2020
ANNUAL REPORT
1
Cellmid 2020 Annual Report CONTENTS
04
06
Chairman’s Letter
CEO Report
28
Corporate
Governance
72
Additional
Information for
Listed Entities
12
Directors’ Report
29
Annual Financial Report
75
Corporate
Directory
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
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Cellmid 2020 Annual ReportCellmid 2020 Annual Report CHAIRMAN’S
LETTER
Dear Shareholder,
It is my pleasure to present
to you the 2020 Annual Report.
It is pleasing that our
pre-pandemic growth strategy
for the consumer health
business, which was founded
on diversifying revenue sources,
expanding our e-commerce
capabilities, building a global
leadership team, and technical
innovation, was sufficiently
advanced in execution to enable
us to stabilise revenues in the
latter part of the financial year
and provide a robust platform
for future growth. From our
perspective, the principal
negative effects of the pandemic
have been to delay, rather than
defeat, our business initiatives,
not only in the consumer health
business but also in our efforts
to separate that business from
our biotech assets.
4
COVID-19 pandemic have been many and varied, and mostly
With regard to the Company’s midkine assets (Lyramid
(but not exclusively) negative in their impacts on the conduct
subsidiary), we have previously reported our intention
Although in last year’s report I foreshadowed that the
Company anticipated that its consumer health division would
achieve profitability in FY2020, that this has not eventuated in
the immensely challenging COVID-19 business environment
will come as no great surprise.The ramifications of the
of business.
On the positive side, the pandemic has undoubtedly
provided further
impetus to the already burgeoning
e-commerce sector in consumer health, and particularly for
the prestige hair-care sector which Cellmid occupies with its
evolis® range of products.
The expansion of our consumer health products distribution
network has continued at a pace throughout the year, and
has included new TV shopping opportunities, a range
of international distribution agreements, and locally an
important trading agreement with the Australia-wide API/
Priceline group. Although the planned in-store rollout with
Priceline was postponed on account of the COVID-19
disruption, this sales channel is expected to be an
important component of future sales growth in Australia.
Internationally, the all-important import permits in the most
significant markets, other than China, are already in place;
and there are good reasons to be optimistic that a Chinese
import permit for evolis® will be forthcoming in the not too
distant future now that the requisite regulatory framework
has been implemented.
It is pleasing that notwithstanding the COVID-19 disruptions,
our total revenue for the year in review increased, albeit
marginally, over the FY2019 year. The consumer health
revenue, by far the largest contributor to total revenue,
contributed to this increase despite a drop in the important
Japanese component of revenue arising from interruptions
to trading with China as well as reduced salon sales. We
remain confident that sales in and through Japan, including
were pleased to appoint Brian McGee as CEO of the USA
exciting new markets in Korea and Singapore, will return
subsidiary of our consumer health business, Advangen LLC.
significant revenue growth in the year ahead. Together with
Brian brings 30 years’ experience in sales, marketing and
the strong growth in the Australian and USA markets during
operations in the beauty and hair care industry, and his
FY20, there is good cause for optimism that overall revenue
important contribution is already evidenced in the year’s
will continue to grow in the months ahead.
strong sales growth in difficult trading conditions in the
to unlock shareholder value by separating this biotech
business from the consumer health business. To this end
we have appointed Bart Wuurman, a highly accomplished
and experienced biotech CEO, to lead the partnering/
USA. Closer to home, late in the year we appointed the
Company’s VP/Director of Operations Dr Dominic Burg to
the important new role of COO. Dominic’s well-deserved
promotion goes some way to ensuring that we have the
management depth and experience to deliver on our
ambitious growth plans.
investment initiatives while at the same time continuing to
In closing, I want to congratulate our entire team, ably
grow our intellectual property portfolio; and continuing our
led by our CEO Maria Halasz, for their outstanding efforts
advanced research programmes through collaboration with
and professionalism throughout the year, and of course
our extensive network of international partners. Negotiations
especially
through
the challenging COVID-impacted
with potential funding and research partners were inhibited
recent months. It remains a matter of great disappointment
by the widespread business interruptions during the early
that their collective efforts are not better reflected in the
months of COVID-19 but are now regaining traction as the
Company’s share price performance, and measures to
target capital and investment markets re-gather momentum.
improve this performance going forward will remain at the
The diagnostics business, which has operated and will
forefront of the Board’s considerations.
continue to operate quite separately from Lyramid, will
I extend my sincere thanks to my fellow board members for
remain a core asset for the Company. To further expand this
their wise counsel and guidance throughout the year; and
business, during the year the Company signed a series of
on behalf of the Board extend our thanks to all shareholders
supply, introducer and distribution agreements for a range
for their support.
of SARS-CoV-2 antibody and PCR diagnostic tests. In the
relatively short time that the COVID-19 pandemic has
been amongst us the landscape for COVID-related testing
regimes has changed rapidly and repeatedly, presenting
challenges in penetrating this market. It is our view that
as the incidence and spread of the disease become better
understood, the testing portfolio available to the Company
will find significant application in both diagnostic and,
importantly, pandemic management roles.
I mentioned earlier in this letter that an important element
of our growth strategy has been to progressively build a
global leadership team. To this end, during the year we
David King
Chairman
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Cellmid 2020 Annual ReportCellmid 2020 Annual Report CEO
REPORT
Dear Shareholder,
It is my pleasure to report
on the results of the 2020
financial year. Strong sales
momentum in early FY2020
and new distribution
channels in Australia, USA,
Japan, Europe and Asia
ensured that we have
been able to navigate
the difficult pandemic
conditions in the second
half of FY2020.
environment. While sales of skincare and make-up brands
The total loss after tax was down by 17% to $4.91 million
have been stagnant overall, functional haircare remains one
(FY2019: $5.91 million). It is important to note that
of the strongest performers amongst premium cosmetics
this includes several non-cash items expensed such as
according to The Beauty 2020-2030 Forecast.
performance options awarded to staff members that are
Other winners of the shift in consumer behaviour in hair care
are dry shampoos, hair masks and treatments; categories
in which Cellmid has recently launched first in class or best
largely yet to vest. Cellmid received $840,288 in R&D tax
credit and generated another $205,363 in diagnostics
income during the FY2020 financial year.
in class products. Hair related google searches surged by
In the past year, Cellmid has raised a total of $8.8 million
13% globally driven by functional hair care, and the rise of
before costs, including $6.3 million in April 2020 and $2.5
Customer S (Silver, indicating Gen X and older) online is
million in October 2019.
particularly important as they represent more than 50% of
Cellmid’s customers by age.
Cellmid ended the financial year with a cash balance of $6.97
million, which will ensure that the company can continue to
Cellmid has been actively engaging with current and
invest in inventory and has sufficient working capital for new
potential partners in China to achieve optimum market
distribution channels and online capabilities in FY2021.
penetration for our Jo-Ju®, Lexilis® and evolis® brands.
Whilst cross border e-commerce (CBEC) presents the most
immediate opportunity, this is only a small portion of the
addressable market for the Company’s hair loss and anti-
aging hair care products. Online survey of 20-50-year-old
Chinese customers indicated that hair loss is one of the top
five health concerns for this age group. This is an enormous
opportunity for our brands that have been developed to
speak to these needs.
With import permits to the US, Europe, UK and Japan our
successful regulatory strategy has been the foundation
of our global brand expansion for evolis®. We intend to
continue our efforts in that regard in China, where with the
new Chinese cosmetics regulations (Cosmetic Supervision
and Administration Regulation or CSAR), the path has
become clearer for obtaining import permits for evolis®.
Our Jo-Ju® and Lexilis® brands have import permits in
In March and April 2020, Cellmid signed supply, introducer,
and distribution agreements for a range of SARS-CoV-2
antibody and PCR tests, including the Wondfo SARS-CoV-2
antibody test (Wondfo Test). The first commercial shipment
of the Wondfo Test was received in April 2020 and we have
sold some of the tests already.
ADVANGEN
Cellmid is leading innovation in anti-aging haircare globally
with deep expertise in hair biology. Cellmid owns and
distributes first in class anti-aging haircare brands that are
based on natural ingredients, clinically and scientifically
validated, and effective in reducing hair loss and increasing
hair growth. In FY2020, Cellmid secured three new hair loss
patents for the formulation of evolis® in Australia, Japan and
China.
China already with strong therapeutic hair loss claims.
Consumer health revenue increased by 1% in FY2020 to
RESULTS OVERVIEW
Our total revenue and other income increased by 2% to
$8.55 million (FY2019: $8.35 million). Our consumer health
brands, Jo-Ju®, Lexilis® and evolis®, have generated 87%
of this revenue with sales primarily in Japan, Australia and
the USA. The other 13% of revenue and other income was
generated through the Lyramid and Diagnostics businesses.
$7.44 million (FY2019: $7.34 million). Sales momentum was
very strong in the first half of the financial year with 18 new
distribution channels established across premium beauty
retailers, pharmacies and television shopping channels in
Australia, USA, Japan, Europe and Asia. However, the retail
environment was adversely impacted by the COVID-19
pandemic in the second half of the year with the closure
of bricks and mortar retail outlets. Although our revenue
growth was lower than expected, we were able to effectively
switch to online sales through our own websites, our retail
partner websites and social commerce.
Our broad distribution network,
together with our
ongoing investment in digital infrastructure and e-commerce
capabilities, allowed us to stabilise revenue throughout the
second half, while setting the business on the path of future
growth as we learn to live with the COVID-19 pandemic.
The financial year has shown that we are well advanced in
the effective execution of our growth strategy announced in
February 2019. At that time, we set out some key objectives
for growth; in our consumer business it was to diversify
our revenue, to expand our e-commerce capabilities,
to build a global leadership team and to continue on
product innovation. That these milestones did not result
in profitability can be largely attributed to the disruptions
to trade during the pandemic. We have also remained
committed to the separation of our consumer health and
biotech businesses (Lyramid) to unlock shareholder value in
each of these assets.
We have made significant progress on all these objectives
since early 2019 which lessened the impact of the pandemic
disruption during the second half of FY2020. I am very
pleased to report on a resilient business, which has reliable
and diverse sales channels, brands that are increasingly
recognisable, products that perform and an outstanding
global team. As we enter FY2021 these important pillars
will continue to support us to reach our growth objectives
for the financial year and power on towards increased sales
and profitability.
Favourable global trends in the consumer sector are
expected to provide strong tailwind to reach our sales
objectives in the next 12-24 months. Online sales of prestige
hair care products rose 31% in 2019 in the US even before
the pandemic. COVID-19 forced a much more rapid shift
to e-commerce adding to an already online heavy trading
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Cellmid 2020 Annual ReportCellmid 2020 Annual Report CEO
REPORT
CONTINUED
The retail disruption resulted in higher inventory holdings,
however with that we have avoided supply chain interruptions
through the critical periods of January to June. We are ready
to ramp up sales as we continue to reactivate distribution
channels in FY2021. Our record Q4 sales of $3.06 million,
the highest revenue to date in any one quarter, was driven
by television shopping channel QVC Japan and by the
resumption of export to China in June.
In 2021 we remain committed to our core brands, evolis®,
Jo-Ju® and Lexilis®, as they address very specific markets in
hair loss and antiaging hair care. A brand strategy matrix as
it applies for FY2021 is provided in Table 1 below. An active
new product development program, and a bank of novel
technologies Cellmid has already developed, means that
we will be able to rapidly address market demand for first
in class and best in class anti-aging products in the future,
whilst riding the current trend of functional hair care.
