Cellmid Limited
Annual Report 2019

Plain-text annual report

2019 ANNUAL REPORT 1 Cellmid 2019 Annual ReportCONTENTS 04 06 Chairman’s Letter CEO Report 25 Corporate Governance 68 Additional Information for Listed Entities 10 Directors’ Report 27 Annual Financial Report 70 Corporate Directory 3 Cellmid Limited (ASX:CDY) Annual Report ABN 69 111 304 119 Suite 204, Level 2 55 Clarence Street Sydney NSW 2000 T: +61 2 9221 6830 F: +61 2 9221 8535 E: info@cellmid.com.au W: www.cellmid.com.au 2 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportCHAIRMAN’S LETTER Dear Shareholder, With this development we believe it is now timely to focus on with the European Patent Office issuing an intention to has been on completing clinical development plans in It is my pleasure to present to you the 2019 Annual Report. Both the consumer health business and the midkine related biotechnology business have progressed well during the year, the former to the point where profitability is eagerly anticipated in FY2020. separating the consumer health and biotechnology assets, grant; a promising sign for the successful grant in other our lead indications – myocarditis, cancer, fibrosis, chronic in order to unlock shareholder value in both businesses. growth markets such as USA, Japan and China. Patent kidney disease and associated conditions – so that we can The Company’s évolis® anti-aging hair care product range is now ideally positioned in the burgeoning market for clean and efficacious beauty products, in which consumer behaviour is clearly shifting from “big name” brands to grant will strengthen the Company’s position in ongoing activate partnering discussions. The midkine assets are negotiations with retail and distribution partners in Europe currently being packaged with a view to securing clinical and other jurisdictions, as well as add commercial value to the évolis® brand. development partners, or dedicated funding into Lyramid. In June this year, as announced on the ASX, we were products with clinically validated scientific credentials, an Together with the anticipated revenue growth, we have fortunate indeed to secure the services of Bart Wuurman, authentic story, and a strong relationship between the brand worked hard throughout the year to implement effective cost a highly accomplished biotech CEO, to head up Lyramid. and the customer. The market appeal of the expanded management, which is an essential component in delivering Bart has over 30 years’ experience in innovative drug range is evidenced by strong revenue growth for the year. profitability in FY2020. In addition, we have during the year development, biotech financing, business development Growth was particularly strong in Japan, and pleasingly profitable. Sales doubled in the USA, and are poised for further substantial growth following our relatively heavy investment in retail partnerships in this important market. Sales were weaker in our home market of Australia, although we are confident of further growing this market after expanding our e-commerce, digital marketing, and social media infrastructure and capability; and advancing negotiations with a national distribution partner. We remain poised to penetrate important new markets in China and Korea, where we have already entered into exclusive distribution agreements with well-credentialled partners and await only the requisite regulatory approvals. Based on the success of our QVC distribution channel in Japan, we are not surprisingly excited about the prospect of working with QVC China, an important component of our Chinese strategy. Both the Chinese and Korean markets offer the potential for transformative revenues over the next two years. Planning to enter other new markets, in both Asia and Europe, is also well advanced, with EU registration for importation of évolis® Professional products into all EU countries, including the UK, already in hand. The first patent protection for the technology which underpins the évolis® formulation was forthcoming in April, filled the important roles of Sales Director and Marketing and licensing; he is already accelerating our partnering Director in our Sydney Head Office, and Chief Operating discussions and identifying new opportunities to more Officer in our USA business. All these roles have attracted fully exploit our extensive midkine assets in readiness for a highly qualified and experienced professionals who have structural separation of the businesses. quickly embraced the exciting potential of our évolis® range of products. These appointments together with Ko Koike, our outstanding Managing Director in Japan, mean we have never been better positioned to deliver on our growth strategy. Our progress during the year would not have been possible without the exceptional efforts of our existing and newly recruited staff members who, without exception, have worked tirelessly and with great professionalism to progress and grow our businesses; none more so than CEO Maria With regard to the Company’s midkine assets, Halasz. It is disappointing of course that the progress we commercialised by wholly owned subsidiary Lyramid, there have made is not reflected in the share price performance, is a growing body of evidence from research around the but we are optimistic that this will be remedied with the world that midkine plays an important, if not critical role in initiatives undertaken during the year. the development of a wide range of diseases. During this last year there were important publications of new findings on the role of midkine in the development of yet more disease indications - in a rare kidney disease (FSGS) and in auto-immune myocarditis. These studies also demonstrated the efficacy of midkine antibodies in mitigating the diseases. It is the very wide range of disease indications in which midkine is implicated which is at the core of the conundrum on how best to extract value from the Company’s intellectual property assets around this protein. As a I also extend my sincere thanks to my fellow board members for their wise counsel and guidance throughout the year. Finally, I extend the Board’s thanks to all shareholders for their support. precursor to separating or consumer health and biotech businesses, as foreshadowed in my opening, our focus David King Chairman 4 5 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportCEO REPORT During the first half of FY2019 we reviewed the business and Our key consumer platforms are Facebook and Instagram, assessed the strengths and weaknesses of our consumer but we keep a close relationship with our customers through health and biotech portfolios. The result of the review was regular emails. Although already seeing great results from the Strategy Update announced to the market in February the hard work by our team, including sales going up 400% 2019, where we set out two key initiatives; operational in a few months, this is just the beginning. We have much profitability for our consumer health business in FY2020 and more to do in the way we perfect the customer experience separation of the two asset portfolios by the end of 2020. from the first time they enter our website to the time they Dear Shareholder, The $10 million capital raising in September 2018 allowed In order to deliver on these, we set out six key measurable strategic objectives; to diversity revenue sources, expand our e-commerce capabilities, build a global leadership team, secure supply chain and improve efficiencies, as well as put the structure in place for the separation of the biotech assets and embark on an active partnering program. us to gear up for growth by getting the right people, It is my pleasure to report that we have advanced significantly systems and channels in place during the year. We have in these six strategic objectives and we are on schedule to cleaned up our balance sheet by repaying a substantial achieve the targets of our Strategy Update. It is my pleasure to report on the results of this 2019 financial year. This has been a year of investment into our people, operations and systems, our intellectual property assets as well as in our sales and distribution channels as we prepare to achieve operational profitability for the consumer business in FY2020 and the separation of our consumer health and research activities. loan, implemented a share buy-back and have successfully navigated through a year with many new partners and collaborators. Importantly, the year marked accelerated sales growth with a 30% increase in consumer sales to $7,338,967 (FY2018: $5,647,930). This has been especially pleasing as most of our new channels have not come online until the latter part of the reporting year. Total revenue and other income came in at $8.347,184, a 22% uplift from last year (FY2018: $6.834,924). In addition to the revenue in Advangen Limited, Cellmid also received $807,972 from the Australian Tax Office under the R&D Tax Incentive Scheme. This funding has been crucial for the Company to continue its development of the high value midkine assets. Cellmid reported a net loss after tax of $5,909,557 million in FY2019, up 58% form the previous financial year (FY2018: $3,732,615 million loss). This included a significant one- off expenditure of $2,608,371 relating to the litigation with Ikon. Operating losses were $3,042,031 in the current year, compared with $2,714,117 in FY2018, reflecting the significant investment we have made into our sales channels and building a global sales and marketing team. We expect this investment to return appropriate dividends in the coming months. Importantly, our consumer health business continues to show operational improvements. Our operating losses this financial were down to $691,527 for the segment from $1,226,334 in FY2018, a 44% reduction. become regular customers. Advangen Inc., (Japan) Sales in Japan were up 40% to $5,929,848 during the financial year (FY2018: $4,230,761). Operational profits reached $1,656,427, a 133% increase on the $711,927 profit achieved in FY2018. The single largest source of product revenue remained the omnichannel retail group, QVC Japan, during the reporting period with just under $3 million in sales. Chinese export of the heritage Lexilis® and Jo-Ju® brands has also increased during the financial year contributing to the record revenue. Working with two distributors, we have also been able to establish a highly profitable bulk business ADVANGEN LIMITED Our consumer health business, Advangen, operates in one of the fastest growing beauty segments; anti-aging hair care. Our FGF5 inhibitor hair products continue to lead the into China. market with novel technology, proof of clinical efficacy and clean and environmentally friendly formulations. Retail is a fast-changing environment, where traditional rules no longer apply. In the past, success of a new brand could be measured by how many retail outlets would stock them; today the fastest growing brands in beauty and health have no brick and mortar retail presence at all. We are prepared to move with the direct to consume wave; our products and business are ideally suited to having a close relationship with our customers. We fulfil a growing The évolis® Professional anti-aging haircare ranges have been launched in Japan at influencer and public relations events. Since the end of the reporting period the Japanese evolis® website and social platforms have also come to life. In Japan, material sales from evolis® are expected from e-commerce, similarly to other markets, while pharmacy and salon sales will remain modest as we continue to focus our investments into our direct to consumer channels. Advangen International Pty Ltd (Australia) desire for authentic, efficacious and clean products, that can Our Australian operations carry the responsibility for the local be most effectively communicated by direct contact with business but also for international business development. To our customers. We have accelerated our investment into e-commerce this year and launched a brand new, commercial platform that extent expenses incurred include a significant portion of global business development plus supporting the USA and Japanese operations. in February 2019. Since then, we have partnered with The most significant development for the financial year has specialists and implemented AfterPay, introduced auto- been the building of a sales, marketing and operational replenishment and a customer rewards program. team that can deliver global growth. In addition, we have Our ‘back end’ has gone through significant automation too, with linking our accounting and fulfilment directly to the e-commerce platform for seamless sales management. Importantly, we have been working with a talented digital marketing agency and most recently appointed a social media specialist to assist with growing our evolis® tribe. invested into our e-commerce capabilities, and brought on partnerships that are expected to make this channel a significant revenue earner. 