ReMuneRaTiOn
Consolidated
2016
$
588,583
13,762
44,175
128,067
774,587
2015
$
588,961
12,511
48,925
73,467
723,864
During the year the following fees were paid or payable for services provided by BDO East Coast Partnership, the auditor
of the parent entity, its related practices and unrelated firms:
Audit or review of the financial statements
- BDO East Coast Partnership – Australia
- BDO Toyo & Co – Japan
Audit or review of the Subsidiary Advangen Limited
- BDO East Coast Partnership – Australia
Consolidated
2016
$
56,500
10,000
12,500
79,000
2015
$
52,500
10,640
-
63,140
Cellmid 2016 Annual Report 47
Notes to the Financial Statements
Continued
8. eaRninGs PeR sHaRe
basic and diluted earnings per share (in cents)
Consolidated
2016
$
(0.38)
2015
$
(0.43)
Reconciliation of earnings to profit or loss from continuing operations
Loss for the year attributable to the owners of Cellmid Limited
(3,498,916)
(3,337,348)
Weighted average number of ordinary shares used in calculating
basic and dilutive earnings per share
no.
No.
910,130,745
696,596,038
Options
Shareholders approved the issue of 8,000,000 options to Directors at the Annual General Meeting held on 12 November
2015. No options were issued to executives or Directors during the 2015 financial year.
For both the year ended 30 June 2016 and 30 June 2015, the options on issue were considered anti-dilutive, and
consequently diluted earnings per share is the same as basic earnings per share. The options have not been included in the
determination of basic earnings per share.
Details relating to options are set out in Note 18.
9. CasH anD CasH eQuiVaLenTs
Cash at bank and in hand
Consolidated
2016
$
2,686,329
2,686,329
2015
$
1,582,899
1,582,899
The effective interest rate on short term bank deposits at 30 June 2016 was 2.65% (2015: 2.5%); these deposits were all
at call.
Reconciliation of cash
Cash and cash equivalents reported in the statement of cash flows are reconciled to the equivalent items in the statement
of financial position as follows:
Cash and cash equivalents
2,686,329 1,582,899
48 Cellmid 2016 Annual Report
10. TRaDe anD OTHeR ReCeiVabLes
Current
Trade receivables
Less: Provision for impairment
Other receivables
Impairment of receivables
Consolidated
2016
$
2015
$
282,047 605,858
(21,430)
(15,019)
37,722
27,808
298,339 618,647
The Group has recognised a loss of $6,411 (2015: $18,890) in profit or loss in respect of impairment of receivables for the
year ended 30 June 2016.
The ageing of the impaired receivables provided for above are:
Over 6 months overdue
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Past due but not impaired
Consolidated
2016
$
21,430
21,430
15,019
6,411
-
21,430
2015
$
15,019
15,019
-
18,890
(3,871)
15,019
Customers with balances past due but without provision for impairment of receivables amount to $10,649 as at 30 June
2016 (30 June 2015: $26,686).
The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of customers based on
recent collection practices.
Effective interest rates and credit risk
The Group has no significant concentration of credit risk with respect to any single counterparty or Group of counterparties
other than those receivables specifically provided for and mentioned within Note 23(a). The class of assets described as
‘trade and other receivables’ is considered to be the main source of credit risk related to the Group.
There is no interest rate risk for the balances of trade and other receivables. There is no material credit risk associated with
other receivables.
Cellmid 2016 Annual Report 49
Notes to the Financial Statements
Continued
11. inVenTORies
Current
Midkine and MK ELISA
Finished goods
Raw materials
12. OTHeR asseTs
Prepayments
13. PLanT anD eQuiPMenT
At cost
Accumulated depreciation and foreign exchange movements
Movements in carrying amounts of plant and equipment
Balance at 1 July 2015
Additions
Depreciation
Foreign exchange movements
Balance at 30 June 2016
Balance at 1 July 2014
Additions
Depreciation
Balance at 30 June 2015
50 Cellmid 2016 Annual Report
Consolidated
2016
$
2015
$
1,006,471 1,018,995
671,831 662,590
331,490 45,875
2,009,792 1,727,460
Consolidated
2016
$
2015
$
136,644
244,610
Consolidated
2016
$
2015
$
515,717
425,892
(446,700)
(350,903)
69,017
74,989
$
74,989
32,928
(45,051)
6,151
69,017
43,269
60,929
(29,209)
74,989
14. inTanGibLe asseTs
Patents and trademarks
At cost
Accumulated amortisation and foreign exchange movements
Movements in carrying amounts of patents and trademarks
Balance at 1 July 2015
Additions
Amortisation
Foreign exchange movements
Balance at 30 June 2016
Balance at 1 July 2014
Additions
Amortisation
Foreign exchange movements
Balance at 30 June 2015
Consolidated
2016
$
2015
$
2,605,267
(390,574)
2,214,693
2,109,775
(210,833)
1,898,942
$
1,898,942
-
(116,562)
432,313
2,214,693
1,911,265
-
(102,129)
89,806
1,898,942
Intangible assets, have finite useful lives. The Group has determined the useful life of the intangible assets at 20 years.