Table 1. Brand strategy matrix - 2021
Japan
Australia
China
Cross-border
China
Mainland
Rest of Asia USA
Europe
Male Hair loss
Lexilis®
evolis®
Female Hair loss
Jo-Ju®
evolis®
Lexilis®
evolis®
Jo-Ju®
evolis®
Lexilis®
Jo-Ju®
evolis®
Lexilis®
evolis®
Jo-Ju®
Antiaging hair care
evolis®
Antiaging skincare
Jo-Ju®
Jo-Ju®
evolis®
evolis®
evolis®
evolis®
evolis®
evolis®
ADVANGEN INC. (JAPAN)
Sales in Japan were down by 5% to $5.61 million during
the 2020 financial year (FY2019: $5.93 million), largely due
to interruptions to trading with China and reduced salon
sales in Japan. The single largest source of product revenue
remained QVC Japan, including just over $2 million from
two strong Today’s Special Value (TSV) sales days on 25
November 2019 and 12 June 2020.
Segment operational profits were down by 71% to $0.51
million (FY2019: $1.66 million), due to the increased
investment in advertising and marketing in preparation
for the launch of the evolis® Professional branded product
range in Japan. Unfortunately, this product launch was
deferred following store and salon closures throughout
Japan in the second half of the financial year. In addition,
economic disruptions prevented the fulfillment of export
orders to China from early in 2020 and shipping of export
products only resumed in June 2020.
Over the next year, we are expecting to see sales traction
in new Asian markets including Korea and Singapore, as
well as increasing sales of the Jo-Ju® and Lexilis® brands
into China, subject to new partnerships with appropriately
credentialled Chinese distributors.
ADVANGEN INTERNATIONAL PTY LTD
(AUSTRALIA)
Cellmid signed an agreement with TV shopping channel,
openshop, in October 2019 for the sale of the evolis®
Professional range and in November 2019 a trading agreement
with API/Priceline for the evolis® Professional brand to be
stocked in 400 stores nationally. An in-store Priceline launch
was planned for March 2020, with experiential marketing
events in all states. Although these events were postponed
due to the COVID-19 business disruption, we have started
an online education campaign for pharmacy staff nationally.
The segment loss improved by 21% to $1.18 million in
the financial year (FY2019: $1.5 million), primarily due to
improved sales growth and the switch to online sales, which
now accounts for around 40% of total sales in Australia. The
Australian operations also carry the responsibility for the
international business development, which was higher than
in FY2019 due to the entry into the European market and
the additional investment in international social and digital
marketing.
ADVANGEN LLC., (USA)
Sales in the USA increased by 51% to $0.63 million in the
financial year (FY2019: $0.42 million) and our segment loss
improved by 21% to $0.67 million (FY2019: $0.85 million).
This positive result was achieved in difficult trading conditions
with the closing of the stores of our largest partners in the USA,
including premium retailers Neiman Marcus, Bloomingdales,
and Saks. Although bricks and mortal retail stalled, these
Sales in Australia were up by 21% to $1.19 million during
department stores re-focused on their e-commerce platforms
the financial year (FY2019: $0.99 million), driven by new
and started to place orders again after a short break.
distribution channels, a new national distribution partner in
API/Priceline, and ongoing investment in our e-commerce
infrastructure.
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Cellmid 2020 Annual ReportCellmid 2020 Annual Report
CEO
REPORT
CONTINUED
The growth in revenue was driven by the significant expansion
The negotiations with potential partners for the midkine
of new online partnerships in the financial year including
assets slowed down between March and July 2020, however
Dermstore, Beauty Collections, Macys.com and most recently
these discussions have recommenced since. As we intensify
Amazon. Our e-commerce revenue increased to around 60%
our search for partnerships Lyramid is well prepared for the
of total revenue and we expect this to remain around this
separation having a small, but capable senior team, broad
level as new online channels are initiated in FY2021, including
intellectual property portfolio, experimental tools to deliver
online professional hair care portal, Salon
Interactive.
the technology and excellent scientific advisors.
We signed an agreement with Tru Beauty, a premium salon
distributor, in late July 2020, which is expected to deliver
material sales during the second half of FY2021.
We expect to continue to invest in our e-commerce, digital
and social marketing infrastructure in 2021 to increase brand
awareness and grow our sales from our direct customer base
DIAGNOSTICS
In addition to its midkine diagnostic business Cellmid signed
a series of supply, introducer, and distribution agreements
for a range of SARS-CoV-2 antibody and PCR tests, including
the Wondfo SARS-CoV-2 antibody test (Wondfo Test) in early
by increasing subscriptions.
2020.
LYRAMID LIMITED
The market for COVID-19 testing has changed dramatically
since the end of April and it continues to evolve. After a flood
Over the past year, we have continued to improve our
of enquiries in March and April 2020, which triggered our
midkine
intellectual property portfolio with additional
move to broaden our diagnostics business with the COVID-19
coverage for the “Improved Midkine Antibody” patent
antibody tests, by late April the demand for serological
in Europe, which will provide further protection for the
testing subsided in Australia and remains relatively modest
humanised antibody candidates targeting the C domain of
internationally. The key testing methods are still nucleotide
midkine. Cellmid currently has 54 granted midkine patents,
based rapid or laboratory PCR’s, with antigen testing at point
four patent applications under examination and one in Patent
of care (POC) now emerging as an option.
CLOSING REMARKS
Having built a resilient consumer business, we plan to fully
capitalise on our existing distribution networks internationally,
grow our direct online presence and tap into the strong
consumer demand for premium functional hair care globally.
We are at the beginning of an exciting shift in consumer
behaviour towards predominantly online purchases, and this
includes the older, Customer S generation.
That we are so well positioned for the future is due to the
outstanding efforts of the Cellmid team, especially during
the particularly difficult period of the COVID-19 pandemic.
It is our directors, employees, consultants, and advisers who
came up to the mark and made it all possible. We are pleased
that we have been able to deliver to our shareholders a
resilient business under difficult operating conditions and we
Cooperation Treaty filing state.
There is consensus on the market that each testing modality
look forward to serving in the future.
The considerable research we have undertaken during
has its role in the diagnostic and disease management
FY2020 was mostly carried out by external partners with
universe of COVID-19 and we are ready to fulfil demand as
minimal spending from Cellmid. Our strategy has remained
it arises with capabilities in all modalities; serological and
the unlocking of shareholder value by separating the
nucleotide testing, POC and laboratory based.
consumer health and biotech businesses. We are well on the
path to achieve this with the appointment of Bart Wuurman
as CEO of Lyramid, who has commenced the preparation for
partnering or divestment.
The diagnostics license with Pacific Edge continued to deliver
Maria Halasz
sub-material royalty revenue in FY2020.
CEO and Managing Director
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1Global Cosmetics Industry, The Beauty 2020-2030 Forecast
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Cellmid 2020 Annual ReportCellmid 2020 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: 160,000 indirectly held
and the entities it controlled, for the financial year ended 30 June 2020.
Special responsibilities
Chairman of the Audit 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 in publicly listed companies.
Interest in shares and options Shares: 300,000 directly held
1,400,000 indirectly held
Special responsibilities
Member of the Audit Committee and chairman of the Nomination and Remuneration
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
Committee
Special responsibilities
Member of the Nomination and Remuneration Committee
Other directorships in
Current directorships - Litigation Capital Management Limited, Galilee Energy Limited
listed entities held in the
and African Petroleum Corporation, Tap Oil Limited and Renergen Limited.
previous three years
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
28 years’ experience in life sciences working in executive positions in private and public
Experience
Over 35 years’ experience working in the pharmaceutical and biotech industries primarily
companies, managing investment funds and holding senior positions in corporate finance
specialising in life sciences. Maria has been CEO and Managing Director of Cellmid since
Interest in shares and options Shares: 420,000 directly held
April 2007.
Shares: 2,580,000 indirectly held
Options: 3,000,000 unvested, 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 with extensive retail
experience in pharmacies and Chairman of the Generics Industry Association and Medicines
Australia.
Interest in shares and options Shares: 325,000 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
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Cellmid 2020 Annual ReportCellmid 2020 Annual Report
DIRECTORS’
REPORT
CONTINUED
Mr Dennis Eck
Director (Non-executive)
Qualifications
BSc, The University of Montana
Experience
40 years senior management experience in the retail sector, providing significant strategic
and operational expertise. Mr Eck, a professional investor, has extensive retail experience in
fashion, groceries, cosmetics, and hair salons. As a senior strategist, Mr Eck has helped reshape
the operations of several retail businesses delivering outstanding shareholder returns.
innovation during the reporting period, researched new hair loss targets and developed new formulations containing additional
ingredients for improved efficacy. These new products will form an important part of product launches in FY2021 and beyond.
The Group has implemented operational and administrative efficiencies in its consumer business during the reporting period.
Lyramid Limited (Lyramid)
The Group holds the largest intellectual property portfolio globally around midkine, a native protein associated with various
disease states, including chronic inflammatory diseases and cancer. During FY2020 Lyramid continued with the research and
development of diagnostic and therapeutic products for the management of diseases such as cancer and various chronic
inflammatory conditions by targeting midkine. During FY2020, the Group investigated the most efficient method for targeting
midkine in collaboration with industry partners and engaged a number of key opinion leaders.
Cellmid Limited (Diagnositcs)
The Group expanded its diagnostic activities and secured access to SARS-CoV-2 testing kits from manufacturers and their
agents by signing supply, introducer and distribution agreements during the reporting period. It has received its first supply of
the Wondfo SARS-CoV-2 antibody tests (Wondfo Test) in April 2020 and was successful in listing it on the Australian Register of
Therapeutic Goods (ARTG) by the Therapeutic Goods Administration (TGA).
2. OPERATING RESULTS AND REVIEW OF OPERATIONS FOR THE YEAR
Interest in shares and options Shares: 12,497,152 directly held
Operating results
Special responsibilities
N/A
Other directorships in listed N/A
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 of the Group
Revenue and other income of the Group was up 2% for FY2020 to $8,547,715 (FY2019: $8,347,184), demonstrating resilience
during a difficult trading period due to the COVID-19 pandemic. Consumer health sales of the Group’s FGF5 inhibitor hair growth
products remained stable at $7,437,200 (FY2019: $7,338,967) despite the adverse impact of the COVID-19 pandemic during
most of the second half of the financial year. Total loss was also down 17% to $4,907,296 (FY2019: $5,909,557) for the Group.
Review of operations
The Group withdrew its Growth Strategy related guidance in March 2020 due to the uncertainty around the impact of the
COVID-19 pandemic. Operational expenditure was contained and effect on revenue was minimised by actively pursuing
online sales channels. Although operational profitability could not be achieved the Group has reached the following significant
milestones during the reporting period:
• Achieved the highest quarterly consumer health revenue of $3.06 million in Q4 FY2020, demonstrating the resilience of
the business under difficult conditions. The record revenue was the result of solid QVC Japan performance in addition to
resuming Chinese exports of the Group’s Lexilis® branded products in June 2020.
• Opened new distribution channels and scaled into existing ones in the US resulting in a revenue growth of 51% during the
reporting period. Online sales channels secured during 1H FY2020 compensated for the store closures of premium retail
partners such as Neiman Marcus, Bloomingdales and Saks.