6 7 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportCEO REPORT CONTINUED We have reviewed our Australian distribution during the built an inhouse team of sales, marketing and operational year and cancelled discounting campaigns that were experts. Our significant investment into our US testing, PR unprofitable. Whilst this resulted in reduced sales, our and branding activities has of course benefited the entire channels became more profitable. Due to these factors Group, not just the local business. reported sales were down in Australia by 18% to $993,748 (FY2018: $1,216,021) . Our losses have also gone down, even though our investment in e-commerce and our marketing team increased significantly, with losses of $1,495,001 (FY2018: $1,671,790). We expect e-commerce to become increasingly important to the Australian sales and we will continue focus on this channel. We have been working with Fukangren, our Chinese distribution partner for evolis®, on our regulatory approvals during the reporting period. We filed the first round of applications and have received periodical feedback and further requests to add to the submission. The process has been slow and onerous as expected when we signed the distribution agreement with Fukangren. However, once successful, our evolis® pharmacy products will be one of two approved imported topical hair loss tonics on the market representing significant marketing advantage. In addition to China, we have been pursuing other markets Now that we have cemented our position in the US as a premium anti-aging hair care brand our major opportunities will come from e-commerce. However, accessing hair salons via a network of premium distributors and scaling into other retailer partnerships we have secured since the end of the financial year will remain important. LYRAMID LIMITED including Asia and Europe. We signed a distribution It seems that all our activities, drug development and agreement for Korea with marketing company, K2B, in consumer health, converge around dealing with the side August 2019. It is expected that after the relatively short effects of aging. As we take a step back and look at where regulatory period we will start selling products into Korea our midkine antibodies have been most effective, they in early 2020. There is a significant demand in Korea for seem to stand out as promising agents to halt the chronic clinically validated and clean products, such as evolis®, inflammatory processes that result in aging and age-related especially from the younger, look and fashion-conscious diseases such as cancer, inflammatory and bone disorders. Korean audience. Advangen LLC., (USA) Sales have doubled during FY2019 in the US and we have closed the year with $415,371 revenue (FY2018: $205,604). Our losses were up at $852,954 (FY2018: $266,468), as we have increased investment into our retail channels as well as With all the synergies between Lyramid and Advangen, they are significant differences which make operations more complex than feasible for a relatively small organization. For that reason, our goal remains to create an effective structure for the separation of our biotech and consumer health assets. Our public relations activities resulted in brand mentions in publications such as Forbes, Allure, New Beauty, msn.com and Readers Digest representing approximately 120 million potential impressions through their readers. With the recent appointment of Bart Wuurman as CEO of Our midkine intellectual portfolio has also increased during Our partnership with premium retailer Neiman Marcus continued to strengthen during the financial year and as of the end of August 2019, we are now ranged in 24 Nieman Marcus stores with the full collection of evolis® PROMOTE, Lyramid our biotech portfolio is actively being prepared the year with newly granted US and European patent titled for partnering. This is being helped by data generated in “Antibody recognizing N-domain of midkine”. This brings inflammatory kidney disease (FSGS) and myocarditis during our total patent portfolio to 58 granted patents, re-enforcing the year. our leadership in midkine intellectual property. REVERSE and PREVENT. The value we are likely to derive in Lyramid from a With the sharp focus on partnering our midkine assets, and partnership or licensing deal is largely determined by the an improved operational performance in our consumer quality of data we have and will generate with our midkine business, we are well prepared to execute on our objectives antibody portfolio in relevant therapeutic indications. of operational profitability for our consumer business in Therefore, it was exciting to complete our collaboration with FY2020 and separating Lyramid and Advangen Limited by the Westmead Research Institute and demonstrate efficacy the end of 2020. of our lead antibody, CAB102, in FSGS (Focal Segmental Glomerulosclerosis) in September 2018. I would like to thank our dedicated team, who delivered record revenue for our consumer business, and progressed The study has shown that CAB102 alleviated damage to our midkine portfolio. I am grateful for the support and the kidney and preserved kidney function at least as well contribution by our board members, especially our as its precursor murine antibody. Whilst our application Chairman, Dr David King. Finally, I would like to thank our for orphan designation was unsuccessful during the year, shareholders for their support. this was due to the reclassification of FSGS to non-orphan indication by the FDA and does not affect the value of the data generated. Other exciting developments have been published in inflammatory heart disease by our collaborators at the Ludwig Maximillian University. They have been able to show for the first time that midkine promotes cardiac muscle inflammation associated with the sometimes- fatal disease, myocarditis. Importantly, they have been able to demonstrate the mechanism of action for midkine in these conditions. Maria Halasz CEO and Managing Director 8 9 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportDIRECTORS’ REPORT Mr Bruce Gordon Director (Non-executive) Qualifications BA, Macquarie University, Fellow of The Institute of Chartered Accountants Australia and New Zealand, Fellow of The Australian Institute of Company Directors Experience 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. The Directors present their report, together with the financial statements of the Group, being Cellmid Limited (“the Company”) Interest in shares and options Shares: 110,000 indirectly held and the entities it controlled, for the financial year ended 30 June 2019. Special responsibilities Chairman of the Audit and Risk Committee and member of the Nomination and Remuneration 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 Committee Other directorships in listed None entities held in the previous three years to the date of this report are: Dr David King Qualifications Chairman (Non-executive) PhD in Seismology, Australian National University, Fellow of The Australian Institute of Company Directors, Fellow of the Australian Institute of Geoscientists Dr Fintan Walton Director (Non-executive) Qualifications PhD, Genetics, Trinity College Dublin Experience Experience as chairman, executive and non-executive director in high growth companies, across a variety of sectors, with focus on governance issues in publicly listed companies. Interest in shares and options Shares: 200,000 directly held Shares: 1,200,000 indirectly held Special responsibilities Member of the Audit and Risk Committee and member of the Nomination and Remuneration Committee Other directorships in Current directorships - Litigation Capital Management Ltd, Galilee Energy Limited, listed entities held in the African Petroleum Corporation, Tap Oil Ltd and Renergen Ltd. previous three years Experience 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: 12,500 directly held Shares: 52,500 indirectly held Special responsibilities Member of the Nomination and Remuneration Committee Other directorships in listed None entities held in the previous three years Ms Maria Halasz Managing Director (Chief Executive Officer) Dr Martin Cross Director (Non-executive) Qualifications MBA, BSc in Microbiology, University of Western Australia, Graduate of the Australian Institute Qualifications PhD. Microbiology, Aberdeen University Scotland. Fellow of the Australia Institute of Company of Company Directors Directors. Experience 26 years’ experience in life sciences working in executive positions in private and public Experience Over 30 years’ experience working in the pharmaceutical and biotech industries primarily companies, then managing investment funds and later holding senior positions in corporate finance specialising in life sciences. Maria has been CEO and Managing Director of Cellmid since April 2007. Interest in shares and options Shares: 420,000 directly held Shares: 1,599,938 indirectly held Special responsibilities Managing Director and Chief Executive Officer Other directorships in listed None entities held in the previous three years in all aspects of marketing, selling and business management. This included global roles at international Headquarters of AstraZeneca and Novartis. Former Country President for Novartis Australia/NZ, Managing Director for Alphapharm (Mylan) Australia/NZ and Chairman of the Generics Industry Association and Medicines Australia. Interest in shares and options Shares: 175,000 indirectly held Special responsibilities Member of the Audit and Risk Committee Other directorships in listed Non-Executive Director Oncosil Ltd entities held in the previous three years Other Non-Executive Director NHMRC National Institute of Dementia Research, Advisor Pursuit Sports Pty Ltd, Advisor University of Technology Sydney (Pharmacy Commercial Advisory Board) 10 11 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportDIRECTORS’ REPORT CONTINUED Mr Dennis Eck Director (Non-executive) Qualifications BSc, The University of Montana Lyramid Limited (Lyramid) The Group holds the largest intellectual property portfolio globally around midkine, a protein associated with various disease states, including chronic inflammatory diseases and cancer. During FY2019 Lyramid continued with 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. During FY2019, the Group continued to investigate the most efficient method for targeting midkine and completed further preclinical validation studies using its humanised antibodies in Focal Segmental Glomerulosclerosis (FSGS). In addition, two new humanised midkine antibodies have been developed during the period. The Group received additional patent coverage for its N terminal binding midkine antibodies in Europe and collaborated with research groups in various clinical indications to increase underlying value of its midkine asset portfolio during FY2019. Significant Change since the end of FY2019 The Group signed an exclusive distribution agreement with Korean marketing company K2B for the sale of its evolis® hair loss products in August 2019. K2B is expected to market the products, following regulatory approval, through Korean television Experience 40 years senior management experience in the retail sector, providing significant strategic and shopping channels and e-commerce. operational expertise. Mr Eck, a professional investor, has extensive retail experience, from fashion to groceries, including cosmetics and hair salons. As a senior strategist, Mr Eck has helped reshape the operations of several retail businesses delivering outstanding shareholder returns. Interest in shares and options Shares: 5,461,579 directly held Special responsibilities N/A Other directorships in listed ULTA Inc., resigned on 16 June 2019 entities held in the previous three years Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Mr Lee Tamplin Company Secretary Qualifications BA (Hons) Financial Services, Bournemouth University United Kingdom, Diploma of Financial Planning, Graduate of the Australian Institute of Company Directors and Member of the Governance Institute of Australia. Experience 20 years’ experience in financial services in both Australia and UK. Company Secretary for several ASX listed, NSX listed and proprietary companies. Principal activities and significant changes in nature of activities The Group has operated primarily through its subsidiary companies, Advangen Limited (consumer health product development and sales) and Lyramid Limited (midkine and midkine antibody research and development). In February 2019 the Group released its Strategy Update to the market outlining two key objectives to increase shareholder value; the separation of Advangen and Lyramid by the end of 2020 and achieving operational profitability for Advangen in FY2020. The principal activities of the Group during the financial year were: Advangen Limited (Advangen): During FY2019 Advangen continued with the development and sale of over-the-counter (OTC) and cosmetic products for hair loss and anti-aging hair care using proprietary FGF5 inhibitor technology. The Group acquired Advangen Inc. in 2013, a Japanese company with a proprietary hair loss technology inhibiting FGF5. Since the acquisition, the Group has improved the technology, rebranded the original products, developed a range of new products under the evolis® brand and built international distribution. During FY2019, Advangen achieved 30% revenue growth increasing sales in all consumer health divisions. Advangen continued with novel product development during the reporting period with new 2. OPERATING RESULTS AND REVIEW OF OPERATIONS FOR THE YEAR Operating results The operations for the Group continued to improve during the 2019 financial year. Revenue and Other Income for the Group increased 22% to $8,347,184 (2018: $6,834,924) during the reporting period, with a 30% increase in Consumer Health revenue to $7,338,967 (2018: $5,652,386). Operating loss was up 12% to $3,042,031 (2018: $2,714,117 loss). An R&D tax credit of $807,973 was received during the reporting period (2018: $1,056,963 including government grants). Review of operations The Group released its Strategy Update to investors in February 2019 with two key objectives to increase shareholder value; the separation of Advangen and Lyramid by the end of 2020 and operational profitability for Advangen in FY2020. The Group achieved several key