The remaining useful life is 18 years.
15. TRaDe anD OTHeR PaYabLes
Trade payables
Other payables
16. LOans anD bORROWinGs
Current
Non-current
Consolidated
2016
$
655,851
778,592
2015
$
652,927
351,416
1,434,443
1,004,343
Consolidated
2016
$
802,177
196,807
998,984
2015
$
1,070,639
29,271
1,099,910
On 25 February 2016, Cellmid Limited entered into an R&D loan advance agreement with Platinum Road for $700,000. The
loan is secured for a period of twelve months from commencement, the date at which the government grant is expected to
be received and the loan repaid.
Cellmid 2016 Annual Report 51
Notes to the Financial Statements
Continued
16. LOans anD bORROWinGs (COnTinueD)
The agreement gives the lenders the right to require Cellmid to issue new ordinary fully paid shares at 3.4 cents per share
to reduce the principal amount, with the maximum total being 20,588,235 shares. Additionally, the lenders have the right to
require Cellmid to issue fully paid ordinary shares in lieu of payment of accrued interest (at an annual rate of 15%, accrued
monthly). These shares are to be issued at 2.3 cents per shares, with a maximum total being 4,577,739 shares being issued.
The remaining loan amounts relate to loan facilities with Keiyo Bank Ltd (JPY: 16,759,000) and Chiba Bank Ltd
(JPY: 8,831,000) and a lease facility with Business Mitsui Trust Panasonic Finance KK (JPY: 513,324).
The loan facility is secured by a fixed charge over the assets of the Group, and is fully drawn as at 30 June 2016.
17. eMPLOYee PROVisiOns
Balance at 1 July 2015
Additional provisions
Balance at 30 June 2016
analysis of total provisions
Current
Non-current
employee Provisions
annual
Leave
Long service
Leave
$
206,836
16,165
223,001
2016
$
223,001
68,336
291,337
$
62,549
5,787
68,336
2015
$
206,836
62,549
269,385
amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The
amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement.
18. issueD CaPiTaL
Consolidated
2016
shares
2015
Shares
2016
$
2015
$
Ordinary shares – fully paid
928,500,508
795,167,175
31,794,565
28,069,050
Unissued ordinary shares under options
330,954,732
301,054,732
632,261
632,261
32,426,826
28,701,311
52 Cellmid 2016 Annual Report
18. issueD CaPiTaL (COnTinueD)
issue
price
$
2016
no.
2015
No.
2016
$
2015
$
(a) Ordinary shares
At the beginning of the year
795,167,175
735,585,702
28,069,050
26,769,571
Shares issued – September 2015
0.0300
23,333,333
Shares issued – August 2015
Shares issued - August 2014
Shares issued - December 2014
Shares issued - December 2014
Shares issued - May 2015
Shares issue costs, net of tax
at the end of the year
0.0300
0.0400
0.0230
0.0270
0.0222
110,000,000
-
-
-
-
-
-
-
700,000
3,300,000
600,000
54,726,089
2,000,000
2,255,384
-
-
-
-
-
(274,485)
-
-
24,000
1,258,700
50,000
50,000
(83,221)
928,500,508
795,167,175
31,794,565
28,069,050
The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Company. On
a show of hands at meetings of the Company, each holder of ordinary shares has one vote in person or by proxy, and upon
a poll each share is entitled to one vote.
The Company does not have a limited amount of authorised capital and the fully paid ordinary shares have no par value.
(b) unissued ordinary shares under option
For information relating to the Cellmid Limited and controlled entities employee option plan, including details of options
issued, exercised and lapsed during the financial year and the options outstanding at year end, refer to Note 28 Share
based payments.
For information relating to share options issued to key management personnel during the financial year, refer to the
remuneration report.
At the beginning of the year
Options issued - September 2015
Options issued - November 2015
Options lapsed - November 2015
Options lapsed - June 2016
Options lapsed - July 2014
Options lapsed - November 2014
Options lapsed - February 2015
At the end of the year
(c) Capital risk management
2016
no.
2015
No.
301,054,732
315,656,738
18,000,000
12,500,000
(100,000)
(500,000)
-
-
-
-
-
-
-
(5,002,006)
(9,000,000)
(600,000)
330,954,732
301,054,732
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Cellmid 2016 Annual Report 53
Notes to the Financial Statements
Continued
18. issueD CaPiTaL (COnTinueD)
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group looks to raise capital when an opportunity to invest in a business or company is seen as value adding relative
to the current parent entity’s share price at the time of the investment. The Group is not actively pursuing additional
investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies.