• Signed agreement with TV shopping channel openshop for the sale of the evolis® Professional branded anti-aging hair care
products in Australia and signed a trading agreement with API/Priceline, both of which contributed to the 21% increase in
The Group has operated primarily through its holding entity, Cellmid (diagnostics) and two subsidiary companies, Advangen
Australian revenue during the reporting period.
Limited (consumer health product development and sales) and Lyramid Limited (midkine and midkine antibody research and
development). The Group continued to work towards its Growth Strategy released in February 2019. Guidance applicable for
FY2020 has been removed in March 2020 due to the uncertainty of the impact of the COVID-19 pandemic. Since March 2020
the Group expanded its diagnostic activities with laboratory and point of care diagnostic testing products for SARS-CoV-2.
• Reported strong QVC sales on two Today’s Special Value (TSV) sales days in December 2019 and June 2020. These two
events contributed $2 million to the Group’s consumer health revenue with the sale of the Jo-Ju® branded hair growth lotion
and shampoo. With several other sales events QVC Japan remained the Group’s most significant sales channel in FY2020.
• Adding to its intellectual property, the Group has secured three hair loss patents pertaining to its consumer business: one
There was no substantial change in the activities of the Group during the reporting period. The principal activities of the Group
each in its key markets of Australia, Japan and China. Importantly, the formulation for evolis®, the Group’s fastest growing
during the financial year were:
Advangen Limited (Advangen):
During FY2020 Advangen continued with the development and sale of over the counter (OTC) and cosmetic products for hair
loss and anti-aging hair care. Products sold continued to feature the Group’s proprietary FGF5 inhibitor technology. Since the
acquisition of the FGF5 technology in 2013 the Group has developed a range of new products under the evolis®, evolis®
Professional, Lexilis® Hybrid, Jo-Ju® RED and Lexilis® BLACK brands. Distribution channels of the Group’s consumer brands
have expanded substantially during the reporting period in Australia, USA and in Japan. The Group continued product
brand, is now protected in China, Australia and Japan.
• Added a new product line to the Group’s diagnostic business, and signed supply, introducer and distribution agreements for
a range of SARS-CoV-2 antibody and PCR tests, including the Wondfo Test.
• Received the first commercial shipment of Wondfo Tests in April 2020 and commenced sales of the SARS-CoV-2 antibody
kits. Although the sales have slowed down since May, the Group retained sufficient inventory to service the market as
opportunities are expected to arise with the developing pandemic.
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Cellmid 2020 Annual ReportCellmid 2020 Annual Report DIRECTORS’
REPORT
CONTINUED
• Successfully filed for the ARTG listing of the Wondfo SARS-CoV-2 antibody test. As part of the TGA’s post-market surveillance
the Wondfo test was submitted to the Doherty Institute for evaluation and results confirmed the manufacturer’s stated
performance in the most relevant period of 14+ days from symptoms (sensitivity of 93.8%, specificity of 95%).
• The Group was successful in its application and has been granted its patent “Improved Midkine Antibodies” in Europe
adding to its substantial intellectual property holding around midkine
i. Advangen Limited
Revenue in the Group’s consumer health business grew 1% to $7,437,200 (FY2019: $7,338,967), with loss before tax down
43% to $1,859,759 (FY2019: $3,405,482). The Australian and US businesses delivered strong revenue growth, 21% and 51%
respectively, despite difficult trading conditions due to the COVID-19 pandemic. For the same reason, and whilst orders have
been received, Japan has not been able to export to China for five months during 2H FY2020, which resulted in a 5% drop in
revenue for that region.
In Japan QVC remained the most significant sales channel for the Group
Sales on television shopping channel, QVC, continued to perform well during FY2020 with two Today’s Special Value (TSV) days
delivering over $2 million revenue for the Group (25 November 2019 and 12 June 2020). Together with other sales events,
and as in previous years, the Jo-Ju® branded FGF5 inhibitor for women was the best performing product for the Group. The
Japanese revenue was down 5% to $5,612,837 (FY2019: $5,929,848) and profit before tax was down 71% to $447,748 (FY2019:
$1,550,844) as a direct result of the pandemic; the Group was unable to fulfil export orders during most of 2H FY2020 due to
economic disruptions and shipping only resumed to China in June 2020. In addition, the Advangen concept store in Ginza was
closed down temporarily during the reporting period, and the launch of the evolis® Professional branded products was also
halted as a result of the closure of salons due to the pandemic.
ii. Lyramid Limited
Under the leadership of CEO Bart Wuurman research activities continued by the Group’s European industry and institutional
partners during the first half of FY2020, however these programs have slowed down or were closed entirely due to the
pandemic. Likewise, negotiations with potential funding partners have also been halted since March 2020. Laboratories
is some European countries started to open again in July 2020 and these partnerships are expected to be revisited in the
coming months. The Midkine Symposium, which was originally planned for May 2020, was postponed for the same reason.
The Group received additional patent coverage for its “Improved Midkine Antibody” patent in Europe, providing further
protection for its humanised antibody candidates targeting the C domain of midkine.
iii. Cellmid Limited
The Group added a new product line to its diagnostic business, and signed supply, introducer and distribution agreements
for a range of SARS-CoV-2 antibody and PCR tests, including the Wondfo SARS-CoV-2 antibody test (Wondfo Test). The
Group successfully filed an application for the Wondfo Test to be included in the ARTG and received its first commercial
shipment in April 2020. After fulfilling initial orders, and as part of the TGA’s post-market surveillance, the Wondfo test was
submitted to the Doherty Institute for evaluation. Although testing conditions were not comparable, the Wondfo Tests
performed according to manufacturer’s specifications in the most relevant period of 14+ days from symptoms (sensitivity of
93.8%, specificity of 95%). The Group commenced sales and will continue marketing of the Wondfo Tests and other SARS-
CoV-2 testing modalities in its repertoire.
iv. Other General Information
Intellectual Property
The Group’s intellectual property portfolio currently stands at 54 granted midkine patents, four patent applications under
examination and one in PCT (Patent Cooperation Treaty) filing stage. In addition, the Group has 14 granted hair loss patents
and one application under examination. The Group was granted four patents during the reporting period including three
hair loss related and one midkine patents. The European Patent Office granted the Group’s “Improved Midkine Antibody”
patent. This patent family protects the composition of humanised midkine antibodies that bind to the C Domain of midkine
and their use in several diagnostic and therapeutic disease settings. The Group has also received grants from the Australian
and Japanese patent offices in relation to the patent “Method for the treatment of alopecia with monoterpenoids”.
Inventory
Inventory holding for the Group increased by 61% to $2,609,359 (FY2019: $1,618,408) in preparation for sales growth in
Australia, USA and to fulfil consumer product orders into China. Of the $2,533,846 cost of goods sold in the statement of
financial performance for the Group, $287,113 related to a provision for fair value.
Australian sales grew 21% largely driven by new channels openshop and the API/Priceline agreement
COVID-19 pandemic impact
The Group’s Australian consumer business grew 21% during FY2020 to $1,198,490 with loss down 60% to $1,633,985
(FY2019: $4,103,371). The Group signed an agreement with television shopping channel, openshop, in October 2019 for the
sale of its evolis® Professional product range. Sales events started during October 2019 with several live and recorded shows
since. The Group has also signed a trading agreement with API/Priceline in November 2019 for the evolis® Professional
brand to be core ranged in 400 stores nationally. Initial orders were delivered in November 2019 and an in-store launch was
planned for March 2020 with experiential marketing events in all states. Due to the pandemic the Priceline in-store events
have been postponed, however online education of pharmacy staff commenced as planned. The Group has initiated an
online retail partnership with Adore Beauty and executed several marketing campaigns during the second half of FY2020.
USA sales were up 51% largely due to growth in online retail partnerships
The Group’s US business grew 51% to $625,873 (FY2109: $415,371) with loss before tax down 21% to $673,522 (FY2019:
$852,955) under significant headwind on sales due to the pandemic. Premium department stores Neiman Marcus,
Bloomingdales and Saks were closed for the most part of the second half of FY2020. While brick-and-mortar retail stalled,
The Group released its Growth Strategy in February 2019 outlining two key objectives: achieving operational profitability
for the consumer health business (Advangen) in FY2020 and the separation of the biotech (Lyramid) and consumer health
assets by the end of calendar 2020. As the significant economic and social impact of the COVID-19 pandemic has unfolded
the Group removed its guidance relating to its Growth Strategy in March 2020. The drop in bricks-and-mortar retail activity
in Japan, Australia and in the USA, and the effective closure of China for months, resulted in lower than expected consumer
health sales, although this was offset by an increase in e-commerce revenue from online retailers during FY2020.
The COVID-19 pandemic has also resulted in the addition of a new product line to the diagnostic business; however, this has
not made an immediate impact on the financial results of the Group. The pandemic has been a catalyst for a sharp focus on
rationalising resources and reducing costs at most areas of the organisations’ operations. Overall, the Group demonstrated
financial and operational resilience as its transition to largely online sales activities commenced well before the pandemic.
3. FINANCIAL REVIEW
department stores re-focused on their e-commerce platforms and continued to order. New online partnerships secured
Financial position
during FY2020, Dermstore, Beauty Collections, Macys.com and most recently Amazon.com, largely accounted for the
revenue growth in FY2020. The agreement with salon distributor, Tru Beauty, was signed after the closing of the reporting
period, effective 1 August 2020.
The net assets of the Group as at 30 June 2020 were $9,810,715, up 67% (2019: $5,857,277) while current assets increased
by 60% to $11,627,853 (2019: $7,233,627). With the cash and cash equivalents up 126% to $6,970,967 (2019: $3,081,924) the
Group is in a strong position to deliver on its strategic objectives.
16
17
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
DIRECTORS’
REPORT
CONTINUED
4. OTHER ITEMS
Significant changes in the state of affairs
• 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.
Meetings of Directors
There have been no significant changes in the state of affairs of the entities in the Group during the 2020 financial year.
Nine meetings of the Directors were held during the financial year. Attendances by each Director during the year were as follows:
Dividends paid or recommended
The Company has not paid or declared any dividends during the financial year (2019: $Nil).
Significant change since the end of FY2020
The Group signed an exclusive distribution agreement with Tru Beauty Concepts, effective 1 August 2020, a premium salon
distributor, for 11 states in the north east of the United States. The distribution agreement is expected to deliver increased US
revenue from the second half of FY2021.
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, while continuing the research and development of its midkine asset portfolio through
partnerships with the view to execute on the separation from the consumer business. Concurrently, the Group is actively
pursuing opportunities for its new product lines, the SARS-CoV-2 testing modalities. Due to the uncertainties that remain as a
result of the COVID-19 pandemic, the Group does not provide any forecasts in relation to its performance in FY2021.
Environmental regulations
The Group’s operations are not regulated by any significant environmental law of the Commonwealth or of a state or territory
of Australia or Japan.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on
behalf of the Group for all or part of those proceedings.
Indemnification and insurance of officers and auditors
During the financial year, the Group paid a premium to insure the Directors and Officers of the Group. The liabilities insured
are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the Directors and
Officers in their capacity as Officers of the Group, and any other payments arising from liabilities incurred by the Officers
in connection with such proceedings. This does not include such liabilities (other than legal costs) that arise from conduct
involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain
advantage for them or someone else or to cause detriment to the Company. It is not possible to apportion the premium
between amounts relating to the insurance against legal costs and those relating to other liabilities.