milestones during FY2019 and made the following progress to reach these important strategic objectives in both divisions. • The Group boosted its senior management team with several new appointments in key sales, marketing and operational functions laying the foundations for a sustainable global business. • A significant increase in marketing spend resulted in building distribution channels for sustainable revenue growth for the Group’s FGF5 inhibitor hair growth products globally. • Scaling into existing sales channels, such as QVC in Japan and Neiman Marcus in the USA, delivered increased sales for the Group. • New opportunities, such as e-commerce in Australia, export sales to China and a distribution partnership with PSL in New Zealand, assisted in achieving record revenue for the Group. • Therapeutic efficacy for the Group’s midkine antibodies in FSGS (Focal Segmental Glomerulosclerosis) added significant value to the Lyramid asset portfolio. • The successful patent application for the N-terminal midkine-antibodies in Europe increased the intellectual property holding of the Group around midkine, adding to the potential application in the treatment of multiple disease indications. • Internationally recognised industry leader, Bart Wuurman, was appointed as CEO of Lyramid in June 2019 to execute on the midkine development plans and the separation of the consumer and midkine businesses. i. Advangen Limited Revenue from the FGF5 inhibitor hair growth and anti-aging hair care products grew 30% during the reporting period to $7,338,967 (FY2018: $5,652,386). The growth was largely the result of an increase of more than 100% in the US sales to $415,371 (FY2018: $205,604) and a 40% increase in Japanese sales to $5,929,848 (FY2018: $4,230,761). Australian sales were down 18% to $993,748 (FY2018: $1,216,021). Importantly, a vastly improved global e-commerce platform was launched in FY2019, laying the foundations for sustainable revenue growth in the Group’s direct to consumer business in Australia, the US and Japan. Repeat customer database increased 400% between the launch of the new www.evolisproducts.com website in February and June 2019 in Australia, the formulations containing additional ingredients for improved efficacy and implemented significant operational efficiencies. first test site for the new platform. 12 13 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportDIRECTORS’ REPORT CONTINUED Growth in Japan from television shopping channel QVC and export to China Sales on television shopping channel, QVC, continued to grow during FY2019 with two sales days delivering over $1 million revenue each for the Group (30 November 2018 and 16 June 2019). The Jo-Ju® branded FGF5 inhibitor products for women remain the largest single brand for the Group. A significant uplift in sales was also achieved from the partnership with Chinese distributor, Huana Likang, responsible for selling the Lexilis® branded, and locally packaged bulk supplied products for men. Building on USA premium retail partnership with Neiman Marcus in preparation to scaling into salons The Group’s retail partnership with Neiman Marcus continued to expand during the reporting period and accounted for the most significant component of revenue growth in the US. Going from e-commerce only to 10 Neiman Marcus stores during FY2019 required a significant investment in sales and operational activities. This was in addition to the 21 soft surroundings stores. The Group’s business model in premium retail is to launch each store with an experiential marketing event conducted in collaboration with sales staff from the retail partner. The events have been supported by social and digital advertising conducted in collaboration with Neiman Marcus. Bloomingdales rolled out its Wellchemist department in 9 of their 65 retail stores up to 30 June 2019, where evolis® is featured both on shelves and on counters. Wellchemist caters for the discerning and health conscious Bloomingdales customer. The Group’s ongoing US public relations campaign delivered news on the evolis® technology and brand to approximately 120 million potential readers with over 11 billion potential impressions during the reporting period. The Group completed a critical pre-clinical program in FSGS (Focal Segmental Glomerulosclerosis) and delivered promising efficacy results for CAB102, one of the humanised midkine antibody drug candidates, in FY2019. CAB102 reduced the area of kidney injury 3-fold compared to control in an Adriamycin induced model of the disease. The work was partially funded by an Australian Government DIIS Innovation connection grant. The Group’s midkine antibody assets have been independently validated by the peer reviewed article “Midkine drives cardiac inflammation by promoting neutrophil trafficking and NETosis in myocarditis” published in the Journal of Experimental Medicine in February 2019. The published data, generated with the Group’s midkine antibodies, showed that these antibodies limited not only neutrophil recruitment but also NET (neutrophil extracellular trap) formation, reinforcing their potential for the treatment of inflammatory heart failure. The Group’s intellectual property portfolio currently stands at 58 granted patents, 14 patent applications under examination and one in PCT (Patent Cooperation Treaty) filing stage. Importantly, the Group was granted the European patent “Antibody recognising N-domain of midkine”, following an extensive examination period. This is an important patent to the Group as it covers the most effective midkine antibodies with strong potential for clinical development. 3. FINANCIAL REVIEW Financial position The net assets of the Group at 30 June 2019 were $5,857,277 ($1,855,172 at 30 June 2018) while current assets increased to $7,233,627 ($4,159,083 at 30 June 2018). With the cash balance of $3,081,924 at 30 June 2019 the Directors believe that the Company will be able to deliver on the its Strategic Plan as outlined in February 2019. 4. OTHER ITEMS Ikon legal action On 22 July 2016, Ikon Communications Pty Ltd (IKON) had filed a claim for an amount of $939,055 plus interest pursuant to the services agreement entered into between Group Company Advangen International Pty Ltd (Advangen) and IKON on 15 June 2015, being a claim for invoices which Advangen has not paid to IKON. Advangen defended its position that it is not liable for those unpaid invoices because IKON has breached the services agreement, failed to provide certain contractually required services at all or adequately and engaged in misleading or deceptive conduct that has caused Advangen loss and damage. Advangen filed a cross claim for payments made for services not provided or not properly provided by IKON, plus Chinese import permit application progressing for evolis® in the face of changing regulatory environment other loss it says it suffered by reason of IKON’s conduct and submitted evidence, including expert evidence, to that effect Fukangren, the Group’s exclusive distributor in China for the evolis® branded tonics and shampoos, has been pursuing regulatory submissions for the products since May 2018. Application for the tonics were submitted in early 2019, with shampoo applications yet to be filed due to the change in responsible regulatory authority in the interim. Subject to receiving the approvals, Fukangren will be required to order minimum product quantities to maintain market exclusivity for the products in China. during the reporting period. The proceedings were heard in the New South Wales Supreme Court between 10 September 2018 and 23 September 2018. On 2 November 2018 the court handed down its decision that IKON was entitled to its claim plus interest and the cross claim by Advangen was dismissed. In the FY2018 financial accounts an amount was allocated as a contingent liability regarding this matter, and the total costs of $2,608,371, including IKON’s claim with interest and costs of both parties have been included in European import permits for evolis® and growing e-commerce sales dominated Australian activities the Consolidated Profit and Loss Statements for FY2019 under the heading ‘Legal fees and claim’. The Group continued to fund international business development activities from Advangen in Australia during FY2019 and, Significant changes in state of affairs as a precursor to sales in Europe, it secured import permits for all evolis® branded products. One of the key operational objectives, building a substantial consumer data base, received a boost during the period with the launch of an e-commerce platform that is more user friendly and capable of connecting and communicating with customers more effectively. An important measure in achieving operational profitability has been ensuring that unprofitable third-party discounting campaigns were not pursued during the reporting period. Although revenue was down in some of the Australian pharmacy networks as a result, the overall profitability of the channel has improved. ii. Lyramid Limited Consolidating midkine related research and development under Lyramid In preparation to separate the strictly research and development based midkine portfolio from a largely consumer product development and sales driven Advangen, all midkine related patents and other and assets were consolidated in a single subsidiary, Lyramid Limited, in FY2019. The appointment of Lyramid CEO, Bart Wuurman, in June 2019 was an important milestone in this process, not only as he is eminently qualified to deliver quality partnerships, but he has also brought solid focus to build a clinical development path. There have been no significant changes in the state of affairs of the entities in the Group during the 2019 financial year. Dividends paid or recommended The Company has not paid or declared any dividends during the financial year (2018: Nil). Events since the end of the financial year Other than that noted on page 13 there have been no significant events since the closing of the 2019 financial year. Likely developments and expected results of operations The Group is focused on building sales of its evolis® branded FGF5 inhibitor hair products by maximising market penetration with a growing product range. Concurrently, the Group is focused on the research and development of its midkine asset portfolio with the view to separate the two businesses. 14 15 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportDIRECTORS’ REPORT CONTINUED Environmental regulations Meetings of Directors The Group’s operations are not regulated by any significant environmental law of the Commonwealth or of a state or territory Eight meetings of the Directors were held during the financial year. Attendances by each Director during the year were as follows: 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. Directors’ Meetings Audit and Risk Committee Nomination and Remuneration Committee Number eligible to attend Number attended Number eligible to attend Number attended Number eligible to attend Number attended Dr David King Ms Maria Halasz Mr Bruce Gordon Dr Fintan Walton Dr Martin Cross Mr Dennis Eck 8 8 8 8 8 8 7 8 7 8 8 7 5 - 5 - 5 - 5 * 5 4 * 4 5 - 1 - 1 1 - - 1 - 1 1 - - During or since the end of the financial year, the Group has given an indemnity or entered into an agreement to indemnify, or * by invitation 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; Shares under option • subject to the Corporations Act 2001, an indemnity in respect of liability to persons other than the Company and its related Unissued ordinary shares of the Company under option at the date of this report are as follows: 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 the auditor during the year. Expiry date Exercise Price Number under option Unlisted options Unlisted options Unlisted options Unlisted options Unlisted options 31 October 2019 1 July 2020 28 September 2021 3 October 2021 30 July 2024 $0.60 $0.60 $0.80 $0.80 $0.23 100,000 50,000 1,000,000 200,000 4,250,000 5,600,000 1,500,000 options lapsed during the financial year ended 30 June 2019 (1,440,000 in 2018) and no options have lapsed since the end of the financial year to the date of this report. 16 17 Cellmid 2019 Annual ReportCellmid 2019 Annual Report DIRECTORS’ REPORT CONTINUED The factors that are considered to affect total shareholders return (‘TSR’) are summarised below: $ 2019 0.17 - (7.77) $ 2018 0.47 - (6.74) $ 2017 0.50 - (8.79) $ 2016 0.66 - (7.60) $ 2015 0.60 - (8.60) Share price at financial year end Total dividends declared Basic earnings per share Remuneration structure 5. REMUNERATION REPORT (AUDITED) In accordance with best practice corporate governance the structure of non-executive director and senior executive remuneration 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. is separate and distinct. Non-executive director remuneration The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001. Objective The key management personnel of the Group for the year consisted of the following Directors of Cellmid Limited: 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. Name of Director Position Date Appointed Date Ceased Structure Dr David King Mr Bruce Gordon Dr Fintan Walton Dr Martin Cross Mr Dennis Eck Ms Maria Halasz Mr Koichiro Koike Mr Bart Wuurman Non-executive Chairman 18 January 2008 Non-executive Director Non-executive Director Non-executive Director Non-executive Director CEO and Managing Director Managing Director – Advangen Inc. CEO - Lyramid 1 July 2015 21 July 2015 16 October 2017 26 March 2018 14 April 2007 1 May 2014 1 June 2019 Current Current Current Current 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 • if and when appropriate, establish performance hurdles in relation to variable executive remuneration. 