19. ReseRVes
share-based payment reserve
Balance at the beginning of the year
Share-based payment expense
Shares issued under share-based arrangements
Balance at the end of the year
General reserve
Balance at the beginning of the year
Equity value of loan - net of transaction costs
Balance at the end of the year
Foreign currency translation reserve
Balance at the beginning of the year
Foreign exchange movements
Balance at the end of the year
Total reserves
(a) share-based payments reserve
Consolidated
2016
$
2015
$
1,860,777
1,801,787
176,123
-
82,990
(24,000)
2,036,900
1,860,777
(131,941)
(131,941)
52,077
(79,864)
-
(131,941)
124,421
461,342
585,763
35,359
89,062
124,421
2,542,799
1,853,257
This reserve records the cumulative value of employee services received for the issue of share options. When the option is
exercised the amount in the share option reserve is transferred to share capital.
(b) General reserve
The movement in the reserve is as a result of the recognition of the equity component of the convertible loan.
(c) Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income,
foreign currency translation reserve. The cumulative amount is reclassified to profit or loss when the net investment is
disposed.
54 Cellmid 2016 Annual Report
20. CasH FLOW inFORMaTiOn
Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax for the year
Adjustments for:
- depreciation and amortisation
- share based payments
- bad and doubtful debts
- interest expense
- finance cost
Changes in operating assets and liabilities
- (increase)/decrease in trade and other receivables
- (increase)/decrease in prepayments
- (increase) in inventories
- (decrease) in trade and other payables
- (decrease) in employee provisions
net cash used in operating activities
21. eVenTs aFTeR THe RePORTinG PeRiOD
Consolidated
2016
$
2015
$
(3,498,916)
(3,337,348)
161,613)
131,338)
176,123)
182,990)
6,411)
18,890)
48,063)
(40,000)
-)
-)
320,308)
(398,176)
107,966)
(18,095)
(282,332)
(176,308)
430,100)
432,476)
21,952)
41,869)
(2,548,712)
(3,123,364)
On 20 July 2016, Advangen International Pty Limited (Advangen), Cellmid’s wholly owned subsidiary, entered into a
distribution partnership with Colour Collective for the USA launch of the Company’s évolis® branded hair loss products.
Colour Collective, a specialist in the launch of high end hair brands in the US, is based in Dallas, Texas.
The principals of Colour Collective have over 40 years of combined experience in successfully launching and distributing
brands in the USA, Europe and Asia for companies such as Revlon, Unilever, LVMH, Bristol-Myers Squibb and Toni & Guy.
Since 2012 Colour Collective has launched nine new brands covering 146 products.
The distribution partnership will provide Advangen with accelerated, direct route to the sales channels that have proven
successful in Australia and Japan during the Company’s commercial proof of concept rollout. These include e-commerce
and sampling channels for rapid customer acquisition, home shopping networks and high-end retail stores. USA sales
will commence in 2016 through e-commerce channels with distribution to high-end retail and other direct to consumer
opportunities to follow.
On 22 July 2016, Ikon Communications Pty Ltd (Ikon), a subsidiary of the WPP AUNZ (ASX: WPP) group of advertising
agencies, filed legal action against Advangen, the entity that operates the Australian consumer health business.
Ikon’s claim is for the amount of $939,055 pursuant to the Services Agreement entered into by the parties on 15 June 2015.
In the claim Ikon alleges that Advangen has failed to pay certain invoices for services rendered in relation to an advertising
campaign.
Advangen strongly disputes that Ikon is entitled to be paid for the work the subject of the invoices. It is Advangen’s position
that Ikon has breached the Services Agreement, failed to provide certain services at all, or adequately, and engaged in
misleading and dishonest conduct that has caused Advangen loss and damage.
Cellmid 2016 Annual Report 55
Notes to the Financial Statements
Continued
21. eVenTs aFTeR THe RePORTinG PeRiOD (COnTinueD)
Advangen intends to vigorously defend its position and cross claim for payments already made for services not provided or
properly provided by Ikon, as well as for any further damages. It will also ensure that there is adequate security for its costs,
and if necessary, apply for an order that security for costs be provided by Ikon.
Apart from the matters noted above, no other matters or circumstances have arisen since the end of the financial year which
significantly affected or could significantly affect the operations of the Group, the results of those operations, or the state of
affairs of the Group in future financial years.
22. ReLaTeD PaRTY TRansaCTiOns
(a) The Group’s main related parties are as follows:
Parent entities
Cellmid Limited is the ultimate parent entity.
Subsidiaries
For details of disclosures relating to subsidiaries, refer to Note 24. Transactions and balances between subsidiaries and the
parent have been eliminated on consolidation of the Group.
Key management personnel
For details of disclosures relating to key management personnel, refer to the remuneration report contained within the
Director’s report.
23. FinanCiaL RisK ManaGeMenT
(a) Transactions with related parties
There were no related party transactions during the year ended 30 June 2016.