During or since the end of the financial year, the Group has given an indemnity or entered into an agreement to indemnify, or
paid or agreed to pay insurance premiums in favour of its Directors as follows:
• a right to access certain Board papers of the Group during the period of their tenure and for a period of seven years after
that tenure ends;
• subject to the Corporations Act 2001, an indemnity in respect of liability to persons other than the Company and its related
bodies corporate, that they may incur while acting in their capacity as an officer of the Company or a related body corporate,
except for specified liabilities where that liability involves a lack of good faith or is for legal costs for defending certain legal
proceedings; and
18
Directors’ Meetings
Audit Committee
Nomination and
Remuneration Committee
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
9
9
9
9
9
9
9
9
9
9
9
9
6
-
6
-
6
-
6
*
6
6
*
5
6
-
1
-
1
1
-
-
1
-
1
1
-
-
Dr David King
Ms Maria Halasz
Mr Bruce Gordon
Dr Fintan Walton
Dr Martin Cross
Mr Dennis Eck
* by invitation
Shares under option
Unissued ordinary shares of the Company under performance dependent share options at the date of this report are as follows:
Expiry date
Exercise Price
Number under option
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
Unlisted options
July 2020
September 2021
October 2021
February 2023
July 2024
November 2024
May 2022
February 2025
March 2025
March 2025
$0.60
$0.80
$0.80
$0.50
$0.23
$0.24
$0.30
$0.20
$0.23
$0.27
50,000
1,000,000
200,000
254,400
4,250,000
3,200,000
1,000,000
200,000
300,000
500,000
10,954,400
100,000 performance dependent share options lapsed during the financial year ended 30 June 2020 (2019: 1,500,000 options)
and another 265,000 performance dependent share options have lapsed since the end of the financial year to the date of
this report.
19
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
DIRECTORS’
REPORT
CONTINUED
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
$
2020
0.10
-
(5.04)
$
2019
0.17
-
(7.77)
$
2018
0.47
-
(6.74)
$
2017
0.50
-
(8.79)
$
2016
0.66
-
(7.60)
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.
The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001.
The key management personnel of the Group for the year consisted of the following directors and management of Cellmid Limited:
is separate and distinct.
Non-executive director remuneration
Objective
The Board seeks to set aggregate remuneration at a level that provides the Group with the ability to attract and retain directors of
the highest calibre, while incurring costs that are acceptable to shareholders.
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
Mr Brian McGee
Non-executive Chairman
18 January 2008
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
CEO and Managing Director
CEO – Advangen Inc.
CEO - Lyramid
CEO – Advangen LLC
1 July 2015
21 July 2015
16 October 2017
26 March 2018
14 April 2007
1 May 2014
1 June 2019
1 May 2019
Current
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.
The Board assesses the appropriateness of the nature and amount of remuneration of directors and senior managers of the Group
on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high-quality Board and executive team.
Group performance and link to remuneration
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
FY2020, the Group paid non executive directors a total of $252,100 (2019: $275,325).
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.
Structure
A policy of the Board is the establishment of employment or consulting contracts with the Chief Executive Officer and other
senior executives. Remuneration consists of fixed remuneration under an employment or consultancy agreement and may include
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
No performance-based cash bonus or incentive payments have been made during the reporting period. The table below details
incentives are intended to retain key executives and reward performance against agreed performance objectives.
the last five years earnings and total shareholders return.
Fixed remuneration
$
2020
$
2019
Revenue and Other Income
Operating Profit / (Loss)
Loss after income tax
8,547,715
(4,108,789)
(4,907,296)
8,347,184
(3,042,031)
(5,909,557)
$
2018
6,834,924
(2,714,117)
(3,732,615)
$
2017
5,560,121
(4,022,577)
(4,482,273)
$
2016
4,611,108
(3,130,344)
(3,498,916)
The level of fixed remuneration is set so as to provide a base level of remuneration that is both appropriate to the position and
competitive in the market. Fixed remuneration is reviewed annually by the Board and the process consists of a review of Group
wide and individual performance, relevant comparative remuneration in the market, and internal and (where appropriate) external
advice on policies and practices.
Senior executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and
expense payment plans, such that the manner of payment chosen is optimal for the recipient without creating additional cost for
the Group.
20
21
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
DIRECTORS’
REPORT
CONTINUED
Remuneration details for the year ended 30 June 2020
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.
2020
Cash salary
Employee
Employee
Short-term benefits
Long-term
benefits
Post-
Shares/
employment options based
payments
benefits
2019
Cash salary
Employee
Employee
Short-term benefits
Long-term
benefits
Post-
Shares/
employment options based
payments
benefits
fees entitlements
entitlements
Superannuation
Equity
Total
$
$
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
-
-
-
-
-
-
$
-
-
-
-
-
-
$
$
$
6,175
-
-
4,750
-
-
-
-
71,175
50,000
50,000
54,750
-
49,400
49,400
10,925
49,400
275,325
Maria Halasz**
Koichiro Koike
Bart Wuurman***
447,391
21,678
4,583
22,800
-
496,452
216,720
24,000
-
-
-
-
-
-
65,814
282,534
-
24,000
fees entitlements
entitlements
Superannuation
Equity
Total
Total executive directors and KMP
688,111
21,678
4,583
22,800
65,814
802,986
$
$
Directors
Non-executive directors
David King
Bruce Gordon
Fintan Walton
Martin Cross
Dennis Eck*
59,583
45,000
41,670
45,833
-
Total non-executive directors
192,086
Executive directors and KMP ^
-
-
-
-
-
-
$
-
-
-
-
-
-
$
$
$
5,660
-
-
4,354
-
-
-
-
65.243
45,000
41,670
50,187
-
50,000
50,000
10,014
50,000
252,100
Maria Halasz**
Koichiro Koike
Brian McGee***
Bart Wuurman
492,603
22,088
10,211
24,914
150,888
700,704
281,172
251,447
221,431
-
-
-
-
-
-
22,499
45,000
348,671
-
-
13,096
264,543
200,103
421,534
Total executive directors and KMP 1,246,653
22,088
10,211
47,413
409,087 1,735,452
* Dennis Eck receives no cash remuneration in relation to his role as non-executive director, unlike other Cellmid directors.
Mr Eck’s renumeration is expected to be in the form of shares. The issue of these shares is subject to shareholders’ approval at the
next Annual General Meeting of the Group. In the event that shareholders’ approval is not received he will receive the equivalent
remuneration to other non-executive directors in cash.
**Maria Halasz - Cash salary includes a backpay component relating to 2019 and consulting fees paid to Direct Capital Group Pty
Ltd. Ms Halasz is a director of Direct Capital Group Pty Ltd (“DCG”), that provides consulting services under specific contract to
the Group.
*** Brian McGee was appointed as CEO of Advangen LLC, a wholly owned subsidiary of Cellmid Limited, on 1 November 2019.
^ KMP’s receive their equity incentives in the form of options. Options issued to Maria Halasz, Koichiro Koike and Brian McGee on
19 November 2019 have not vested during the reporting period. Bart Wuurman’s options vested on 1 April 2020.
* Dennis Eck receives no cash remuneration in relation to his role as non-executive director, unlike other Cellmid directors.
Mr Eck’s renumeration is expected to be in the form of shares. The issue of these shares is subject to shareholders’ approval at the
next Annual General Meeting of the Group. In the event that shareholders’ approval is not received he will receive the equivalent
remuneration to other non-executive directors in cash.
**Maria Halasz - Short-term benefits include consulting fees paid to Direct Capital Group Pty Ltd. Ms Halasz is a director of Direct
Capital Group Pty Ltd (“DCG”), that provides consulting services under specific contract to the Group.
*** Bart Wuurman commenced employment 1 June 2019.
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:
2020
beginning of year
Balance at
Received as part
remuneration
David King
Maria Halasz
Bruce Gordon
Fintan Walton
Martin Cross
Dennis Eck *
Koichiro Koike
Brian McGee
Bart Wuurman
2019
David King
Maria Halasz
Bruce Gordon
Fintan Walton
Martin Cross
Dennis Eck
Koichiro Koike
Bart Wuurman
1,400,000
2,019,938
110,000
65,000
175,000
5,461,579
157,146
-
-
1,400,000
1,573,651
75,000
65,000
45,000
2,700,000
12,500
-
-
-
-
-
-
217,391
-
-
-
-
500,000
-
-
-
130,000
144,646
-
Other
changes
300,000
980,062
50,000
-
150,000
6,818,182
-
-
-
-
(53,713)
35,000
-
130,000
2,631,579
-
-
Balance at
end of year
1,700,000
3,000,000
160,000
65,000
325,000
12,497,152
157,146
-
-
1,400,000
2,019,938
110,000
65,000
175,000
5,461,579
157,146
-
23
22
* Dennis Eck receives no cash remuneration in relation to his role as non-executive director. His renumeration was provided
in the form of shares, approved by shareholders at the Annual General Meeting of the Group.
Cellmid 2020 Annual ReportCellmid 2020 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.
Balance at
beginning of year Acquired
Disposed/Expired/
Exercised/
Received as part of
2020 remuneration
Balance at
Vested at
end of year end of year
2020
David King
Maria Halasz
Bruce Gordon
Fintan Walton
Martin Cross
Dennis Eck
Koichiro Koike
Brian McGee
Bart Wuurman
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
3,000,000
-
-
-
-
-
-
-
-
1,000,000
1,000,000
200,000
200,000
-
-
-
-
-
-
-
-
2,500,000
2,500,000
2,000,000
Balance at
beginning of year Acquired
Disposed/Expired/
Exercised/
Received as part of
2019 remuneration
Balance at
Vested at
end of year end of year
2019
David King
Maria Halasz
Bruce Gordon
Fintan Walton
Martin Cross
Dennis Eck
Koichiro Koike
Bart Wuurman
200,000
-
100,000
100,000
-
-
50,000
-
-
-
-
-
-
-
-
-
(200,000)
-
(100,000)
(100,000)
-
-
(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:
Service agreements
Maria Halasz
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 2019 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 a consulting agreement with Advangen Limited, was
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.
• 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.
• 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.
Koichiro Koike
Koichiro Koike is contracted as CEO of Advangen Inc., the Group’s wholly owned Japanese subsidiary, on the following terms and
pursuant to Japanese employment laws and as revised on 20 August 2019:
• The remuneration of Mr Koike is fixed, however, at the discretion of the Board he may receive performance-based incentives.
• There is no fixed term in Mr Koike’s contract.
• There is leave, retirement and travel allowance included in the 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.
Brian McGee
Brian McGee was appointed as CEO of Advangen LLC, the Group’s wholly owned US subsidiary, on the following terms on 1
November 2019:
• Mr McGee’s remuneration is fixed, however, at the discretion of the Board he may receive performance-based incentives.
• The term of the contract is one year extendable to a further two years.
• The Group or Mr McGee may terminate the contract by giving one-month notice.