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. On 8 November 2018, at the annual general meeting of shareholders, the aggregate remuneration was changed to $400,000, to ensure that the Group can compensate all of its non-executive directors. In FY2019, the Group paid non-executive directors a total of $275,325 ($210,202 in 2018). The amount of aggregate remuneration sought to be approved by shareholders and the fixed fees paid to directors are reviewed annually. There has been no increase in individual director remuneration during the period. 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. The Board assesses the appropriateness of the nature and amount of remuneration of directors and senior managers of the Group Structure 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 cash bonus or incentive payments have been made during the reporting period. The table below details the last five years earnings and total shareholders return. $ 2019 $ 2018 $ 2017 $ 2016 Revenue and Other Income 8,347,184 6,834,924 5,560,121 4,611,108 Operating Profit / (Loss) (3,042,031) (2,714,117) (4,022,577) (3,130,344) Loss after income tax (5,909,557) (3,732,615) (4,482,273) (3,498,916) $ 2015 2,967,562 (3,174,838) (3,337,348) 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 bonus or short term and 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. 18 19 Cellmid 2019 Annual ReportCellmid 2019 Annual Report DIRECTORS’ REPORT CONTINUED Remuneration details for the year ended 30 June 2019 Details of the remuneration of the directors and key management personnel (“KMP”) 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 employment Share-based payments benefits Post- 2018 Cash salary Employee Employee fees entitlements entitlements Superannuation Shares Total $ $ $ $ $ $ Directors Non-executive directors David King Bruce Gordon Fintan Walton Martin Cross Dennis Eck^ 65,000 50,000 50,000 35,641 - Total non-executive directors 200,641 Executive directors and KMP - - - - - - - - - - - - 6,175 - - 3,386 - 9,561 - - - - - 71,175 50,000 50,000 39,027 - - 210,202 Short-term benefits Long-term benefits employment Share-based payments benefits Total executive directors Post- Maria Halasz* 428,538 18,457 4,696 22,800 - 474,491 2019 Cash salary Employee Employee fees entitlements entitlements Superannuation Shares Total and KMP 428,538 18,457 4,696 22,800 - 474,491 Directors Non-executive directors David King Bruce Gordon Fintan Walton Martin Cross Dennis Eck $ 65,000 50,000 50,000 50,000 - Total non-executive directors 215,000 Executive directors and KMP $ - - - - - - $ - - - - - - $ $ $ ^ Dennis Eck is remunerated on an equity basis, which was approved at the 2018 Annual General Meeting of the Group. 6,175 - - 4,750 - - - - 71,175 50,000 50,000 54,750 - 49,400 49,400 10,925 49,400 275,325 Directors’ and Key Management Personnel (KMP) shareholdings The number of shares held in the Group during the financial year by each Director and (KMP) of Cellmid Limited, including their related parties, are set out below: Balance at beginning of year Received as part of remuneration Other changes Pre Consolidation Consolidation* Other changes Post Consolidation Balance at end of year Maria Halasz* Koichiro Koike** Bart Wuurman*** 447,391 216,720 24,000 21,678 4,583 22,800 185,000 681,452 - - - - - - 65,814 282,534 - 24,000 Total executive directors and KMP 688,111 21,678 4,583 22,800 250,814 987,986 * Amount includes consulting fees paid to Direct Capital Group Pty Ltd. Ms Halasz is also the director of Direct Capital Group Pty Ltd (“DCG”) who provides consulting services to the Group. The contract between the Group and DCG is based on normal commercial terms. **Koichiro Koike was an existing employee of the Group in 2018 and was not considered as a KMP. ***Bart Wuurman was appointed as CEO of Lyramid Limited, a wholly owned subsidiary of Cellmid Limited, on 1 June 2019. 2019 David King Maria Halasz Bruce Gordon Fintan Walton Martin Cross Dennis Eck Koichiro Koike Bart Wuurman 2018 David King Maria Halasz Bruce Gordon Fintan Walton Martin Cross Dennis Eck 1,400,000 1,573,651 75,000 65,000 45,000 2,700,000 12,500 - 24,000,000 25,073,025 1,500,000 800,000 - - Koichiro Koike 12,500 - 500,000 - - - 130,000 144,646 - - - - - - - - - - - - - - - - - - - - - - - - - 1,400,000 (53,713) 2,019,938 35,000 - 130,000 110,000 65,000 175,000 2,631,579 5,461,579 - - 157,146 - 4,000,000 2,250,000 - 500,000 900,000 - - (26,600,000) (25,956,874) (1,425,000) (1,235,000) (855,000) - 1,400,000 207,500 1,573,651 - - - 75,000 65,000 45,000 - - 2,700,000 2,700,000 - 12,500 *On 23 November 2017, the Group completed a twenty to one share consolidation. 20 21 Cellmid 2019 Annual ReportCellmid 2019 Annual Report DIRECTORS’ REPORT CONTINUED Directors’ and 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. Service agreements The remuneration of the Chief Executive Officer, Maria Halasz, reflects the activities of the two business units, Advangen Limited and Lyramid Limited, within the Group. On 1 July 2016 a service agreement was signed between the Group and Maria Halasz. Pursuant to this service agreement Maria Halasz’s salary component incurred by Cellmid Limited was reduced, and two consulting agreements, one with Lyramid Limited and one with Advangen Limited, were signed by Direct Capital Group Pty Ltd, a company associated with Ms Halasz to better reflect her operational responsibilities. The above arrangement is covered under one service agreement and the conditions are as follows: • The remuneration for Ms Halasz is fixed, however, at the discretion of the Board and subject to approval by shareholders, she may receive performance-based incentives in the future. • The duration of the service agreement is 3 years. In the event that the parties do not sign a new agreement prior to the expiry of the term, the agreement is automatically extended for 12 months. Received as part of 2019 remuneration Consolidation Balance at end of year Vested and exercisable at end of year • No leave and superannuation entitlement accrue in relation to the consulting agreements with Direct Capital Group Pty Ltd. • Ms Halasz may resign from her position and thus terminate the service agreement, including the consulting agreements with Direct Capital Group Pty Ltd, by giving six months’ written notice. On resignation any unvested options will be forfeited. Balance at beginning of year Acquired 2019 David King Maria Halasz Bruce Gordon Fintan Walton Martin Cross Dennis Eck 200,000 - 100,000 100,000 - - Koichiro Koike 50,000 Bart Wuurman - - - - - - - - - Balance at beginning of year Acquired Disposed/ Expired/ Exercised/ (200,000) - (100,000) (100,000) - - (50,000) - Disposed/ Expired/ Exercised/ 2018 David King 4,000,000 Maria Halasz - Bruce Gordon 2,000,000 Fintan Walton 2,000,000 Martin Cross Dennis Eck - - Koichiro Koike 50,000 - - - - - - - - - - - - - - - - - - - - - - Received as part of 2017 - - - - - - - - - - - - - - - - - - - - - - - - Balance at end of year Vested and exercisable at end of year remuneration Consolidation - - - - - - - (3,800,000) 200,000 200,000 - (1,900,000) (1,900,000) - 100,000 100,000 - 100,000 100,000 - - - - - - - 50,000 50,000 Relationship between remuneration policy and company performance The proportion of remuneration linked to performance and the proportion that is fixed is as follows: Directors David King Maria Halasz Bruce Gordon Fintan Walton Martin Cross Dennis Eck^ Koichiro Koike Bart Wuurman 22 Fixed remuneration At risk STI At risk LTI 2019 % 100.00 72.90 100.00 100.00 100.00 100.00 76.80 100.00 2018 % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - 2019 % - 27.10 - - - - 23.20 - 2018 % 2019 % 2018 % - - - - - - - - - - - - - - - - - - - - - - - - ^Dennis Eck is remunerated on an equity basis. • The Group may terminate the employment agreement, including the consulting agreements with Direct Capital Group Pty Ltd, 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. Equity-based compensation No equity-based compensation in the form of options over ordinary shares were issued during the year ended 30 June 2019. On 12 September 2018, equity shares were granted to some executives of the Group under the Employee Incentive Plan and as approved by shareholders at the annual general meeting on 12 November 2018. Ordinary shares were issued under the arrangement with the following conditions attached: Name Grant date Shares issued Vesting date Service and performance criteria Maria Halasz 12/11/2018 500,000 12/11/2018 A cash bonus of $185,000 was awarded to Ms Halasz by non-conflicting members of the Board for achieving profitability of at least one subsidiary of the Company in FY2018. Ms Halasz accepted her bonus in shares in lieu of cash. The fair value at the date of grant was $185,000. The vesting condition of achieving profitability of at least one subsidiary has been met. Dennis Eck 12/11/2018 130,000 12/11/2018 Vesting condition was previous service as a director without compensation. The accumulated director’s fee was to be taken in shares in lieu of cash. The fair value of the shares at the date of grant was $49,400, equivalent to the accumulated unpaid director’s fees. The condition of previous unpaid service as a director has been met. Koichiro Koike 3/10/2018 144,646 12/11/2018 Vesting condition was for operating revenue to reach $5 million in FY2018. The fair value at the date of grant was $65,814. The condition of achieving operating revenue over $5 million in FY2018 has been met. 23 Cellmid 2019 Annual ReportCellmid 2019 Annual Report DIRECTORS’ REPORT CONTINUED CORPORATE GOVERNANCE 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 2019 has been received and can be found on page 64 of the financial report. This director’s report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors. 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 2019 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. Dr David King Director Dated this 28th day of August 2019 24 25 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportANNUAL FINANCIAL REPORT CONTENTS 28 Consolidated Statement of Profit or Loss and Other Comprehensive Income 31 29 30 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity 32 63 Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration 64 65 68 Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 Independent Auditor’s Report Additional Information for Listed Public Companies 70 Corporate Directory 26 27 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportCONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2019 Revenue from contracts with customers Other income Total Revenue Cost of goods sold Gross Profit Selling and distribution expenses Research and development expenses Administrative expenses Other operating expenses Operating Profit / (Loss) Finance costs Legal fees Loss before income tax expense Income tax expense Loss for the year after income tax Note 3 4 5 5 5 5 6 Consolidated 2019 $ 7,389,473 957,711 8,347,184 2018 $ 5,712,182 1,122,742 6,834,924 (2,137,384) (2,169,844) 6,209,800 4,600,028 (1,714,787) (848,473) (5,378,421) (1,310,150) (1,418,361) (619,024) (4,391,963) (884,797) (3,042,031) (2,714,117) (235,043) (2,608,371) (5,885,445) (24,112) (473,274) (542,794) (3,730,185) (2,430) (5,909,557) (3,732,615) Other comprehensive income, net of income tax Items that will be reclassified to profit or loss when specific conditions are met AS AT 30 JUNE 2019 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment Intangibles TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Loans and borrowings Provisions Exchange differences on translating foreign controlled entities 115,798 106,223 TOTAL CURRENT LIABILITIES Total comprehensive income for the year (5,793,759) (3,626,392) Loss for the year attributable to: Owners of Cellmid Limited Total comprehensive income for the year attributable to: Owners of Cellmid Limited (5,909,557) (3,732,615) (5,793,759) (3,626,392) Earnings per share for loss attributable to the owners of Cellmid Limited Basic earnings per share (cents) Diluted earnings per share (cents) 9 9 (7.77) (7.77) (6.74) (6.74) NON-CURRENT LIABILITIES Loans and borrowings Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Consolidated 2019 Note $ 2018 $ 1,607,783 1,031,346 1,180,731 339,223 3,081,924 2,286,671 1,618,408 246,624 7,233,627 4,159,083 800,243 1,758,264 2,558,507 9,792,134 2,426,909 266,804 214,549 2,908,262 1,019,855 6,740 1,026,595 3,934,857 5,857,277 770,990 1,818,504 2,589,494 6,748,577 1,539,742 2,007,427 175,345 3,722,514 1,166,447 4,444 1,170,891 4,893,405 1,855,172 47,765,837 632,353 (42,540,913) 38,014,078 2,595,360 (38,754,266) 5,857,277 1,855,172 10 11 12 13 14 15 16 17 18 17 18 19 20 The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. The above Statement of Financial Position should be read in conjunction with the accompanying notes. 