The Group’s activities expose it to a number of financial risks as described below. The Group’s overall risk management
program seeks to minimise potential adverse effects on the financial performance of the Group. To date, the Group has not
had the need to utilise derivative financial instruments such as foreign exchange contracts or interest rate swaps to manage
any risk exposures identified.
The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting
policies to these financial statements, are as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
56 Cellmid 2016 Annual Report
Consolidated
2016
$
2015
$
9
10
2,686,329 1,582,899
298,339 618,647
2,984,668 2,201,546
23. FinanCiaL RisK ManaGeMenT (COnTinueD)
Financial Liabilities
Financial liabilities at amortised cost
- Trade and other payables
- Loans and borrowings
Consolidated
2016
$
2015
$
15
16
1,434,443 1,004,343
998,984 1,099,910
2,433,427 2,104,253
The fair value of financial assets and liabilities equate to the carrying value.
(a) Credit risk
Credit risk is managed on a Group basis. The Group has no significant concentration of credit risk.
The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period is equivalent
to the carrying value and classification of those financial assets (net of any provisions) as presented in the table above.
Trade and other receivables that are neither past due nor impaired are considered to be of high credit quality.
Credit risk related to balances with banks and other financial institutions is managed by management in accordance with
approved board policy. Such policy requires that surplus funds are only invested with counterparties with a Standard &
Poor’s rating of at least AA .
(b) Liquidity risk
The Group manages this risk through the following mechanisms:
• preparing forward looking cash flow analysis in relation to its operational, investing and financing activities;
• managing credit risk related to financial assets; and
• only investing surplus cash with major financial institutions.
The Group is not exposed to any material liquidity risk.
Financial liabilities consist of two items, trade and other payables for which the contractual maturity dates are within 6
months of the reporting date and loans and borrowings.
Loans and borrowings at reporting date have contractual maturity dates as follows:
Within one year
One to five years
(c) Market risk
Foreign exchange risk
2016
$
802,177
196,807
2015
$
1,070,639
29,271
Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to
movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the
functional currency of the Group, being Australian dollars.
Cellmid 2016 Annual Report 57
Notes to the Financial Statements
Continued
23. FinanCiaL RisK ManaGeMenT (COnTinueD)
The maximum exposure to foreign exchange risk is the fluctuation in exchange rates on the USD and JPY denominated
bank accounts and also the profit and net assets of the Japanese subsidiary, Advangen Incorporated.
The Group has performed a sensitivity analysis relating to its exposure to foreign currency risk at the end of the financial year.
The sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in
this risk.
At the end of the financial year, the effect on profit and equity as a result of changes in the foreign exchange rate with all
other variables remaining constant would be as follows:
Year ended 30 June 2016
+/- 1% in foreign exchange rates
Year ended 30 June 2015
+/- 1% in foreign exchange rates
Interest rate risk
Profit
$
equity
$
+/-1,249
-/+ 2,153
+/-3,215
+/- 6,125
The Group’s main interest rate risk arises from deposits with banks and other financial institutions.
Deposits made at variable rates expose the Group to interest rate risk. Management maintains approximately 100% of
deposits with banks at call on variable interest rates.
The Group has performed a sensitivity analysis relating to its exposure to interest rate risk at the end of the financial year.
The sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in
this risk. At the end of the financial year, the effect on profit and equity as a result of changes in the interest rate with all other
variables remaining constant would be as follows:
Year ended 30 June 2016
+/- 1% in interest rates
Year ended 30 June 2015
+/- 1% in interest rates
Price risk
The Group is not exposed to any material price risk.
Profit
$
equity
$
+/- 26,863
+/- 26,863
+/- 15,829
+/- 15,829
58 Cellmid 2016 Annual Report
24. inTeResTs in subsiDiaRies
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries
in accordance with the accounting policy described in Note 1:
name
subsidiaries of Cellmid Limited:
Advangen Limited
Kinera Limited
Lyramid Limited
subsidiaries of advangen Limited:
Advangen International Pty Ltd
Advangen Incorporated
Country of
incorporation
Percentage
Owned (%)
2016
Percentage
Owned (%)
2015
Australia
Australia
Australia
Australia
Japan
100
100
100
100
100
100
-
-
100
100
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
On 30 June 2016, Cellmid Limited entered into a deed of cross guarantee to support the liabilities and obligations of four
of its wholly-owned subsidiaries, Advangen Limited, Kinera Limited, Lyramid Limited and Advangen International Pty Ltd.
By entering into the deed, the wholly-owned unlisted public entities have been relieved from the requirement to prepare
a financial report and directors’ report under Class Order 98/1418 issued by the Australian Securities and Investments
Commission.
The following are the aggregate totals, for each category, relieved under the deed.