Fixed remuneration
At risk STI
At risk LTI
• 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
David King
Maria Halasz
Bruce Gordon
Fintan Walton
Martin Cross
Dennis Eck^
Koichiro Koike
Brian McGee
Bart Wuurman
2020
%
100.00
78.47
100.00
100.00
100.00
100.00
87.09
95.05
52.53
2019
%
100.00
100.00
100.00
100.00
100.00
100.00
76.80
-
100.00
2020
%
-
17.13
-
-
-
-
12.91
4.54
47.45
2019
%
-
-
-
-
-
-
23.20
-
-
2020
%
-
4.40
-
-
-
-
-
0.41
0.02
2019
%
-
-
-
-
-
-
-
-
-
Bart Wuurman
Bart Wuurman is contracted as CEO of Lyramid Limited pursuant to a modified service agreement dated 1 April 2020 on the
following terms:
• Mr Wuurman’s remuneration consists of a fixed and at-risk component.
• The term of the service agreement is three months extendable by mutual consent (extended on 1 July 2020).
• There is no leave and retirement component in the service agreement.
• The Group may terminate the service agreement with one-month notice.
• 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.
24
^Dennis Eck remuneration is expected to be received on an equity basis in the form of shares.
25
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
Name
Grant date
Number issued
Vesting date
Service and performance criteria
DIRECTORS’
REPORT
CONTINUED
Equity-based compensation
Brian McGee
30/7/2019
200,000
Equity-based compensation in the form of shares and options over ordinary shares were issued during the year ended 30 June 2020.
Shares and options were granted to some executives of the Group under the Employee Incentive Plan and/or as approved by
shareholders at the annual general meeting on 19 November 2019. Ordinary shares and options were issued under the following
conditions attached:
Name
Grant date
Number issued
Vesting date
Service and performance criteria
Bart Wuurman 30/7/2019
31/3/2020
500,000
2,000,000
1/4/2020
Unvested, vesting subject to key performance
indicators assessed at 30 June 2020 (100,000)
and 30 June 2022 (200,000) including
profitability, effective team-based performance
across the Group and increased distribution and
sales. Subject to meeting vesting conditions
the options are exercisable at $0.23 each on
or before 30 July 2024 with a fair value of per
option at grant date of $0.12.
2,000,000 options vested on the condition of
accepting a reduced cash compensation.
500,000 unvested with the vesting condition
of securing dedicated funding for Lyramid.
2,000,000 options are exercisable at $0.23
each on or before 30 July 2024. Subject to
meeting vesting condition 500,000 options
are exercisable on or before 31 March 2025 at
$0.27 each with a fair value per option at grant
date of $0.15.
Dennis Eck
20/11/2019
217,391
Maria Halasz
20/11/2019
3,000,000
Koichiro Koike 30/7/2019
1,000,000
500,000
1/4/2020
Grant 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 $50,000,
equivalent to the accumulated unpaid
director’s fees.
The condition of previous unpaid service as a
director has been met.
Unvested, vesting subject to key performance
indicators assessed at 30 June 2020 (1,000,000)
and 30 June 2022 (2,000,000) including
achieving growth, profitability of the Group,
monetisation of certain assets and share price
performance over 3 years. Subject to meeting
vesting conditions the options are exercisable
at $0.24 each on or before 20 November
2024 with a fair value per option at grant date of
$0.12.
Unvested, vesting subject to key performance
indicators assessed at 30 June 2020 (500,000)
and 30 June 2022 (500,000) including achieving
growth, profitability of Japan and the Group,
monetisation of some of the consumer health
assets, increased distribution and team based
performance over 3 years. Subject to meeting
vesting conditions the options are exercisable
at $0.23 each on or before 30 July 2024 with a
fair value per option at grant date of $0.12.
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.
Cellmid Limited received 81.05% of ‘yes’ votes on its Remuneration Report for the financial year ending 30 June 2019. The
Company received no specific feedback on its Remuneration Report at the Annual General Meeting.
Use of remuneration consultants
The Group’s Nomination and Renumeration Committee may employ the services of renumeration consultants from time to time
to review and provide recommendations in respect of the amount and elements of executive renumeration, including short-
term and long-term incentive plans. No remuneration consultant was used during the current 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 2020 has been received and can be found on page 67 of the financial report.
This director’s report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors.
Dr David King
Director
Dated this 27th day of August 2020
26
27
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
CORPORATE
GOVERNANCE
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 2020 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.
ANNUAL FINANCIAL REPORT
CONTENTS
30
Consolidated
Statement of Profit or
Loss and Other
Comprehensive
Income
33
31 32
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
34 66
Consolidated Statement
of Cash Flows
Notes to the Financial
Statements
Directors’ Declaration
68 72
Independent Auditor’s
Report
Additional
Information for
Listed Entities
67
Auditor’s Independence
Declaration under
Section 307C of the
Corporations Act 2001
75
Corporate Directory
28
28
Cellmid 2020 Annual Report
Cellmid 2020 Annual Report
29
29
Cellmid 2020 Annual ReportCellmid 2020 Annual Report CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2020
Note
Consolidated
2020
$
2019
$
Total Revenue from contracts with customers
3
7,482,311
7,389,473
Cost of goods sold
Gross Profit
Other income
Selling and distribution expenses
Research and development expenses
Administrative expenses
Impairment of financial assets
Other operating expenses
Operating Profit / (Loss)
Finance costs
Legal fees and claim
Loss before income tax expense
Income tax expense
Loss for the year after income tax
(2,533,846)
(2,137,384)
4,948,465
5,252,089
1,065,404
957,711
(2,024,059)
(849,019)
(5,175,169)
(163,835)
(1,910,576)
(4,108,789)
(71,257)
(637,777)
(4,817,823)
(89,473)
(1,714,787)
(848,473)
(5,378,421)
(43,050)
(1,267,100)
(3,042,031)
(235,043)
(2,608,371)
(5,885,445)
(24,112)
(4,907,296)
(5,909,557)
4
5
5
5
5
5
5
6
Other comprehensive income, net of income tax
Items that will be reclassified to profit or loss when specific conditions are met
Exchange differences on translating foreign controlled entities
30,647
115,798
Total comprehensive income for the year
(4,876,649)
(5,793,759)
Loss for the year attributable to:
Owners of Cellmid Limited
Total comprehensive income for the year attributable to:
Owners of Cellmid Limited
(4,907,296)
(5,909,557)
(4,876,649)
(5,793,759)
Earnings per share for loss attributable to the owners of Cellmid Limited
Basic earnings per share (cents)
Diluted earnings per share (cents)
9
9
(5.04)
(5.04)
(7.77)
(7.77)
AS AT 30 JUNE 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
Right of use assets
Intangibles
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Lease liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Loans and borrowings
Lease liabilities
Provisions
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Note
Consolidated
2020
$
2019
$
10
11
12
13
14
15
16
17
18
19
20
18
19
20
6,970,967
1,870,632
2,609,359
176,895
3,081,924
2,286,671
1,618,408
246,624
11,627,853
7,233,627
764,031
739,325
1,757,002
3,260,358
14,888,211
2,770,047
217,893
247,335
248,716
3,483,991
800,243
-
1,758,264
2,558,507
9,792,134
2,426,909
266,804
-
214,549
2,908,262
1,033,826
1,019,855
462,411
97,268
1,593,505
5,077,496
9,810,715
-
6,740
1,026,595
3,934,857
5,857,277
21
22
56,064,284
47,765,837
1,137,254
632,353
(47,390,823)
(42,540,913)
9,810,715
5,857,277
The above Statement of Consolidated 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.
30
31
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
FOR THE YEAR ENDED 30 JUNE 2020
Issued
Capital
$
Note
Share
Based
Payments
Reserve
$
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total
Equity
$
Balance at 1 July 2019
47,765,837
103,950
528,403
(42,540,913)
5,857,277
Adjustment from the adoption of AASB 16
1
-
-
-
57,386
57,386
Adjusted balance at 1 July 2019
47,765,837
103,950
528,403
(42,483,527)
5,914,663
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers
Payments to suppliers and employees
Interest received
Grant income and other benefits from government
Net cash used in operating activities
Consolidated
2020
$
2019
$
8,291,383
6,399,171
(13,319,089)
(12,954,633)
19,753
994,848
(4,013,105)
76,116
807,973
(5,671,373)
Note
23
-
(4,907,296)
(4,907,296)
CASH FLOWS FROM INVESTING ACTIVITIES:
30,647
-
30,647
Purchase/(proceeds) from acquisition/(disposal) of plant and equipment
Loss for the year
Other comprehensive income / (loss)
Total comprehensive income / (loss)
for the year
Transactions with equity holders
Equity share-based compensation
Shares issued – net of transaction costs
22
21
-
-
-
-
8,298,447
-
-
-
30,647
(4,907,296)
(4,876,649)
411,554
62,700
-
-
-
-
411,554
8,361,147
Balance at 30 June 2020
56,064,284
578,204
559,050
(47,390,823)
9,810,715
FOR THE YEAR ENDED 30 JUNE 2019
Share
Based
Foreign
Currency
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of shares
Share buy back
Share issue costs
Proceeds from borrowings
Repayment of borrowings
Repayment of leasing liabilities
Finance costs
Net cash provided by financing activities
Issued
Capital
$
Note
General Payments Translation Accumulated
Losses
Reserve
$
$
Reserve
$
Reserve
$
Total
Equity
$
Net increase / (decrease) in cash and cash equivalents held
Cash and cash equivalents at beginning of financial year
Effect of exchange rate changes
Consolidated
Cash and cash equivalents at end of financial year
10
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
Equity share-based compensation
22
318,414
Shares issued –
net of transaction costs
21
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)
(48,255)
-
2,122,910
Transfer to accumulated losses
-
(18,258) (2,152,907)
-
-
(65,677)
(65,677)
8,847,000
10,111,000
-
(535,828)
273,447
(300,253)
(233.214)
(71,257)
7,979,895
3,966,790
3,081,924
(77,747)
6,970,967
(114,795)
(470,499)
-
(1,987,446)
-
(263,289)
7,274,971
1,537,921
1,607,783
(63,780)
3,081,924
Balance at 30 June 2019
47,765,837
-
103,950
528,403
(42,540,913) 5,857,277
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.
32
33
Cellmid 2020 Annual ReportCellmid 2020 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. Key Management Personnel Disclosures (“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. Right-Of-Use-Assets
16. Intangibles
17. Trade And Other Payables
18. Loans And Borrowings
19. Lease Liabilities
20. Provisions
21. Issued Capital
22. Reserves
23. Cash Flow Information
24. Events After The Reporting Period
25. Related Party Transactions
26. Financial Risk Management
27. Interests In Subsidiaries
28. Contingent Liabilities And Contingent Assets
29. Share Based Payments
30. Parent Entity Information
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 27th August 2020.
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
AASB 16 Leases
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and for lessees eliminates the
classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use
assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease
expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest
expense on the recognised lease liabilities (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 improve as the administration expense is now replaced by interest
expense and depreciation in the statement of financial performance. For classification within the statement of cash flows, the
interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in
financing activities. For lessor accounting, the standard does not substantially change how a lessor accounts for leases.
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The
impact of adoption on opening accumulated losses as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Contracts reassessed as lease contracts
Discounted using incremental borrowing rate
Right-of-use assets (AASB 16)
Lease liabilities - current (AASB 16)
Lease liabilities – non-current (AASB 16)
Make good provisions
Increase in opening accumulated losses as at 1 July 2019 ^
1 July 2019
$
998,635
117,061
(94,695)
1,021,001
(260,278)
(668,921)
(84,921)
(6,881)
1,021,001
35
46
48
48
49
49
50
50
51
51
51
52
53
53
53
54
54
54
55
55
56
57
58
58
58
59
62
64
64
65
34
35
^ In addition to the opening balance adjustment of $6,881, a lease incentive provision was also adjusted for under AASB 16 in
FY2020. This represented a benefit to opening accumulated losses at 1 July 2019 of $64,267.