28 29 Cellmid 2019 Annual ReportCellmid 2019 Annual Report CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 FOR THE YEAR ENDED 30 JUNE 2019 Share Based Foreign Currency Consolidated 2019 $ 2018 $ Note Issued Capital $ Note General Payments Translation Accumulated Losses Reserve $ $ Reserve $ Reserve $ Total Equity $ Consolidated Balance at 1 July 2018 38,014,078 18,258 2,164,497 412,605 (38,754,266) 1,855,172 Loss for the year Other comprehensive income / (loss) Total comprehensive income / (loss) for the year Transactions with equity holders Shares issued – - - - employee share scheme 21 318,414 Shares issued – net of transaction costs 19 9,548,140 Share buy back (114,795) - - - - - - - - - (5,909,557) (5,909,557) 115,798 - 115,798 - 115,798 (5,909,557) (5,793,759) - 92,360 - - - - - - - - 318,414 9,640,500 (114,795) 2,122,910 (48,255) Transfer to accumulated losses - (18,258) (2,152,907) Balance at 30 June 2019 47,765,837 - 103,950 528,403 (42,540,913) 5,857,277 Balance at 1 July 2017 36,715,030 18,258 2,053,007 306,382 (35,021,651) 4,071,026 CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers Payments to suppliers and employees Interest received Grant income received Net cash used in operating activities 21 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of non-current assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issue of shares Share buy back Share issue costs, net of tax Proceeds from loans and borrowings Repayment of loans and borrowings Finance costs Net cash provided by financing activities 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 21 Shares issued - net of transaction - - - - costs (Cash) 19 1,299,048 - - - 111,490 - - - 111,490 - 1,299,048 - - - - - - (3,732,615) (3,732,615) 106,223 - 106,223 Net increase / (decrease) in cash and cash equivalents held Cash and cash equivalents at beginning of financial year Effect of exchange rate changes - 106,223 (3,732,615) (3,626,392) Cash and cash equivalents at end of financial year 10 Balance at 30 June 2018 38,014,078 18,258 2,164,497 412,605 (38,754,266) 1,855,172 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. The above Statement of Cashflows should be read in conjunction with the accompanying notes. 30 31 6,399,171 5,038,814 (12,954,633) (10,293,029) 76,116 807,973 (5,671,373) 33,599 1,056,963 (4,163,653) (65,677) (65,677) (107,167) (107,167) 10,111,000 1,326,000 (114,795) (470,499) - (1,987,446) (263,289) 7,274,971 1,537,921 1,607,783 (63,780) 3,081,924 - (26,952) 903,477 - (357,981) 1,844,544 (2,426,276) 3,994,641 39,418 1,607,783 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS 1. Summary Of Significant Accounting Policies 2. Segment Information 3. Revenue From Contracts With Customers 4. Other Income 5. Material Profit Or Loss Items 6. Income Tax 7. Interests Of Key Management Personnel (“KMP”) 8. Auditor’s Remuneration 9. Earnings Per Share 10. Cash And Cash Equivalents 11.Trade And Other Receivables 12. Inventories 13. Other Assets 14. Plant And Equipment 15. Intangible Assets 16. Trade And Other Payables 17. Loans And Borrowings 18. Provisions 19. Issued Capital 20. Reserves 21. Cash Flow Information 22. Events After The Reporting Period 23. Related Party Transactions 24. Financial Risk Management 25. Interests In Subsidiaries 26. Commitments 27. Contingent Liabilities And Contingent Assets 28. Share-Based Payments 29. Parent Entity Information 32 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of compliance Cellmid Limited is a public company, listed on the Australian Securities Exchange, limited by shares and incorporated and domiciled in Australia. 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 28th August 2019. Basis of Preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. Cellmid Limited is a for-profit entity for the purpose of preparing the financial statements. These financial statements also comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Historical Cost Convention The financial statements have been prepared on a historical cost basis, except for certain non-current assets and financial instruments that are measured at re-valued amounts or fair values. All amounts are presented in Australian dollars, unless otherwise noted. New standards and interpretations not yet adopted by the Group 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 2019. 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 16 Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 ‘Leases’ and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a ‘right- of-use’ asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a ‘right-of-use’ asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The Group will adopt this standard from 1 July 2019. As at reporting date, the Group has assessed the impact of the standard and the expected impacts are as follows: • Increase in assets and liabilities amounting to approximately $907,900 and $907,900 respectively. • Increase in the loss position on the consolidated statement of comprehensive income in the amount of approximately $4,000. The impact to the profit and loss in the years 2019 to 2021 is expected to increase the expense due to ‘front loading’ of interest and depreciation expense by approximately $39,000 and in the years 2022 to 2023 the impact to the profit and loss is expected to be a reduction in expense of approximately $38,000. • It is not expected that there will be any net impact on the consolidated statement of cash flows. 33 33 44 46 46 47 47 48 49 49 49 49 50 50 50 51 52 52 52 53 54 55 55 56 56 59 60 61 61 61 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportNOTES TO THE FINANCIAL STATEMENTS CONTINUED New and amended standards adopted by the Group 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 the Black-Scholes method 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 do not have any impact on the carrying amounts of assets and liabilities within the subsequent annual reporting period but may impact expenses and equity. • Estimated impairment of intangibles The group tests whether intangible assets have suffered any impairment at each reporting date. The recoverable amount of intangible assets is assessed at its value in use. This calculation requires the use of assumptions. 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 29. The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Going concern Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. For the year ended 30 June 2019, the Group incurred a loss after income tax of $5,909,557 (2018: $3,732,615), experienced net cash outflows from operating activities of $5,671,373 (2018: $4,163,653) and at 30 June 2019 has cash and cash The following Accounting Standards and Interpretations adopted during the year are most relevant to the Group: equivalents of $3,081,924. AASB 9 Financial Instruments The Group has adopted AASB 9 from 1 July 2018. The standard introduced 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 that are solely principal and interest. New impairment requirements use an ‘expected credit loss’ (‘ECL’) model to recognise an allowance. Impairment is measured using 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. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. AASB 15 Revenue from Contracts with Customers The Group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-based revenue recognition model with a The financial statements have been prepared on a going concern basis, which contemplates continuity of normal activities and realisation of assets and settlement of liabilities in the normal course of business including the presumption that sufficient funds will be available to finance the operations of the Group. As is often the case with fast growing companies, the ability of the Group to continue its development activities as a going concern is dependent upon growing revenue in Advangen, further developing the Lyramid business and deriving cash from other sources of revenue such as grant funding. The directors have considered the cash flow forecasts and the funding requirements of the business and will continue to build revenue through scaling into existing channels and opening new market opportunities for the FGF5 inhibitor hair loss products. The Group made a significant investment into the business in FY2019 and built a highly capable, global management team expected to deliver on FY2020 sales targets. Together with the operational efficiencies already achieved, the Group is well placed to exploit its opportunities in ecommerce and traditional retail. In addition, the Group is actively pursuing opportunities to deliver a return for its high value midkine assets. With the appointment of new Lyramid CEO, Bart Wuurman, an active partnering program has been put in place. Finally, as in previous years, government grant opportunities for export activities and research and development will also be pursued. measurement approach that is based on an allocation of the transaction price. Credit risk is presented separately as an expense If the Group is unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities rather than adjusted against revenue. Contracts with customers are presented in an entity’s statement of financial position as other than in the normal course of business and at amounts different to those stated in the financial statements. The financial a contract liability, a contract asset, or a receivable, depending on the relationship between the entity’s performance and the statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the customer’s payment. Customer acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as amount of liabilities that might result should the Group be unable to continue as a going concern and meet its debts as and an asset and amortised over the contract period. Impact of adoption when they become due and payable. Principles of consolidation The Group has adopted Accounting Standards AASB 9 and AASB 15 for the year ended 30 June 2019. The Accounting Standards The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Cellmid Limited (“the were adopted from 1 July 2018 using transitional rules that allow for comparatives not be restated. The adoption of AASB 9 and Company”) as at 30 June 2019 and the results of all subsidiaries for the year then ended. Cellmid Limited and its subsidiaries AASB 15 did not result in any change to the opening net assets or the opening accumulated losses as at 1 July 2018. together are referred to in these financial statements as “the Group”. Critical Accounting Estimates and Judgements The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas of assumptions and estimates are: • R&D Tax Incentives From 1 July 2011 the Australian Government has provided a tax incentive, in the form of a refundable tax offset of 43.5%, for eligible research and development expenditure. Management has assessed its research and development activities and expenditure to determine which are likely to be eligible under the scheme. For the period ended 30 June 2019 the Group has recorded an item in other income of $807,973 (2018: $1,056,963) based on tax refund received from the government. • Share-based payment transactions 34 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. 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. 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. 35 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportNOTES TO THE FINANCIAL STATEMENTS CONTINUED 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. Intercompany transactions, balances and unrealised gains on transactions between entities in the group are eliminated. 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 results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet • income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. • all resulting exchange differences are recognised in other comprehensive income. The foreign currency translation reserve is Segment reporting recognised in profit or loss when the foreign operation or net investment is disposed. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. Identification of reporting segments The Group is organised into two operating segments: • Lyramid Limited; research and development of diagnostics and therapeutics; and • Advangen Limited; research, development and marketing of hair growth products. Revenue recognition For each contract with a customer, the Group: - identifies the contract with a customer; - identifies the performance obligations in the contract; - determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (identified each distinct good or service to be delivered; and as the Chief Operating Decision Makers (CODM) in assessing performance and in determining the allocation of resources - recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer both from a product and geographic perspective. There is no aggregation of operating segments. The CODM primarily uses of the goods or services promised. a measure of adjusted earnings before interest, tax, depreciation and amortisation (“Adjusted EBITDA” or “Operating Profit/ (Loss)”) to assess the performance of operating segments. However, the CODM also receive information about segments revenue and assets on a monthly basis. The Group’s contracts with customers for the sale of goods generally include one performance obligation. The Group has concluded that revenue from the sale of goods should be recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods. The principal products and services of each of these operating segments are as follows (further details on the business of each segment in included on pages 12 to 15 in the Directors’ Report of this document): Other income Lyramid Limited • Midkine diagnostics and therapeutics for cancer, inflammatory and ischemic conditions. Advangen Limited Interest revenue is recognised as interest accrues using the effective interest rate method. Grants from the government are recognised at the fair value of the cash received. Government grants includes the research and development tax incentive. This represents a refundable tax offset that is available on eligible research and development expenditure incurred by the Group. Government Grants are recognised in profit or loss when the grant is received. • research, development and marketing of hair growth products. Income tax Operating Profit / Loss Operating profit / loss excludes the effects of significant one-off items of income and expenditure, which are not gained/ incurred in the ordinary course of business of either Lyramid or Advangen, such as legal claim and related legal expenses. It also excludes the effects of equity-settled share-based payments. Corporate expense categories including net finance costs, 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. The Group is tax consolidated in Australia. employee benefits, depreciation and amortisation are not allocated to segments, as this type of activity relates to the Head Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable Office / corporate function of the Group. Functional and presentation currency that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars which is the Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. parent entity’s functional and presentation currency. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. 36 37 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportNOTES TO THE FINANCIAL STATEMENTS CONTINUED 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 Investments and other financial assets From 1 July 2018, the group classifies its financial assets in the following measurement categories: • those to be measured subsequently at fair value (either through OCI or through profit or loss), and • those to be measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The Group reclassifies debt investments when and only when its business model for managing those assets changes. Recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have • by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. ordinary shares issued during the financial year. Diluted earnings per share Measurement At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction • The after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and costs of financial assets carried at FVPL are expensed in profit or loss • the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are ordinary shares. Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated statement of financial position. Trade receivables Receivables are recognised initially at fair value and subsequently measured at amortised cost, less credit losses. Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance for expected credit loss is recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. solely payment of principal and interest. Debt instruments Subsequent measurement of debt instruments depends on the group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the group classifies its debt instruments: • Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. • FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and The Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and economic environment. 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 standard costing and are reviewed regularly. Costs of purchased losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss. • FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises. inventory are determined after deducting rebates and realisable value is the estimated selling price in the ordinary course of Equity instruments business less the estimated costs of completion and the estimated cost necessary to make the sale. The group subsequently measures all equity investments at fair value. Where the group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the group’s right to receive payments is established. 38 39 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportNOTES TO THE FINANCIAL STATEMENTS CONTINUED Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. Impairment Intangible assets Patents and trademarks Patents and trademarks have a finite life and are measured at cost less any accumulated amortisation and any impairment losses. Research and development Research expenditure and development expenditure that do not meet the criteria below are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by the group are recognised as intangible assets when the following criteria are met: • it is technically feasible to complete the software so that it will be available for use • management intends to complete the software and use or sell it • there is an ability to use or sell the software • it can be demonstrated how the software will generate probable future economic benefits From 1 July 2018, the group assesses on a forward-looking basis the expected credit loss associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. • adequate technical, financial and other resources to complete the development and to use or sell the software are available, and • the expenditure attributable to the software during its development can be reliably measured. Plant and equipment Impairment of intangible assets. Plant and equipment is measured at historical cost less accumulated depreciation/amortisation 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 during the financial period in which they are incurred. At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment includes 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. The recoverable amounts of the asset is 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. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss. its estimated recoverable amount Depreciation / Amortisation 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. Amortisation of the cost of the Midkine protein asset is calculated on a ug (or mg) basis as the protein is consumed through research activities and/or production of MK Elisa kits. The depreciation rates used for each class of asset are: Class of asset Depreciation Rate Furniture and fittings 20% Office equipment Midkine 6.7% – 33.33% Based on usage Estimation of useful lives of assets The Group determines the estimated useful lives and related depreciation and amortisation charges for its plant and equipment. 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. 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. 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. Provisions Provisions are recognised when the Group has a present legal or constructive obligation, as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. 40 41 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED Borrowings 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. Share-based payments Share -based compensation benefits are provided to employees and directors via an employee option plan and the executive incentive scheme. The fair value of options granted is recognised as a benefit expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted: Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at - including any market performance conditions (e.g. the entity’s share price) amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any noncash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. - excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the entity over a specified time period), and - including the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a specific period of time). The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. The Group measures the cost of equity-settled transactions Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all with employees by reference to the fair value of the equity instruments at the date at which they are granted. or part of the liability, a gain or loss is recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. The fair value at grant date is determined using the 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 Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for share, the expected dividend yield and the risk free interest rate for the term of the option. at least 12 months after the reporting period. Employee benefits 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 allocated to share capital. Provision is made for the Company’s liability for employee benefits arising from services rendered by employees up to the end Contributed equity 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 obligations 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 benefit obligations Liability for annual leave and long service leave not expected to be settled within 12 months from the reporting date is Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the company’s equity instruments, for example as the result of a share buy-back or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of the Group as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of the Group. recognised in the provision for employee benefits and measured as the present value of expected future payments to be made Goods and Services Tax (GST) 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 Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable Contributions for retirement benefit obligations are recognised as an expense as they become payable. Prepaid contributions from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. 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. 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 taxation authority, are presented as operating cash flows. 42 43 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportNOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. SEGMENT INFORMATION 2019 Lyramid Australia $ Australia $ Advangen USA $ Japan $ Total $ Group Total $ Total revenue and other income 1,008,217 993,748 415,371 5,929,848 7,338,967 8,347,184 Cost of goods sold (2,927) (288,259) (97,458) (1,748,740) (2,134,457) (2,137,384) Selling and distribution expenses (185,602) (619,184) (432,881) (477,120) (1,529,185) (1,714,787) Research and development expenses (576,919) (193,568) (5,322) (72,664) (271,554) (848,473) 2. SEGMENT INFORMATION (CONTINUED) 2018 Lyramid Australia $ Australia $ Advangen USA $ Japan $ Total $ Group Total $ Total revenue and other income 1,182,538 1,216,021 205,604 4,230,761 5,652,386 6,834,924 Cost of goods sold (12,104) Selling and distribution expenses (184,939) (447,094) (762,897) (99,385) (1,611,261) (2,157,740) (2,169,844) (101,120) (369,404) (1,233,422) (1,418,361) Research and development expenses (432,514) (125,358) - (61,152) (186,510) (619,024) Administrative expenses (491,807) (1,337,684) (244,460) (1,229,456) (2,811,600) (3,303,407) Other operating expenses (195,882) (214,781) (27,106) (247,561) (489,448) (685,330) Corporate costs and unallocated items Consultancy expense Subscription expense Occupancy expense Share-based compensation Directors’ remuneration Employee benefits expense Depreciation and amortisation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (138,433) (80,703) (178,472) (111,490) (200,627) (454,425) (188,929) Administrative expenses (723,328) (1,179,594) (594,497) (1,664,789) (3,438,880) (4,162,208) Operating Profit / (Loss) (134,708) (1,671,793) (266,468) 711,927 (1,226,334) (2,714,117) Other operating expenses (180,401) (208,143) (138,168) (310,109) (656,419) (836,821) Corporate costs and unallocated items Gain / (loss) on disposal of fixed assets Consultancy expense Subscription expense Occupancy expense Share-based payment compensation Directors’ remuneration Employee benefits expense Depreciation and amortisation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (2,020) (190,409) (106,120) (187,623) (318,414) (225,925) (506,122) (152,891) Operating Profit / (Loss) (660,960) (1,495,001) (852,954) 1,656,427 (691,527) (3,042,031) Finance costs Legal fees and claim Profit / (Loss) before income (129,461) - - (2,608,371) - - (105,582) (105,582) (235,043) - (2,608,371) (2,608,371) tax expense (790,421) (4,103,372) (852,954) 1,550,845 (3,405,481) (5,885,445) Finance costs Legal fees and claim Profit / (Loss) before income (355,693) - - (117,581) (117,581) (473,274) - (535,126) (7,668) - (542,794) (542,794) tax expense (490,401) (2,206,919) (274,136) 594,346 (1,886,709) (3,730,185) Income tax expense - - - (2,430) (2,430) (2,430) Profit / (Loss) after income tax expense (490,401) (2,206,919) (274,136) 591,916 (1,889,139) (3,732,615) Total assets Total liabilities 1,487,721 813,396 238,881 4,208,580 5,260,857 6,748,578 2,637,405 657,745 34,987 1,563,270 2,256,002 4,893,407 Total intercompany 12,341,560 (10,536,834) (1,051,417) (753,309) (12,341,560) - Income tax expense - - - (24,112) (24,112) (24,112) Major customers Profit / (Loss) after income tax expense (790,421) (4,103,372) (852,954) 1,526,733 (3,429,593) (5,909,557) Total assets Total liabilities 2,721,707 929,356 378,162 5,762,909 7,070,427 9,792,134 850,045 1,167,138 187,041 1,730,633 3,084,812 3,934,857 Total Intercompany 16,810,307 (14,245,413) (1,913,395) (651,499) (16,810,307) - The Group has a number of customers to whom it provides both products and services. The Group supplies a single external customer in the Advangen segment who accounts for 39.5% of external revenue (2018: 11.0%). The next most significant client accounts for 12.0% (2018: 3.2%) of external revenue. 