(a) sTaTeMenT OF FinanCiaL POsiTiOn
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
Intangible assets
Investments in Advangen Inc. Japan
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
Members of the
Closed Group
2016
$
2,686,329
298,339
2,009,792
136,644
5,131,104
69,017
2,214,693
-
2,283,710
7,414,814
Parties to the
Deed of Cross
Guarantee
2016
$
2,250,700
111,325
1,567,214
108,317
4,037,556
27,176
1,440
3,242,558
3,271,174
7,308,730
Cellmid 2016 Annual Report 59
Notes to the Financial Statements
Continued
24. inTeResTs in subsiDiaRies (COnTinueD)
Members of the
Closed Group
2016
$
1,434,443
802,177
223,001
2,459,621
68,336
196,807
265,143
2,724,764
4,690,050
Parties to the
Deed of Cross
Guarantee
2016
$
1,184,649
655,986
223,001
2,063,636
68,336
-
68,336
2,131,972
5,176,758
32,426,826
2,542,799
32,426,826
1,944,060
(30,279,575)
(29,194,128)
4,690,050
5,176,758
(3,487,871)
(3,501,470)
(11,045)
(3,498,916)
(3,498,916)
-
(3,501,470)
(3,501,470)
(26,780,659)
(3,498,916)
(30,279,575)
(25,692,658)
(3,501,470)
(29,194,128)
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Employee provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Employee provisions
Loans and borrowings
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
neT asseTs
EQUITY
Issued capital
Reserves
Accumulated losses
TOTaL eQuiTY
(b) sTaTeMenT OF PROFiT OR LOss anD OTHeR
COMPReHensiVe inCOMe:
Loss before income tax
Income tax expense
Loss after income tax
Loss attributable to members of the parent entity
(C) ReTaineD eaRninGs:
Retained profits at the beginning of the year
Loss after income tax
Retained earnings at the end of the year
25. seGMenT inFORMaTiOn
Identification of reporting segments
The Group is organised into two operating segments:
•
•
research and development of diagnostics and therapeutics; and
research, development and marketing of hair growth products.
60 Cellmid 2016 Annual Report
25. seGMenT inFORMaTiOn (COnTinueD)
These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (identified
as the Chief Operating Decision Makers (CODM)) in assessing performance and in determining the allocation of resources.
There is no aggregation of operating segments.
The CODM reviews both adjusted earnings before interest, tax, depreciation and amortisation (segment result) and profit
before income tax.
Types of products and services
The principal products and services of each of these operating segments are as follows:
Midkine Diagnostic and Therapeutic (Midkine business)
• Midkine diagnostics and therapeutics for cancer, inflammatory and ischemic conditions.
Research, development and marketing of hair growth products (Consumer Health business)
•
research, development and marketing of hair growth products.
Geographical segment information
The primary geographic segment within which the Group operates is Australia as at 30 June 2016. For primary reporting
purposes, the Group operates in two geographic segments as described as at 30 June 2016.
Midkine australia
Consumer Health
australia
Consumer Health
Japan
Total
2016
$
2015
$
2016
$
2015
$
2016
$
2015
$
2016
$
2015
$
158,061
47,790
811,935
658,030
2,150,371
1,136,984
3,120,367
1,842,804
158,061
47,790
811,935
658,030
2,150,371
1,136,984
3,120,367
1,842,804
39,342
205,390
27,280
99,263
131
-
-
-
23,636
-
-
-
36
-
-
16
-
-
39,509
205,390
23,636
27,296
99,263
-
402,793
174,333
835,702
658,030
2,150,407
1,137,000
3,388,902
1,969,363
Revenue
Consumer health and product sales
to external customers
Total
Interest received
Royalties and licences
Other revenue
Total revenue
Other income
Government grant received
1,026,172
952,621
95,390
35,830
-
1,121,562
988,451
Gain/Loss on disposal of assets
Other income
Expenses
-
24,042
5,200
6,140
-
-
-
-
(1,592)
-
76,602
-
100,644
3,608
6,140
(2,370,634)
(3,239,129)
(3,126,861)
(1,365,415)
(2,067,834)
(1,454,866)
(7,565,329)
(6,059,410)
-
-
Share based compensation
(176,123)
(82,990)
-
-
-
-
(176,123)
(82,990)
Depreciation and amortisation
(16,007)
(16,638)
(3,445)
(82)
(142,161)
(114,618)
(161,613)
(131,338)
Finance costs
(189,458)
(25,056)
(804)
(649)
(5,652)
(2,104)
(195,914)
(27,809)
Profit / (Loss) before income tax
(1,299,215)
(2,225,519)
(2,200,018)
(672,286)
11,362
(436,180)
(3,487,871)
(3,333,985)
Income tax (expense)
Loss after income tax
assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
(11,045)
(3,363)
(3,498,916)
(3,337,348)
3,274,865
2,605,320
747,643
865,258
3,392,306
2,676,969
7,414,814
6,147,547
7,414,814
6,147,547
(1,392,353)
(1,770,731)
(739,619)
(188,077)
(592,792)
(414,830)
(2,724,764)
(2,373,638)
(2,724,764)
(2,373,638)
Cellmid 2016 Annual Report 61
Notes to the Financial Statements
Continued
25. seGMenT inFORMaTiOn (COnTinueD)
Major customers
The Group has a number of customers to whom it provides both products and services. The Group supplies a single
external customer in the consumer health segment who accounts for 39.94% of external revenue (2015: 18.78%). The next
most significant customer accounts for 12.22% (2015: 4.19%) of external revenue.