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
When adopting AASB 16 from 1 July 2019, the Group has applied the following assumptions:
o applying a single discount rate to the portfolio of leases with reasonably similar characteristics;
o accounting for leases with a remaining lease term of 12 months as at 1 July 2019 as short-term leases;
o excluding any initial direct costs from the measurement of right-of-use assets; and
o using hindsight in determining the lease term when the contract contains options to extend or terminate the lease.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in
the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the
lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms
of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to the statement of financial
performance as incurred.
Lease liabilities
concludes that it is not probable that the taxation authority will accept an uncertain tax treatment, it shall reflect the effect of
uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates,
measuring the tax uncertainty based on either the most likely amount or the expected value. In making the assessment it is assumed
that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information
when making those examinations. Interpretation 23 was adopted using the modified retrospective approach and as such
comparatives have not been restated. There was no impact of adoption on the opening accumulated losses as at 1 July 2019.
New and amended standards adopted by the Group
At the date of authorisation of these financial statements, several new, but not yet effective, Standards and amendments
to existing Standards, and Interpretations have been published by the AASB. None of these Standards or amendments to
existing Standards have been adopted early by the Group. Management anticipates that all relevant pronouncements will be
adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and
Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on
the Group’s financial statements.
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:
• Coronavirus Pandemic (COVID-19)
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have,
on the Group based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as addressed
in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any
significant uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date
or subsequently as a result of the Coronavirus (COVID-19) pandemic.
• Allowance for Credit Losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime
expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate
for each group. These assumptions include recent sales experience, historical collection rates, the impact of the Coronavirus
(COVID-19) pandemic and forward-looking information that is available. The allowance for expected credit losses, as disclosed
in note 11, is calculated based on the information available at the time of preparation. The actual credit losses in future years
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
may be higher or lower.
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments
less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid
under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to
occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if
there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee;
lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is
made to the corresponding right-of use asset, or to statement of financial performance if the carrying amount of the right-of-
use asset is fully written down.
AASB Interpretation 23 - Uncertainty over Income Tax Treatments
The Group entity has adopted Interpretation 23 from 1 July 2019. The interpretation clarifies how to apply the recognition
and measurement requirements of AASB 112 ‘Income Taxes’ in circumstances where uncertain tax treatments exists. The
interpretation requires: the consolidated entity to determine whether each uncertain tax treatment should be treated
separately or together, based on which approach better predicts the resolution of the uncertainty; the consolidated entity to
consider whether it is probable that a taxation authority will accept an uncertain tax treatment; and if the consolidated entity
• Impairment of non-financial assets
The Group assesses impairment of non-financial assets at each reporting date by evaluating conditions specific to the Group
and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset
is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key
estimates and assumptions.
• Inventories
Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each
reporting date. The future realisation of these inventories may be affected by future technology or other market-driven changes
that may reduce future selling prices.
• 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 2020 the Group has
recorded an item in other income of $840,288 (2019: $807,973) based on tax refund received from the government.
36
37
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
• Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity.
The Group recognises the fair value of the consideration received and the fair value of any investment retained together with
any gain or loss in profit or loss.
Intercompany transactions, balances and unrealised gains on transactions between entities in the group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The Group is organised into two main operating segments:
The Group has operated primarily through its holding entity, Cellmid (diagnostics) and two subsidiary companies, Advangen Limited
(consumer health product development and sales) and Lyramid Limited (midkine and midkine antibody research and development).
instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes method taking
These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (identified as
into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions
the Chief Operating Decision Makers (CODM) in assessing performance and in determining the allocation of resources both from
relating to equity-settled share-based payments do not have any impact on the carrying amounts of assets and liabilities within
a product and geographic perspective. There is no aggregation of operating segments. The CODM primarily uses a measure of
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.
Comparatives
Certain comparative in the statement of profit or loss and other comprehensive income and statement of financial position
have been reclassified, where necessary, to be consistent with current year presentation.
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 30.
Going concern
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 principal products and services of each of these operating segments are as follows (further details on the business of each
segment in included in the Directors’ Report of this document):
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 Cellmid, 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, employee benefits, depreciation and amortisation are not allocated to segments, as this type of activity relates to
the Head Office / corporate function of the Group.
Functional and presentation currency
Based on its current commitments, the Group has sufficient funds to meet its debts as and when they fall due. Accordingly, the
financial report has been prepared on a going concern basis.
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
The directors determined that the use of the going concern basis of accounting is appropriate in preparing the financial report.
The assessment of going concern is based on cash flow projections. The preparation of these projections incorporate a number
of assumptions and judgements, and the directors have concluded that the range of possible outcomes considered in arriving
at this judgement does not give rise to a material uncertainty casting significant doubt on the Group’s ability to continue as a
going concern.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Cellmid Limited (“the
Company”) as at 30 June 2020 and the results of all subsidiaries for the year then ended. Cellmid Limited and its subsidiaries
together are referred to in these financial statements as “the Group”.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases.
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.
38
parent entity’s functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
financial year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit
or loss.
Foreign operations
The 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
• all resulting exchange differences are recognised in other comprehensive income. The foreign currency translation reserve is
recognised in profit or loss when the foreign operation or net investment is disposed.
39
Cellmid 2020 Annual ReportCellmid 2020 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Revenue recognition
For each contract with a customer, the Group:
- identifies the contract with a customer;
- identifies the performance obligations in the contract;
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit or loss attributable to owners of Cellmid Limited, excluding any costs of servicing equity other than ordinary shares
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in
ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
• The after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and
• the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Cash and cash equivalents
- 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
each distinct good or service to be delivered; and
- recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer
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.
of the goods or services promised.
Trade receivables
The Group’s contracts with customers for the sale of goods generally include one performance obligation. The Group
Receivables are recognised initially at fair value and subsequently measured at amortised cost, less expected credit losses (ECL).
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.
Other income
Interest revenue is recognised as interest accrues using the effective interest rate method.
Grants and other benefits received from the government are recognised in the statement of financial performance at the
fair value of the cash received. Government grants are primarily research and development tax incentives. This represents a
Collectability of receivables is reviewed on an ongoing basis and debts which are known to be uncollectible are written off. The
Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is
based on its historical credit loss experience, and where necessary, adjusted for forward-looking factors specific to the debtors
and the latest economic environment.
Inventories
refundable tax offset that is available on eligible research and development expenditure incurred by the Group.
Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct
Income tax
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the
national income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and adjustments recognised for prior periods where applicable. The Group is tax
consolidated in Australia.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable
materials and direct labour with any variable and fixed overheads expensed is a period cost. Costs of purchased inventory are
determined after deducting rebates and realisable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated cost necessary to make the sale.
Plant and equipment
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.
that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Deferred tax
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
deferred tax balances relate to the same taxation authority.
measured reliably. All other repairs and maintenance are charged to the statement of profit and loss during the financial period
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to
in which they are incurred.
settle on a net basis, or to realise the asset and settle the liability simultaneously.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
its estimated recoverable amount
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
Depreciation / Amortisation
equity, respectively.
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.
40
41
Cellmid 2020 Annual ReportCellmid 2020 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
The depreciation rates used for each class of asset are:
Class of asset
Depreciation Rate
Furniture and fittings
20%
Office equipment
Midkine
6.7% – 40.0%
Based on usage
Estimation of useful lives of assets
Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss.
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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in
the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the
lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.
The Group entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms
of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if
The Group determines the estimated useful lives and related depreciation and amortisation charges for its plant and
that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed
equipment. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected
period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably
greater than its estimated recoverable amount.
certain to occur, and any anticipated termination penalties.
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.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there
is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease
term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
Research and development
Trade and other payables
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.
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
Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by the
measured at amortised cost and are not discounted.
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
• 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.
Impairment of intangible assets.
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.
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.
42
43
Cellmid 2020 Annual ReportCellmid 2020 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
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
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 including:
- any market performance conditions (e.g. the entity’s share price)
- 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
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
- the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a specific period
drawn down. In this case, the fee is deferred until the draw down occurs.
of time).
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another
are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to
party and the consideration paid, including any noncash assets transferred or liabilities assumed, is recognised in profit or loss
vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if
as other income or finance costs.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all
any, in profit or loss, with a corresponding adjustment to equity. 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.
or part of the liability, a gain or loss is recognised in profit or loss, which is measured as the difference between the carrying
The fair value at grant date is determined using the Black-Scholes option pricing model that takes into account the exercise
amount of the financial liability and the fair value of the equity instruments issued.
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
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown
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
recognised in the provision for employee benefits and measured as the present value of expected future payments to be made
in respect of services provided by employees up to the reporting date, using the projected unit credit method. Consideration
in equity as a deduction 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.
Goods and Services Tax (GST)
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.
is given to expected future wage and salary levels, of employee departures and period of service.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
Retirement benefit obligations
Contributions for retirement benefit obligations are recognised as an expense as they become payable. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in the future payment is available. Contributions are
paid into the fund nominated by the employee.
from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
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.
44
45
Cellmid 2020 Annual ReportCellmid 2020 Annual Report NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
2. SEGMENT INFORMATION
2020
Diagnostics
Cellmid/Lyramid
Australia
$
Consumer Health
Advangen
Australia
$
Advangen
USA
$
Advangen
Japan
$
Advangen
Total
$
Group
Total
$
Total revenue and other income
1,110,515
1,198,490
625,873
5,612,837
7,437,200
8,547,715
Cost of goods sold
(357,554)
Selling and distribution expenses
(183,609)
Research and development expenses (439,949)
Administrative expenses
Other operating expenses
(788,495)
(251,551)
(213,311)
(761,109)
(286,692)
(868,545)
(247,931)
(266,508)
(1,696,473)
(2,176,292)
(2,533,846)
(266,542)
(812,799)
(1,840,450)
(2,024,059)
-
(122,378)
(409,070)
(849,019)
Segment operating profit/(loss)
(910,643)
(1,179,098)
(673,522)
511,793
(1,340,827)
(2,251,470)
Corporate costs and unallocated items
Consultancy expense
Subscription expense
Occupancy expense
Share-based payment compensation
Directors’ remuneration
Employee benefits expense
Depreciation and amortisation
Finance costs
Legal fees and claim
Profit / (Loss) before income tax expense
Income tax expense
Profit / (Loss) after income tax expense
(166,445)
(58,639)
(32,669)
(411,554)
(257,102)
(412,254)
(518,656)
(71,257)
(637,777)
(4,817,823)
(89,473)
(4,907,296)
Total assets
Total liabilities
6,617,970
1,497,189
385,936
6,387,116
8,270,241 14,888,211
672,648
1,743,667
62,870
2,598,311
4,404,848
5,077,496
Total Intercompany
18,913,680
(13,556,285)
(2,821,212)
(2,536,183) (18,913,680)
-
2. SEGMENT INFORMATION (CONTINUED)
2019
Diagnostics
Cellmid/Lyramid
Australia
$
Consumer Health
Advangen
Australia
$
Advangen
USA
$
Advangen
Japan
$
Advangen
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)
Administrative expenses
(723,328)
(1,179,594)
(594,497) (1,664,789) (3,438,880)
(4,162,208)
Other operating expenses
(180,401)
(208,143)
(138,168) (310,109) (656,420)
(836,821)
Segment operating profit/(loss)
(660,960)
(1,495,000)
(852,955)
1,656,426
(691,529)
(1,352,489)
(722,834)
(1,971,351)
(3,562,730)
(4,351,225)
Depreciation and amortisation
(43,511)
(498,043)
(789,485)
(1,041,036)
Corporate costs and unallocated items
Consultancy expense
Subscription expense
Occupancy expense
Share-based compensation
Directors’ remuneration
Employee benefits expense
Finance costs
Legal fees and claim
Profit / (Loss) before income tax expense
Income tax expense
Profit / (Loss) after income tax expense
(190,409)
(108,158)
(187,623)
(318,414)
(225,925)
(506,122)
(152,891)
(235,043)
(2,608,371)
(5,885,445)
(24,112)
(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)
-
Major customers
The Group has a number of customers to whom it provides both products and services. The Group supplies a single external
customer in the Advangen segment who accounts for $3.4M of external revenue (2019: $2.8M). The next most significant
customer accounts for $0.5M (2019: $0.9M) of external revenue.