44 45 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 3. REVENUE FROM CONTRACTS WITH CUSTOMERS - Sale of goods transferred at a point in time - Royalties and license fees recognised at a point in time Total revenue from contracts with customers Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Major product lines - Heritage hair loss brands including Jo-Ju® and Lexilis® - evolis® Pharmacy range - evolis® Professional range - Diagnostics income 2019 $ 2018 $ 7,301,686 87,787 5,647,930 64,252 7,389,473 5,712,812 5,888,754 713,323 681,814 105,582 4,584,023 963,059 73,636 92,094 Total revenue from contracts with customers 7,389,473 5,712,812 3. OTHER INCOME Other income: - Interest income - Other revenue - Government grants Total other income 2019 $ 2018 $ 76,870 72,868 807,973 33,599 32,180 1,056,963 957,711 1,122,742 5. MATERIAL PROFIT OR LOSS ITEMS The Group has identified a number of items which are material due to the significance of their nature and/or amount. These are listed separately here to provide a better understanding of the financial performance of the Group. Loss before income tax includes the following specific expenses: Cost of goods sold Advertising and marketing expenses Travel expenses Consultancy expenses Employee benefits expense Legal fees and claim Other expenses 2019 $ (2,137,384) (1,096,930) (568,895) (626,623) (3,918,933) (2,608,371) (654,819) 2018 $ (2,169,844) (977,785) (385,888) (488,718) (3,283,562) (542,794) (642,864) 6. INCOME TAX (a) The major components of income tax expense comprise: Income tax expense (24,112) (2,430) (b) Numerical reconciliation of income tax expense to accounting loss: Loss for the year before income tax expense (5,885,445) (3,730,185) Prima facie tax benefit on loss from ordinary activities before income tax at 27.50% (2018: 27.50%) Add / (less) tax effect of: - Adjustment for tax-rate differences in foreign jurisdictions - Share based payments - Sundry items - Research and development expenditure - Tax losses not brought to account Income tax expense (1,618,497) (1,025,801) 60,691 87,564 (132,918) 541,688 1,037,360 (24,112) (18,878) 30,632 243,684 159,715 608,218 (2,430) The Group operates across three tax jurisdictions being Australia, Japan and USA each with different corporate tax rates. (c) Unused tax losses Movements in unused tax losses Carried forward unused tax losses at the Australia $ Japan $ USA $ Total $ beginning of the financial year 23,608,834 1,612,286 822,345 26,043,465 Prior period differences between tax calculation and income tax return (66,934) - - (66,934) Actual carried forward unused tax losses at the beginning of the financial year 23,541,900 1,612,286 822,345 25,976,531 Current unused / (used) tax losses for which no deferred tax asset has been recognised 6,446,313 (1,534,153) 854,137 5,766,297 Carried forward unused tax losses at the end of the financial year Notional tax rate Potential future tax benefit 29,988,213 27.50% 8,246,758 78,133 30.86% 24,112 1,676,482 31,742,828 21.00% 352,061 8,622,931 46 47 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 6. INCOME TAX (CONTINUED) No income tax benefit was recognised. 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; maintains the continuity of ownership test and has carried on the same business since the tax loss was incurred; and 8. AUDITOR’S REMUNERATION During the year the following fees were paid or payable for services provided by Grant Thornton Australia Limited, the auditor of the parent entity and its related practices: Audit or review of the Group Cellmid Limited - Australia (Grant Thornton) - Japan (Grant Thornton) 9. EARNINGS PER SHARE 2019 $ 97,500 10,000 107,500 2018 $ 97,500 10,000 107,500 Basic and diluted earnings per share (in cents) (7.77) (6.74) Reconciliation of earnings to profit or loss from continuing operations Loss for the year attributable to the owners of Cellmid Limited (5,909,557) (3,732,615) iii. no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses. and dilutive earnings per share Weighted average number of ordinary shares used in calculating basic No. 75,729,120 No. 55,355,156 The Group has adopted the small business tax rate for the Australian entities, being 27.5%. The Group meets the small business eligibility criteria set by the Australian Taxation Office being aggregated turnover below $25 million and 80% or less of assessable income is passive income. The Group has no capital tax losses available. 7. INTERESTS OF KEY MANAGEMENT PERSONNEL (“KMP”) (a) Directors and key management personnel Details relating to options are set out in Note 28. 10. CASH AND CASH EQUIVALENTS Cash at bank and on hand 3,081,924 1,607,783 The following persons were directors or key management personnel of Cellmid Limited during the financial year: The effective interest rate on short term bank deposits at 30 June 2019 was 2.4% (2018: 2.4%); these deposits were all at call. Dr David King (Non-Executive Chairman) Ms Maria Halasz (CEO and Managing Director) Mr Bruce Gordon (Non-Executive Director) Dr Fintan Walton (Non-Executive Director) Dr Martin Cross (Non-Executive Director) Mr Dennis Eck (Non-Executive Director) Mr Koichiro Koike (CEO – Advangen Inc.) Mr. Bart Wuurman (CEO – Lyramid) (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 2019. The totals of remuneration paid to Executive directors and 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 48 2019 $ 709,789 4,583 22,800 250,814 987,986 2018 $ 446,995 4,696 22,800 - 474,491 11. TRADE AND OTHER RECEIVABLES Current Trade receivables Less: Impairment allowance Other receivables The ageing of the impaired receivables provided for above are as follows: More than 30 days past due More than 60 days past due More than 90 days past due Movements in the provision for impairment of receivables are as follows: Opening balance Additional provisions recognised Receivables written off during the year Foreign exchange movements Closing balance 2,228,939 (86,075) 143,807 1,023,892 (56,967) 64,421 2,286,671 1,031,346 413 3,891 81,771 86,075 56,967 43,050 (13,942) - 86,075 - - 56,967 56,967 20,970 35,514 - 483 56,967 49 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 11. TRADE AND OTHER RECEIVABLES (CONTINUED) Past due but not impaired Customers with balances past due but without an allowance for expected credit loss amount to $56,991 as at 30 June 2019 (30 June 2018: $17,526). 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 24(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. 12. INVENTORIES Midkine and MK ELISA Consumer Health-finished goods Consumer Health-raw materials 13. OTHER ASSETS Prepayments 14. PLANT AND EQUIPMENT At cost Accumulated depreciation / amortisation 50 2019 $ 35,193 1,005,738 577,477 1,618,408 2018 $ 16,957 937,344 226,430 1,180,731 246,624 339,223 1,569,030 (768,787) 800,243 1,614,734 (843,744) 770,990 14. PLANT AND EQUIPMENT (CONTINUED) Movements in carrying amounts of plant and equipment Computers and office equipment Furniture and Fittings 516,431 (383,431) 133,000 107,676 56,536 (28,532) (2,680) 133,000 572,436 (464,760) 107,676 55,944 107,167 (46,521) (8,914) 107,676 At cost Accumulated depreciation / amortisation Net book value Balance at 1 July 2018 Additions Depreciation / amortisation Foreign exchange movements Balance at 30 June 2019 Movements in carrying amounts of plant and equipment At cost Accumulated depreciation / amortisation Net book value Balance at 1 July 2017 Additions Depreciation / amortisation Foreign exchange movements Balance at 30 June 2018 15. INTANGIBLE ASSETS Patents and trademarks At cost Accumulated amortisation Movements in carrying amounts of patents and trademarks Balance at 1 July 2018 Additions Amortisation Foreign exchange movements Balance at 30 June 2019 Balance at 1 July 2017 Additions Amortisation Foreign exchange movements Balance at 30 June 2018 52,599 (35,860) 16,739 10,077 9,141 (2,479) - Midkine 1,000,000 (349,496) 650,504 653,237 - (2,733) - 16,739 650,504 42,298 (32,221) 10,077 12,777 - (2,700) - 1,000,000 (346,763) 653,237 675,983 - (22,746) - 10,077 653,237 Total 1,569,030 (768,787) 800,243 770,990 65,677 (33,744) (2,680) 800,243 1,614,734 (843,744) 770,990 744,704 107,167 (71,967) (8,914) 770,990 2019 $ 2018 $ 2,509,874 (751,610) 1,758,264 2,424,193 (605,689) 1,818,504 $ 1,818,504 - (145,921) 85,681 1,758,264 1,841,385 - (115,571) 92,690 1,818,504 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 14 years. 51 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 16. TRADE AND OTHER PAYABLES Trade payables Other payables 17. LOANS AND BORROWINGS Current Non-current 2019 $ 685,223 1,741,686 2018 $ 603,759 935,983 2,426,909 1,539,742 266,804 1,019,855 2,007,427 1,166,447 1,286,659 3,173,874 The current loan amount includes a loan to fund Directors’ and Officers’ liability insurance for $132,315 at an interest rate of 5.20%. The non-current loan amount includes loan facilities with Keiyo Bank Ltd (AUD: 1,118,692) at an interest rate of 1.50% and Chiba Bank Ltd. (AUD: 35,652) at an interest rate of 2.10%. Amounts payable within 12 months are included within current liabilities. During the year the Group fully repaid the loan to Platinum Road amounting to $1,987,444 which was secured against the R&D tax credit for a period of twenty-four months from commencement. 18. PROVISIONS Balance at 1 July 2018 Additional provisions / (payments) Balance at 30 June 2019 Annual Leave $ 99,100 34,619 Employee Benefits Long Service Leave $ 80,689 6,881 Total $ 179,789 41,500 133,719 87,570 221,289 18. PROVISIONS (CONTINUED) Analysis of employee provisions Current Non-current 2019 $ 214,549 6,740 221,289 2018 $ 175,345 4,444 179,789 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 Group does not have an unconditional right to defer settlement. 19. ISSUED CAPITAL At the beginning of the year Share buyback and cancellation 20 to 1 shares consolidation on 23 November 2017 Shares issued – private placement Shares issued – employee share scheme Shares issued – loan shares Transaction costs 2019 No. 56,912,357 (499,117) - 26,381,589 814,646 400,000 - 2018 No. 1,072,456,303 (4,000,000) (1,015,033,419) 3,489,473 - - - 2019 $ 38,014,078 (114,795) - 10,025,000 318,414 86,000 (562,860) 2018 $ 36,715,030 - - 1,326,000 - - (26,952) 84,009,475 56,912,357 47,765,837 38,014,078 Issue Price $ 2019 No. 2018 No.* 2019 $ 2018 $ At the beginning of the year Shares issued – January 2018 Shares issued – September 2018 Shares issue costs, net of tax 20 to 1 shares consolidation on 23 November 2017 Shares buyback and cancellation Shares issued – October 2018 Shares issued – November 2018 0.38 0.38 0.45 0.37 Shares issued – loan shares – April 2019 0.21 56,912,357 1,072,456,303 38,014,078 36,715,030 - 3,489,473 - 1,326,000 26,381,589 - - - 10,025,000 (562,860) - (26,952) - (1,015,033,419) - (499,117) (4,000,000) (114,795) 184,646 630,000 400,000 - - - 84,014 234,400 86,000 - - - - - At the end of the year 84,009,475 56,912,357 47,765,837 38,014,078 * On 23 November 2017, the Group completed the twenty to one share consolidation and the number of issued shares was reducedby 1,015,033,419. 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. 52 53 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 19. ISSUED CAPITAL (CONTINUED) The Company does not have a limited amount of authorised capital and the fully paid ordinary shares have no par value. 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. At the beginning of the year Options lapsed – August 2017 Consolidation Options lapsed – August 2018 Options issued – September 2018 Options issued – October 2018 Options lapsed – November 2018 At the end of the year (c) Capital risk management 2019 No. 1,650,000 - - (900,000) 1,000,000 200,000 (600,000) 2018 No. 34,440,000 (1,440,000) (31,350,000) - - - - 1,350,000 1,650,000 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. 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. 20. RESERVES Share-based payments reserve Balance at the beginning of the year Share-based payments expense Transfer to accumulated losses Balance at the end of the year 2019 $ 2018 $ 2,164,497 92,360 (2,152,907) 2,053,007 111,490 - 103,950 2,164,497 20. RESERVES (CONTINUED) General reserve Balance at the beginning of the year Movement during the year* Balance at the end of the year * The movement in the general reserve is as a result of the derecognition of the equity component of the convertible loan. Foreign currency translation reserve* Balance at the beginning of the year Foreign exchange movements Balance at the end of the year Total reserves 2019 $ 18,258 (18,258) - 2018 $ 18,258 - 18,258 412,605 115,798 528,403 632,353 306,382 106,223 412,605 2,595,360 * Exchange differences arising on translation of foreign controlled entities 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. 21. 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 - interest income - foreign exchange movements Changes in operating assets and liabilities - (increase) in trade and other receivables - (increase) / decrease in prepayments - (increase) in inventories - increase / (decrease) in trade and other payables - increase / (decrease) in provisions Net cash used in operating activities 22. EVENTS AFTER THE REPORTING PERIOD 2019 $ 2018 $ (5,909,557) (3,732,615) 152,891 318,414 2,025 - - 187,538 111,490 - 115,293 - 141,177 (16,972) (1,255,325) 10,290 (355,368) 1,182,580 41,500 (653,062) (229,169) (101,408) 284,055 (128,803) (5,671,373) (4,163,653) No matters or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the group’s operations, the results of those operations, or the group’s state of affairs in future financial years. 54 55 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 23. 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 25. 