26. COMMiTMenTs
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Minimum lease payments
Consolidated
2016
$
2015
$
140,844
135,037
275,881
134,508
274,624
409,132
Operating lease commitments includes contracted amounts for office space under non-cancellable operating lease expiring
within five years with no option to extend and business telephone system.
27. COnTinGenT LiabiLiTies anD COnTinGenT asseTs
Claims
On 22 July 2016, Ikon Communications Pty Ltd (Ikon), a subsidiary of the WPP AUNZ (ASX:WPP) group of advertising
agencies, filed legal action against Advangen International Pty Limited (Advangen), Cellmid’s wholly owned subsidiary
operating the Australian consumer health business.
Ikon’s claim is for the amount of $939,055 pursuant to the Services Agreement entered into by the parties on 15 June 2015.
In the claim Ikon alleges that Advangen has failed to pay certain invoices for services rendered in relation to an advertising
campaign.
Advangen strongly disputes that Ikon is entitled to be paid for the work the subject of the invoices. It is Advangen’s position
that Ikon has breached the Services Agreement, failed to provide certain services at all or adequately and engaged in
misleading and dishonest conduct that has caused Advangen loss and damage.
Advangen intends to vigorously defend its position and cross claim for payments already made for services not provided or
properly provided by Ikon, as well as for any further damages. It will also ensure that there is adequate security for its costs,
and if necessary, apply for an order that security for costs be provided by Ikon.
Guarantees
The Group has given bank guarantees as at 30 June 2016 of $65,829 (30 June 2015: $65,829) relating to the lease of
commercial office space.
For information about guarantees given by entities within the group, including the parent entity, please refer to note 2.
Other than the matter noted above, the Group had no contingent liabilities or contingent assets at 30 June 2016.
(30 June 2015: Nil)
62 Cellmid 2016 Annual Report
28. sHaRe-baseD PaYMenTs
The Cellmid Limited and Controlled Entities Employee Incentive Plan is designed as an incentive for eligible employees of
the Group. Under the Plan, participants are granted options which only vest if certain conditions are met.
A summary of the Company options granted under the Plan is as follows:
Granted
exercised
expiry Date
15/11/2015
15/11/2016
15/06/2017
14/08/2017
01/08/2018
01/08/2018
01/08/2018
19/11/2018
19/11/2018
exercise
price
0.100
0.030
balance at
start of the
year
100,000
3,971,962
0.032
5,000,000
0.034
1,440,000
-
-
-
-
0.040
0.050
0.060
0.031
0.060
-
-
-
-
-
4,000,000
4,000,000
10,000,000
500,000
12,000,000
10,511,962
30,500,000
Forfeited/
expired
balance at
the end of
the year
exercisable
at end of year
(100,000)
-
-
-
-
-
-
-
-
-
3,971,962
3,971,962
5,000,000
5,000,000
1,440,000
1,440,000
4,000,000
4,000,000
4,000,000
4,000,000
10,000,000
10,000,000
500,000
500,000
(500,000)
11,500,000
9,500,000
(600,000)
40,411,962
37,911,962
-
-
-
-
-
-
-
-
-
-
The weighted average exercise price during the financial year was $0.046 ($0.034 in 2015). The weighted average remaining
contractual life of the options outstanding at the end of the financial year was 1.83 years (1.97 years in 2015).
Refer to Note 1(o) for information as to how the fair value of these options were determined.
30,500,000 options were granted during the 2016 financial year (2015: Nil) and share based payment expense for the
period was $176,123 (2015: Nil).
Other options on issue
A summary of the Company options not issued under the plan is as follows:
expiry Date
exercise
price
balance at
start of the
year
23/10/2016
0.034 290,542,770
290,542,770
Granted
exercised
Forfeited/
expired
balance at
the end of
the year
exercisable
at end of year
-
-
-
-
- 290,542,770 290,542,770
- 290,542,770 290,542,770
Cellmid 2016 Annual Report 63
Directors’
Declaration
The directors of the company declare that:
1. the financial statements and notes, as set out on pages 29 to 63, are in accordance with the Corporations Act 2001 and:
i. comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial
statements, constitutes compliance with International Financial Reporting Standards; and
ii. give a true and fair view of the financial position as at 30 June 2016 and of the performance for the year ended on
that date of the consolidated group;
2. in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable; and
3. the directors have been given the declarations required by s 295A of the Corporations Act 2001 from the Chief Executive
Officer and Chief Financial Officer.