46
47
Cellmid 2020 Annual ReportCellmid 2020 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
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
2020
$
2019
$
7,380,895
101,416
7,301,686
87,787
7,482,311
7,389,473
5,541,809
512,682
1,228,169
199,651
5,888,754
713,323
681,814
105,582
4. OTHER INCOME
Other income:
- Interest income
Other income ^
- Government grants
Total other income
2020
$
2019
$
19,753
205,363
840,288
1,065,404
76,870
72,868
807,973
957,711
^ Other income received in the year included Government assistance in the form of Jobkeeper and Cashboost.
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
Impairment of financial assets - receivables
Depreciation and amortisation expense
Other expenses
6. INCOME TAX
2020
$
(2,533,846)
(1,486,911)
(342,569)
(632,771)
(3,835,910)
(637,777)
(163,835)
(518,656)
(851,221)
2019
$
(2,137,384)
(1,096,930)
(568,895)
(626,623)
(3,918,933)
(2,608,371)
(43,050)
(152,891)
(611,769)
(a) The major components of income tax expense comprise:
Income tax expense
(89,473)
(24,112)
(b) Numerical reconciliation of income tax expense to accounting loss:
Loss for the year before income tax expense
(4,817,823)
(5,885,445)
Prima facie tax benefit on loss from ordinary activities before income tax at 27.50%
(2019: 27.50%)
Add / (less) tax effect of:
- Share based payments
- Sundry items
- Research and development expenditure
- Tax losses not brought to account
Income tax expense
- current tax
- deferred tax
(1,324,901)
(1,618,497)
49,477
113,177
5,914
574,603
492,257
(89,473)
(89,473)
-
60,691
87,564
(132,918)
541,688
1,037,360
(24,112)
(24,112)
-
(89,473)
(24,112)
The Group operates across three main tax jurisdictions being Australia, Japan and USA each with different corporate income tax rates.
(c) Unused tax losses
Movements in unused tax losses
Australia $
Japan $
USA $
Total $
Carried forward unused tax losses at the
beginning of the financial year
29,988,213
78,133
1,676,482
31,742,828
Prior period differences between tax
calculation and income tax return
(3,432,379)
701,998
-
(2,730,381)
Actual carried forward unused tax losses at the
beginning of the financial year
26,555,834
780,131
1,676,482
29,012,447
Current unused / (used) tax losses for which no
deferred tax asset has been recognised
1,833,620
82,224
966,958
2,882,802
Carried forward unused tax losses at the end
of the financial year
Notional tax rate
Potential future tax benefit
28,389,454
27.50%
7,807,100
862,355
30.86%
266,123
2,643,440
21.00%
31,895,249
-
555,122
8,628,345
Total revenue from contracts with customers
7,482,311
7,389,473
- Adjustment for tax-rate differences in foreign jurisdictions
48
49
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
9. EARNINGS PER SHARE
Basic and diluted earnings per share (in cents)
Reconciliation of earnings to profit or loss from continuing operations
2020
$
(5.04)
2019
$
(7.77)
Loss for the year attributable to the owners of Cellmid Limited
(4,907,296)
(5,909,557)
Weighted average number of ordinary shares used in calculating basic
and dilutive earnings per share
No.
97,350,774
No.
75,729,120
6. INCOME TAX (CONTINUED)
Details relating to options are set out in Note 29.
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
10. CASH AND CASH EQUIVALENTS
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
iii. no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses.
Cash at bank and on hand
6,970,967
3,081,924
The effective interest rate on short term bank deposits at 30 June 2020
was 0.75% (2019: 2.4%). These deposits were all at call.
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
11. TRADE AND OTHER RECEIVABLES
of assessable income is passive income. The Group has no capital tax losses available.
7. KEY MANAGEMENT PERSONNEL DISCLOSURES (“KMP”)
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 2020.
Current
Trade receivables
Less: Allowance for expected credit losses
Other receivables
The total of remuneration paid to the directors and KMP of the company and the Group during the year are as follows:
Impairment of receivables
2,051,246
(220,875)
40,261
2,228,939
(86,075)
143,807
1,870,632
2,286,671
Short term employment benefits
Long-term benefits
Post employment benefits
Share-based payments
8. AUDITOR’S REMUNERATION
2020
$
1,460,827
10,211
57,427
459,087
2019
$
924,789
4,583
33,725
115,214
1,987,552
1,078,311
During the year the following fees were paid or payable for services provided by Grant Thornton Audit Pty Limited, the auditor
of the parent entity, its related practices and unrelated firms:
Audit or review of the Group Cellmid Limited
- Australia (Grant Thornton)
- Japan (Grant Thornton)
50
2020
$
103,500
13,000
116,500
2019
$
97,500
10,000
107,500
The Group has recognised a loss of $163,835 (2019: $43,050) in the statement of financial performance in respect of impairment
of receivables for the year ended 30 June 2020.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
2020
Not due
More than 30 days past due
More than 60 days past due
More than 90 days past due
Expected Credit
Loss Rate
%
Carrying
Amount
$
Allowance for
expected credit losses
$
0%
1%
20%
95%
1,734,626
79,995
6,291
230,334
2,051,246
-
800
1,258
218,817
220,875
51
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
11. TRADE AND OTHER RECEIVABLES (CONTINUED)
2019
Not due
More than 30 days past due
More than 60 days past due
More than 90 days past due
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Receivables written off and other adjustments during the year
Foreign exchange movements
Closing balance
Effective interest rates and credit risk
Expected Credit
Loss Rate
%
Carrying
Amount
$
Allowance for
expected credit losses
$
0%
1%
20%
95%
2,085,873
37,535
19,456
86,075
2,228,939
-
413
3,891
81,771
86,075
2019
$
56,967
43,050
(13,942)
-
86,075
2020
$
86,075
163,835
(33,964)
4,929
220,875
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 26. 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
Consumer Health-raw materials at cost
Consumer Health-finished goods at cost
Diagnostics – finished goods at cost
Diagnostics – finished goods at fair value less cost to sell
13. OTHER ASSETS
Prepayments
14. PLANT AND EQUIPMENT
At cost
Accumulated depreciation / amortisation
Movements in carrying amounts
of plant and equipment
Computers and
Office Equipment
Furniture and
Fittings
At cost
Accumulated depreciation / amortisation
Net book value
Balance at 1 July 2019
Additions
Depreciation / amortisation
Foreign exchange movements
Balance at 30 June 2020
Movements in carrying amounts
of plant and equipment
At cost
Accumulated depreciation / amortisation
Net book value
Balance at 1 July 2018
Additions
Depreciation / amortisation
Foreign exchange movements
Balance at 30 June 2019
15. RIGHT-OF-USE-ASSETS
534,765
(420,058)
114,707
133,000
-
(75,670)
57,377
114,707
516,431
(383,431)
133,000
107,676
56,536
(28,532)
(2,680)
133,000
53,238
(40,785)
12,453
16,739
-
(7,181)
2,895
12,453
52,599
(35,860)
16,739
10,077
9,141
(2,479)
-
16,739
650,504
2020
$
2019
$
176,895
246,624
1,588,003
(823,972)
764,031
Midkine
1,000,000
(363,129)
636,871
1,569,030
(768,787)
800,243
Total
1,588,003
(823,972)
764,031
650,504
800,243
-
(13,633)
-
636,871
1,000,000
(349,496)
650,504
653,237
-
(2,733)
-
-
(96,484)
60,272
764,031
1,569,030
(768,787)
800,243
770,990
65,677
(33,744)
(2,680)
800,243
2020
$
2019
$
1,021,001
(281,676)
739,325
1,021,001
(281,676)
739,325
-
-
-
-
-
-
53
657,432
1,685,144
32,560
234,223
577,477
1,005,738
35,193
-
2,609,359
1,618,408
Non current assets
Right-of-use assets
Less: accumulated depreciation
Written down values at the beginning and end of the financial year are set out below:
Provisioning of inventories to net realisable value amounted to $287,113 (2019: $42,890). These were recognised as an expense during
the year ended 30 June 2020 and included in the cost of sales in the statement of profit or loss and other comprehensive income.
Adoption of AASB 16 on 1 July 2019
Depreciation expense
52
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
16. INTANGIBLE ASSETS
Patents and trademarks
At cost
Accumulated amortisation
Movements in carrying amounts of patents and trademarks
Balance at beginning of the year
Additions
Amortisation
Foreign exchange movements
Balance at end of the year
2020
$
2019
$
2,683,554
(926,552)
1,757,002
2,509,874
(751,610)
1,758,264
1,758,264
1,818,504
-
(140,497)
139,235
-
(145,921)
85,681
1,757,002
1,758,264
Intangible assets have finite useful lives. The Group has determined the useful life of the intangible assets at 20 years.
19. LEASE LIABILITIES
Current
Non-current
Interest expense related to lease liabilities
2020
$
247,335
462,411
2019
$
-
-
2,770,047
2,426,909
40,259
-
The Group has leases for office premises in Australia and Japan. Each lease is accounted for on the statement of financial
position as a right-of-use asset and a lease liability. In the prior years these obligations were classified and reported as “lease
commitments”, off-balance sheet.
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another
party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by
incurring a termination fee.
In accordance with individual lease contracts, the Group must keep these properties in a good state of repair and return the
properties in their original condition at the end of the lease. Furthermore, the Group must insure items of property, plant and
equipment and incur maintenance fees on such items in accordance with the lease contracts.
The lease liabilities are secured by the related underlying assets. Future minimum lease payments as at 30 June 2020 were as
follows:
30 June 2020
Lease payments
Finance charges
Minimum lease payment due
Within
1 year
1-2
years
2-3
years
3-4
years
280,566
261,255
223,082
18,590
(33,231)
(23,516)
(13,734)
(3,266)
Total
783,493
(73,747)
Net present values
247,335
237,739
209,348
15,324
709,746
The remaining useful life is 13 years.
17. TRADE AND OTHER PAYABLES
Trade payables
Other payables
18. LOANS AND BORROWINGS
Current
Non-current
2020
$
2019
$
839,727
1,930,320
685,223
1,741,686
2,770,047
2,426,909
217,893
1,033,826
266,804
1,019,855
1,251,719
1,286,659
20. PROVISIONS
Current
Employee entitlements
Non-current
Employee entitlements
Make-good provision
2020
$
2019
$
248,716
214,549
12,347
84,921
97,268
6,740
-
6,740
The current loan amount includes a loan to fund general company insurance for $42,129 at an interest rate of 5.39%.