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. Transactions with related parties 24. FINANCIAL RISK MANAGEMENT (CONTINUED) 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 statement of financial position. Trade and other receivables that are neither past due nor impaired are considered to be of high credit quality. Trade receivables and contract assets The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 24 months before 30 June 2019 and the corresponding historical credit losses experienced within this period. On that basis, the loss allowance as at 30 June 2019 (on adoption of AASB 9) was determined as follows for trade receivables: Not overdue More than 30 days past due More than 60 days past due More than 90 days past due Total Expected loss rate 0% 1.1% 20% 95% Gross carrying amount – trade receivables 2,085,873 Impairment allowance - 37,535 413 19,456 3,891 86,075 2,228,939 81,771 86,075 Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable The remuneration for Ms Halasz is restructured to reflect the management costs incurred by each wholly owned subsidiary of expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and the Consolidated Entity. As a result, Direct Capital Group Pty Ltd, a related party to Ms Halasz, was paid $188,538 a failure to make contractual payments for a period of greater than 90 days past due. Impairment losses on trade receivables (2018: $188,538) for management services. No amount was outstanding as at 30 June 2019 (30 June 2018: Nil). are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are 24. FINANCIAL RISK MANAGEMENT credited against the same line item. (b) Liquidity risk The Group’s activities expose it to a number of financial risks as described below. The Group’s overall risk management The Group manages this risk through the following mechanisms: 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 fair value of financial assets and liabilities equate to the carrying value. (a) Credit risk Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables. • 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. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. Credit risk is managed on a Group basis. For banks and financial institutions, only independently rated parties with a minimum Loans and borrowings at reporting date have contractual maturity dates as follows: rating of ‘AA-’ are accepted. If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk. There are no significant concentrations of credit risk (except for a single counterparty that makes up approximately 50% of the total trade receivables balance which was subsequently paid in July 2019), whether through exposure to individual customers, specific Within one year One to five years industry sectors and/or region. 56 2019 $ 2018 $ 266,804 1,231,121 2,007,427 1,166,447 57 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 24. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk Foreign exchange risk 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. 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 and US subsidiary, Advangen Inc and Advangen LLC. 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. 25. 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 Country of Incorporation Percentage Owned (%) 2019 Percentage Owned (%) 2018 Subsidiaries of Cellmid Limited: Advangen Limited Kinera Limited Lyramid Limited Subsidiaries of Advangen Limited: Advangen International Pty Ltd Advangen LLC Advangen Incorporated Evolis Japan Incorporated Australia Australia Australia Australia USA Japan Japan 100 100 100 100 100 100 100 100 100 100 100 100 100 - 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 ASIC Corporations (wholly owned companies) Instrument 2016/785 issued by the Australian At the end of the financial year, the effect on loss and equity as a result of changes in the foreign exchange rate with all other Securities and Investments Commission. variables remaining constant would be as follows: The following are the aggregate totals, for each category, relieved under the deed. Year ended 30 June 2019 +/- 5% in foreign exchange rates Year ended 30 June 2018 +/- 5% in foreign exchange rates Interest rate risk Loss $ Equity $ +/-53,964 +/-51,235 +/-13,460 +/-6,728 The Group’s main interest rate risk arises from loans from banks and other financial institutions. The Group has performed a sensitivity analysis relating to its exposure to interest rate risk at the end of the financial year. STATEMENT OF FINANCIAL POSITION CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other assets The sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in TOTAL CURRENT ASSETS this risk. At the end of the financial year, the effect on loss 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 2019 +/- 1% in interest rates Year ended 30 June 2018 +/- 1% in interest rates 58 Loss $ Equity $ +/-12,867 +/-12,867 +/- 31,73 +/- 31,739 NON-CURRENT ASSETS Plant and equipment Intangible assets Investment in subsidiaries TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Loans and borrowings Employee provisions TOTAL CURRENT LIABILITIES Parties to the Deed of Cross Guarantee 2019 $ Parties to the Deed of Cross Guarantee 2018 $ 1,956,127 124,873 708,952 141,559 2,931,511 686,939 1,440 2,888,105 3,576,484 6,507,995 1,705,477 - 214,549 1,920,026 722,681 196,051 548,509 186,993 1,654,234 688,395 1,440 2,888,105 3,577,940 5,232,174 1,150,885 2,007,427 175,345 3,333,657 59 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 25. INTERESTS IN SUBSIDIARIES (CONTINUED) Parties to the Deed of Cross Guarantee 2019 $ Parties to the Deed of Cross Guarantee 2018 $ NON-CURRENT LIABILITIES Employee provisions Loans and borrowings Loan from subsidiaries 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) ACCUMULATED LOSSES: Accumulated Losses at the beginning of the year Loss after income tax + Transfer SOCE Inventory restatement Accumulated Losses at the end of the year 26. COMMITMENTS Lease commitments - operating Committed at the reporting date but not recognised as liabilities, payable: Within one year One to five years Over five years Minimum lease payments 6,740 132,315 122,665 261,720 2,181,746 4,326,249 47,765,837 157,085 (43,596,673) 4,326,249 4,444 - 122,665 127,109 3,460,766 1,771,408 38,014,078 2,169,778 (38,412,448) 1,771,408 (5,204,076) (4,361,045) - (5,024,076 (5,204,076) (38,412,448) (5,204,076) - (43,616,524) - (4,361,045) (4,361,045) (34,051,403) (4,361,045) - (38,412,448) 2019 $ 2018 $ 270,408 728,227 - 998,635 127,082 833,205 19,093 979,380 Operating please commitments includes contracted amounts for office space under non-cancellable operating lease expiring within five years with no option to extend. 60 27. CONTINGENT LIABILITIES AND CONTINGENT ASSETS Claims The amounts recorded in legal fees and settlement and trade and other payables include amounts in relation to the concluded legal dispute that has been underway since 2016 in the NSW Supreme Court between a wholly owned subsidiary Advangen International Pty Ltd and Ikon Communications (Ikon). The Court ruled that Ikon is entitled to their claim of $939,055 plus interest and costs. The Group fully paid Ikon’s claim with interest in December 2018 and accrued any potential liability to cover any future obligations in relation to legal costs. Guarantees The Group has given bank guarantees as at 30 June 2019 of $129,560 (30 June 2018: $129,560) 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 29. Other than the matter noted above, the Group had no contingent liabilities or contingent assets at 30 June 2019. (30 June 2018: Nil) 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: Expiry Date Exercise price Balance at start of the year Granted Exercised Expired Balance at end of the year Exercisable at end of year 1/08/2018 1/08/2018 1/08/2018 19/11/2018 19/11/2018 1/07/2020 31/10/2019 28/09/2021 03/10/2021 0.80 1.00 1.20 0.62 1.20 0.60 0.60 0.80 0.80 200,000 200,000 500,000 25,000 575,000 50,000 100,000 - - - - - - - - 1,000,000 - 200,000 - - - - - - - - - (200,000) (200,000) (500,000) (25,000) (575,000) - - - - - - - - - - - - - - 50,000 100,000 50,000 100,000 1,000,000 1,000,000 200,000 200,000 1,650,000 1,200,000 - (1,500,000) 1,350,000 1,350,000 The weighted average exercise price during the financial year was $0.78 ($1.06 in 2018). The weighted average remaining contractual life of the options outstanding at the end of the financial year was 1.48 years (0.33 years in 2018). 1,200,000 options were granted during the 2019 financial year (2018: Nil) with no vesting conditions attached as follows: - 1,000,000 options granted at a fair value of $0.077 per option on 28/9/2018 and expiry date of 28/9/2021 - 200,000 options granted at a fair value of $0.076 per option on 3/10/2018 and expiry date of 3/10/2021 Other options on issue No other options on issue. 29. 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. 61 Cellmid 2019 Annual ReportCellmid 2019 Annual Report NOTES TO THE FINANCIAL STATEMENTS CONTINUED 29. PARENT ENTITY INFORMATION (CONTINUED) ASSETS Current assets Non-current assets Total Assets LIABILITIES Current liabilities Non-current liabilities Total Liabilities EQUITY Issued capital Accumulated losses Share based payments reserve 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 DIRECTORS’ DECLARATION The directors of the company declare that: 1. the financial statements and notes, as set out on pages 28 to 62, 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 2019 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 Australian 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. 2019 $ 2018 $ 2,055,817 4,730,419 6,786,236 (626,402) (302,557) (928,959) 47,765,837 (42,012,510) 103,950 5,857,277 847.998 3,605,018 4,453,016 (2,590,589) (7,255) (2,597,844) 38,014,078 (38,525,679) 2,366,773 1,855,172 (3,486,829) (3,486,829) (3,626,391) (3,626,391) David King Director Dated this 28th day of August 2019 The parent entity has given bank guarantees as at 30 June 2019 of $129,560 (30 June 2018: $129,560) 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 ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 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 2019. Capital Commitments The parent entity had no capital commitments at 30 June 2019 (Nil at 30 June 2018). 62 63 Cellmid 2019 Annual ReportCellmid 2019 Annual Report 64 65 Cellmid 2019 Annual ReportCellmid 2019 Annual Report66 67 Cellmid 2019 Annual ReportCellmid 2019 Annual Report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 20 August 2019. SUBSTANTIAL HOLDERS Mr Dennis Keith Eck is an individual substantial shareholder of Cellmid Limited shares who holds 5,461,579 shares or 6.53% of the voting rights. HOLDING ANALYSIS Holding Ranges 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,0000 100,001 – 99,999,999 Totals Holders Total Units 70 401 233 499 151 28,605 1,397,564 1,846,645 16,389,664 63,946,997 % 0.03 1.67 2.21 19.60 76.48 1,354 83,609,475 100.00 20 LARGEST SHAREHOLDERS Fully Paid Ordinary Shares Shareholders MR DENNIS KEITH ECK UBS NOMINEES PTY LTD JASGO NOMINEES PTY LTD WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED <> MR GREGORY GLENN WORTH MOORE FAMILY NOMINEE PTY LIMITED CELL SIGNALS INC ONE MANAGED INVT FUNDS LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED SEISTEND (SUPER) PTY LTD CITICORP NOMINEES PTY LIMITED MR KEVIN PETER HOOPER & MR RONALD LESLIE HOOPER MR TREVOR GOTTLIEB MR DARIN ANJOUL & MRS TANIA ANJOUL DIRECT CAPITAL GROUP PTY LTD MR JAMES PATRICK TUITE & MRS WENDY TUITE NATIONAL NOMINEES LIMITED MISS FLORENCE ANNE GRAND MRS MARGARET ANN RYAN & MR MICHAEL RODNEY RYAN DR KUEN SENG CHAN Total Issued Share Capital 68 Balance Percent NUMBER OF HOLDERS AND VOTING RIGHTS IN EACH CLASS OF SECURITIES 5,461,579 3,871,929 2,631,578 2,128,917 1,824,000 1,750,000 1,300,000 1,212,891 1,185,665 1,150,000 1,071,861 1,050,000 914,974 850,000 800,938 791,876 771,442 758,700 710,000 700,000 6.53% 4.66% 3.15% 2.55% 2.18% 2.09% 1.55% 1.45% 1.42% 1.38% 1.28% 1.26% 1.09% 1.02% 0.96% 0.95% 0.92% 0.91% 0.85% 0.84% 30,936,350 83,609,475 37.00% Class of Security No. of Holders Voting Rights Ordinary Shares 1,354 Yes Unlisted Options $0.60 expiring 31/10/2019 Unlisted Options $0.60 expiring 01/07/2020 Unlisted Options $0.80 expiring 28/09/2021 Unlisted Options $0.80 expiring 03/10/2021 Unlisted Options $0.23 expiring 30/07/2024 1 1 1 1 7 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 187. CLASSES OF UNQUOTED SECURITIES Class of Security No. of Holders Total Units Unlisted Options $0.60 expiring 31/10/2019 Unlisted Options $0.60 expiring 01/07/2020 Unlisted Options $0.80 expiring 28/09/2021 Unlisted Options $0.80 expiring 03/10/2021 Unlisted Options $0.23 expiring 30/07/2024 GENERAL There is no current on-market buy-back for the Company’s securities. 1 1 1 1 7 100,000 50,000 1,000,000 200,000 4,250,000 69 Cellmid 2019 Annual ReportCellmid 2019 Annual Report CORPORATE DIRECTORY COMPANY DETAILS The registered office of the company is: Suite 204, Level 2 55 Clarence Street Sydney NSW 2000 The principal places of business are: Cellmid Limited Suite 204, Level 2 55 Clarence Street Sydney NSW 2000 Advangen International Pty Limited Suite 204, Level 2 55 Clarence Street Sydney NSW 2000 Advangen Incorporated Chiba Industry Advancement Centre Tokatsu Techno Plaza 5-4-6 Kashiwanoha Kashiwa Chiba 277-082 Japan Kinera Limited Suite 204, Level 2 55 Clarence Street Sydney NSW 2000 Lyramid Limited Suite 204, Level 2 55 Clarence Street Sydney NSW 2000 Advangen LLC 1601 Elm Street, Floor 33 Dallas Dallas County Texas 75207 BOARD OF DIRECTORS Non-Executive Chairman Dr David King CEO and Managing Director Ms Maria Halasz Non-Executive Directors Mr Bruce Gordon Dr Fintan Walton Dr Martin Cross Mr Dennis Eck Company Secretary Mr Lee Tamplin AUDITORS, SOLICITORS AND PATENT ATTORNEY Auditors Grant Thornton Audit Pty Ltd 17/383 Kent 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 Automic Pty Limited Level 5, 126 Phillip Street Sydney NSW 2000, Australia “As we are entering uncertain times again, anti-aging hair care sales are showing double digit growth, especially in emerging markets. The cosmetics industry, including hair care, seems to be immune to negative economic indicators.” Maria Halasz CEO and Managing Director 70 71 Cellmid 2019 Annual ReportCellmid 2019 Annual ReportCellmid Limited Suite 204, Level 2 55 Clarence Street Sydney NSW 2000 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 72 Cellmid 2019 Annual Report