The company and its four wholly-owned subsidiaries, Advangen Limited, Kinera Limited, Lyramid Limited and Advangen
International Pty Limited, have entered into a deed of cross guarantee under which the company and its subsidiaries
guarantee the debts of each other.
At the date of this declaration, there are reasonable grounds to believe that the companies which are party to this deed of
cross guarantee will be able to meet any obligations or liabilities to which they are, or may become, subject to by virtue of
the deed.
Signed in accordance with a resolution of the Board of Directors made pursuant to Section 295 (5) of the Corporations
Act 2001.
Director
Dr David King
Dated this 30th day of August 2016
64 Cellmid 2016 Annual Report
Cellmid 2016 Annual Report 67
Additional Information
for Listed Entities
asX aDDiTiOnaL inFORMaTiOn
Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below.
This information is effective as at 23 September 2016.
20 LaRGesT sHaReHOLDeRs
Cellmid FPO Voluntary Escrow for 3 years
Fully Paid Ordinary Shares
shareholders
MR GREGORY GLENN WORTH
CELL SIGNALS INC
NATIONAL NOMINEES LIMITED
SEISTEND (SUPER) PTY LTD
MR JAMES PATRICK TUITE & MRS WENDY TUITE
INSCAPE SOLUTIONS PTY LTD
MR DARIN ANJOUL & MRS TANIA ANJOUL
MR TREVOR GOTTLIEB
DR KUEN SENG CHAN
MR KEVIN PETER HOOPER & MR RONALD LESLIE HOOPER
MS MARIA HALASZ
MR SCOTT JEFFREY RICHARD CHAPMAN
MR HAROLD LEONARD GOTTLIEB & MRS HELEN CYNTHIA GOTTLIEB
MR GREGORY BERNARD HILTON
MISS REBECCA DERAGOPIAN
MR MING LOV & MRS CHIU LOV
MR TRAFFORD WILLIAM VAGG
J20 INVESTMENTS PTY LTD
TZ HOLDINGS PTY LTD
MR IVAN STARESINIC
Total
issued share Capital
balance
Percent
(%)
36,000,000
28,000,000
24,338,660
22,500,000
20,646,462
17,600,000
14,750,000
14,510,000
14,000,000
14,000,000
13,874,375
11,700,000
11,448,028
10,897,000
10,892,779
10,676,327
9,816,910
9,320,000
9,071,000
9,000,000
3.877
3.016
2.621
2.423
2.224
1.896
1.589
1.563
1.508
1.508
1.494
1.260
1.233
1.174
1.173
1.150
1.057
1.004
0.977
0.969
313,041,541
33.715
928,500,508
Cellmid 2016 Annual Report 69
Additional Information for Listed Entities
Continued
subsTanTiaL HOLDeRs
There are no current individual substantial shareholders of Cellmid Limited shares, however the ASX has been advised that
Mr Paul Ruggiero holds 15.6% of the collective voting rights of like-minded investors.
anaLYsis OF HOLDinGs
securities
Cellmid FPO Voluntary Escrow for 3 years
Fully Paid Ordinary Shares
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
Holders
Total units
67
37
125
1,113
821
2,163
11,126
116,970
1,155,408
54,461,968
872,755,036
928,500,508
Percent
(%)
0.001
0.013
0.124
5.866
93.996
100.000
20 LaRGesT sHaReHOLDeRs OF QuOTeD OPTiOns
Listed Options $0.034 Expiring 23 October 2016
Holder name
STRUCTURE INVESTMENTS PTY LTD
PATHOLD NO 77 PTY LTD
MR EGAN HARVEY JOHNSON
MR TREVOR GOTTLIEB
SEISTEND (SUPER) PTY LTD
MR JAMES PATRICK TUITE & MRS WENDY TUITE
PROCURE TO REPORT PTY LTD
MR GREGORY GLENN WORTH
MR OSCAR DARIO ROSERO
MR PAUL PHILIP RANBY
IQ GLOBAL ASSET PARTNERS PTY LTD
MR DARIN ANJOUL & MRS TANIA ANJOUL
PAESLER TRADING PTY LTD
MR DARIN ANJOUL & MRS TANIA ANJOUL
MR TRAFFORD WILLIAM VAGG
DR ROBERT SYLVESTER VAGG & DR KYMBERLEY ANN VICKERY
TALRIND PTY LTD
CHAMIER ENDERSBEE PTY LTD
MR STEVEN ANDREW COOPER
ROGERS SF MANAGEMENT PTY LTD
Total
issued Quoted Options
70 Cellmid 2016 Annual Report
balance
40,814,930
38,201,482
18,003,220
13,255,500
11,250,000
9,523,231
8,430,110
8,000,000
7,684,153
7,575,813
5,847,137
5,000,000
5,000,000
5,000,000
4,770,178
4,700,000
4,000,000
3,800,000
3,000,000
3,000,000
Percent
(%)
14.048
13.148
6.196
4.562
3.872
3.278
2.902
2.753
2.645
2.607
2.012
1.721
1.721
1.721
1.642
1.618
1.377
1.308
1.033
1.033
206,855,754
71.196
290,542,770
nuMbeR OF HOLDeRs anD VOTinG RiGHTs in eaCH CLass OF seCuRiTies
Class of security
Ordinary Shares
Listed Options $0.034 expiring 23/10/2016
Unlisted Options $0.030 expiring 15/11/2016
Unlisted Options $0.032 expiring 15/06/2017
Unlisted Options $0.034 expiring 14/08/2017
Unlisted Options $0.040 expiring 01/08/2018
Unlisted Options $0.050 expiring 01/08/2018
Unlisted Options $0.060 expiring 01/08/2018
Unlisted Options $0.031 expiring 19/11/2018
Unlisted Options $0.060 expiring 19/11/2018
Cellmid FPO Voluntary Escrow for 3 years
no of Holders
Voting Rights
2,162
329
1
1
3
1
1
2
1
8
1
Yes
No
No
No
No
No
No
No
No
No
No
Subject to the ASX Listing Rules, the Company’s Constitution and any special rights or restrictions attached to a share, at
a meeting of shareholders:
• On a show of hands, each shareholder present (in person, by proxy, attorney or representative) has one vote; and
• On a poll, each shareholder present (in person, by proxy, attorney or representative) has;
- One vote for each fully paid share they hold; and
- A fraction of a vote for each partly paid share they hold.
unMaRKeTabLe PaRCeLs OF sHaRes
The number of shareholders with less than a marketable parcel of shares is 343.
CLasses OF unQuOTeD seCuRiTies
Class of security
Unlisted Options $0.030 expiring 15/11/2016
Unlisted Options $0.032 expiring 15/06/2017
Unlisted Options $0.034 expiring 14/08/2017
Unlisted Options $0.040 expiring 01/08/2018
Unlisted Options $0.050 expiring 01/08/2018
Unlisted Options $0.060 expiring 01/08/2018
Unlisted Options $0.031 expiring 19/11/2018
Unlisted Options $0.060 expiring 19/11/2018
GeneRaL
There is no current on-market buy-back for the Company’s securities.
no of Holders
Total units
1
1
3
1
1
2
1
8
3,971,962
5,000,000
1,440,000
4,000,000
4,000,000
10,000,000
500,000
11,500,000
Cellmid 2016 Annual Report 71
Corporate
Directory
COMPanY DeTaiLs
bOaRD OF DiReCTORs
The registered office of the company is:
non-executive Chairman
Suite 1802, Level 18
15 Castlereagh Street
Sydney NSW 2000 Australia
DR DAVID KING
Managing Director and Chief executive Officer
The principal places of business are:
MS MARIA HALASZ
Cellmid Limited
Suite 1802, Level 18
15 Castlereagh Street
Sydney NSW 2000 Australia
Advangen International Pty Limited
Suite 1802, Level 18
15 Castlereagh Street
Sydney NSW 2000 Australia
Advangen Incorporated
Chiba Industry Advancement Centre
Tokatsu Techno Plaza
5-4-6 Kashiwanoha, Kashiwa
Chiba 277-0082 Japan
Advangen Limited
Suite 1802, Level 18
15 Castlereagh Street
Sydney NSW 2000 Australia
Kinera Limited
Suite 1802, Level 18
5 Castlereagh Street
Sydney NSW 2000 Australia
Lyramid Limited
Suite 1802, Level 18
15 Castlereagh Street
Sydney NSW 2000 Australia
72 Cellmid 2016 Annual Report
non-executive Directors
MR BRUCE GORDON
(Appointed 1 July 2015)
DR FINTAN WALTON
(Appointed 21 July 2015)
Company secretary
MRS ALICESON ROURKE
(Appointed 1 November 2015)
auDiTORs, sOLiCiTORs
anD PaTenT aTTORneY
auditors
BDO East Coast Partnership
Level 11, 1 Margaret Street
Sydney NSW 2000 Australia
solicitors
Piper Alderman
Governor Macquarie Tower
1 Farrer Place
Sydney NSW 2000 Australia
Patent attorney
FB Rice & Co
Level 23, 44 Market Street
Sydney NSW 2000 Australia
sHaRe ReGisTRY
Boardroom Limited
Grosvenor Place
Level 12, 225 George Street
Sydney NSW 2000 Australia
Cellmid Limited
Suite 1802, Level 18,
15 Castlereagh Street
Sydney NSW 2000
Australia
ABN 69 111 304 119
T: +61 2 9221 6830
F: +61 2 9221 8535
E: info@cellmid.com.au
W: www.cellmid.com.au
2016 Annual Report
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