The non-current loan amount includes loan facilities with Keiyo Bank Ltd at an interest rate ranging between 1.20% - 1.50%.
Amounts payable within 12 months are included within current liabilities.
The loan facilities are secured by a fixed charge over the assets of Advangen Inc. and are fully drawn as at 30 June 2020.
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.
54
55
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
21. ISSUED CAPITAL
(a) Ordinary shares
Issue Price
$
2020
No.
At the beginning of the year
84,009,475
Shares issued – September 2018
0.38
2019
No.
56,912,357
26,381,589
2020
$
2019
$
47,765,837
Shares issue costs
Shares buyback and cancellation
Shares issued – October 2018
Shares issued – November 2018
Shares issued – April 2019
Shares issued – October 2019
Shares issued – November 2019
Shares issued – November 2019
Shares issued – November 2019
Shares issued – April 2020
Shares issued – May 2020
Shares issued – June 2020
At the end of the year
(400,000)
(499,117)
-
(598,553)
0.45
0.37
0.21
0.20
0.20
0.23
0.22
0.22
0.22
4,400,000
8,320,000
50,000
217,391
22,727,273
1,377,272
4,545,455
184,646
630,000
400,000
-
-
-
-
-
-
-
880,000
1,664,000
-
50,000
5,000,000
303,000
1,000,000
125,246,866
84,009,475
56,064,284
47,765,837
38,014,078
10,025,000
(562,860)
(114,795)
84,014
234,400
86,000
-
-
-
-
-
-
-
The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Company. On a
show of hands at meetings of the Company, each holder of ordinary shares has one vote in person or by proxy, and upon a poll
each share is entitled to one vote.
The Company does not have a limited amount of authorised capital and the fully paid ordinary shares have no par value.
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 29 Share based
payments.
For information relating to share options issued to key management personnel during the financial year, refer to the
remuneration report.
21. ISSUED CAPITAL (CONTINUED)
At the beginning of the year
Options lapsed – November 2016
Options lapsed – August 2018
Options issued – September 2018
Options issued – October 2018
Options lapsed – November 2018
Options issued – July 2019
Options issued – November 2019
Options issued – February 2020
Options issued – June 2020
At the end of the year
(b) Capital risk management
2020
No.
1,350,000
(100,000)
-
-
-
-
4,250,000
3,200,000
454,400
1,800,000
2019
No.
1,650,000
-
(900,000)
1,000,000
200,000
(600,000)
-
-
-
-
10,954,400
1,350,000
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.
22. 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
General reserve
Balance at the beginning of the year
Movement during the year
Balance at the end of the year
Foreign currency translation reserve*
Balance at the beginning of the year
Foreign exchange movements
Balance at the end of the year
Total reserves
2020
$
2019
$
103,950
474,254
2,164,497
92,360
-
(2,152,907)
578,204
103,950
-
-
-
528,403
30,647
559,050
1,137,254
18,258
(18,258)
-
412,605
115,798
528,403
632,353
56
57
*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.
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
23. 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
- foreign exchange movements
Changes in operating assets and liabilities
- decrease/(increase) in trade and other receivables
- (increase) / decrease in prepayments
- (increase) in inventories
- increase in trade and other payables
- increase in provisions
Net cash used in operating activities
24. EVENTS AFTER THE REPORTING PERIOD
518,656
461,554
163,835
71,257
(39,323)
321,500
(59,517)
(990,951)
424
446,756
152,891
318,414
2,025
-
141,177
(1,255,325)
10,290
(355,368)
1,182,580
41,500
(4,013,105)
(5,671,373)
The Group signed an exclusive distribution agreement with Tru Beauty Concepts, effective 1 August 2020, a premium salon
distributor, for 11 states in the north east of the United States. The distribution agreement is expected to deliver increased US
revenue from the second half of FY2021.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and is likely to continue to impact operations in FY2021,
although it is not practicable to estimate the potential future impact, positive or negative, after the reporting date. The
situation is dynamic, rapidly emerging and is dependent on potential future measures imposed by the Australian Government
and other countries, such as maintaining social distancing requirements, quarantine, ongoing travel restrictions and any
economic stimulus that may be provided.
25. RELATED PARTY TRANSACTIONS
The Group’s main related parties are as follows:
Parent entity
Cellmid Limited is the ultimate parent entity.
Subsidiaries
For details of disclosures relating to subsidiaries, refer to Note 27. 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 Note 7: “Key Management Personnel Disclosures”.
Transactions with related parties
The remuneration for Ms Halasz is structured to reflect the management costs incurred by each wholly owned subsidiary of the
Cellmid Group. Direct Capital Group Pty Ltd, a management consulting company related to Ms Halasz, was engaged and paid
$208,533 (2019: $207,391) for management and consulting services rendered to the Cellmid Group throughout the year. No
amount was outstanding to Direct Capital Group as at 30 June 2020 (2019: $Nil).
2020
$
2019
$
26. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a number of financial risks as described below. The Group’s overall risk management
program seeks to minimise potential adverse effects on the financial performance of the Group. To date, the Group has not
(4,907,296)
(5,909,557)
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.
Credit risk is managed on a Group basis. For banks and financial institutions, only independently rated parties with a minimum
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, whether through exposure to individual customers, specific industry sectors and/or region.
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.
The expected loss rates are primarily based on the payment profile for recent historic sales and the respective credit losses
occurring during the corresponding period. The loss rates are also adjusted to reflect current and forwarding looking
macroeconomic factors affecting the customer’s ability to settle the amounts outstanding. The group has identified specific
industry trends and general economic performance for those countries in which the customers are domiciled to be the most
relevant factors when estimating credit loss rates.
The historical rates reflect the type of customers for which balances remain outstanding (e.g. wholesalers), their specific
circumstances and the current and forwarding looking macroeconomic factors affecting the customer’s ability to settle the
amount outstanding. The Group has also considered gross domestic product (GDP) and unemployment rates of the countries
in which the customers are domiciled to be the most relevant factors and according adjusts historical loss rates for expected
changes in these factors.
58
59
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
26. 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.
On that basis, the loss allowance at balance date was determined as follows for trade receivables:
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
variables remaining constant would be as follows:
Current
(within 12 mths)
$
Non-Current
(1-5 yrs)
$
2,770,048
-
217,893
1,033,826
2,987,941
1,033,826
2,426,909
-
266,804
1,019,855
2,693,713
1,019,855
30 June 2020
Not
overdue
More than 30
days past due
More than 60
days past due
More than 90
days past due
Total
Expected credit loss rate
0%
1%
20%
95%
Gross carrying amount – trade
receivables
Loss allowance
1,734,626
-
79,995
800
6,291
1,258
230,334
2,051,246
2020
218,817
220,875
30 June 2019
Not
overdue
More than 30
days past due
More than 60
days past due
More than 90
days past due
Total
Expected credit loss rate
0%
1%
20%
95%
Gross carrying amount – trade
receivables
Loss allowance
2,085,873
-
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
expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and
a failure to make contractual payments for a period of greater than 90 days past due. Impairment losses on trade receivables
are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are
credited against the same line item.
b) Liquidity risk
The Group manages this risk through the following mechanisms:
Trade and other payables
Loans and borrowings
2019
Trade and other payables
Loans and borrowings
(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.
• preparing forward-looking cash flow analysis in relation to its operational, investing and financing activities;
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
• 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.
variables remaining constant would be as follows:
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.
The Group holds loans and borrowings with overseas banks which are subject to variable interest rates (refer Note 18 “Loans
and Borrowings”). At reporting date have contractual maturity (including interest payments where applicable) dates are as
Year ended 30 June 2020
+/- 5% in foreign exchange rates
Year ended 30 June 2019
+/- 5% in foreign exchange rates
follows:
60
Loss
$
Equity
$
+/-50,265
+/-12,595
+/-53,964
+/-51,235
61
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
27. INTERESTS IN SUBSIDIARIES (CONTINUED)
The following are the aggregate totals, for each category, relieved under the deed.
Parties to the Deed
of Cross Guarantee
2020
$
Parties to the Deed
of Cross Guarantee
2019
$
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
Interest rate risk
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. The
sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in this risk.
At the end of the financial year, the effect on 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 2020
+/- 1% in foreign exchange rates
Year ended 30 June 2019
+/- 1% in foreign exchange rates
27. INTERESTS IN SUBSIDIARIES
Loss
$
Equity
$
+/-12,517
+/-12,517
+/-12,867
+/-12,867
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 (%)
2020
Percentage Owned (%)
2019
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
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
Securities and Investments Commission.
62
(A) STATEMENT OF FINANCIAL POSITION
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
TOTAL CURRENT ASSETS
NON CURRENT ASSETS
Plant and equipment
Intangible assets
Investment in subsidiaries
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease liabilities
Loans and borrowings
Provisions
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Lease liabilities
Loans and borrowings
Provisions
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
5,965,667
160,550
992,592
78,496
7,197,305
1,259,643
1,440
2,888,105
4,149,188
11,346,493
1,912,674
205,018
42,129
248,716
2,408,537
383,362
476,182
62,346
921,890
3,330,427
8,016,066
56,064,284
578,204
(48,626,422)
8,016,066
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
1,573,162
-
132,315
214,549
1,920,026
-
254,980
6,740
261,720
2,181,746
4,326,249
47,765,837
157,085
(43,596,673)
4,326,249
63
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
27. INTERESTS IN SUBSIDIARIES (CONTINUED)
Parties to the Deed
of Cross Guarantee
2020
$
Parties to the Deed
of Cross Guarantee
2019
$
(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
Adjustment to Accumulated Losses (AASB 16)
Loss after income tax
(5,027,791)
(5,204,076)
-
(5,027,791)
(5,027,791)
-
(5,204,076)
(5,204,076)
(43,596,673)
(1,958)
(5,027,791)
(38,392,597)
-
(5,204,076)
29. SHARE-BASED PAYMENTS (CONTINUED)
A summary of the Company options granted under the Plan and those issued to external vendors to settle liabilities for
services rendered throughout the year is summarised as follows:
Weighted
Average
Exercise price
Balance at
start of
the year
Expiry Date
Granted Exercised
Expired
Balance at
end of
the year
Vested at
end of
the year
July 2020
September 2019
September 2021
October 2021
May 2022
February 2023
July 2024
November 2024
February 2025
March 2025
March 2025
0.60
0.60
0.80
0.80
0.30
0.50
0.23
0.24
0.20
0.27
0.23
50,000
100,000
1,000,000
200,000
-
-
-
-
-
-
-
-
-
-
-
1,000,000
254,400
4,250,000
3,200,000
200,000
500,000
300,000
1,350,000
9,704,400
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
50,000
(100,000)
-
100,000
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
200,000
200,000
1,000,000
1,000,000
254,400
254,400
4,250,000
2,000,000
3,200,000
200,000
500,000
300,000
-
-
-
(100,000)
10,954,400
1,250,000
The weighted average exercise price of options outstanding at the end of the financial year was $0.31 (2019: $0.78). The weighted
average remaining contractual life of the options outstanding at the end of the financial year was 3.7 years (2019: 0.33 years).
There were no other options were on issue.
30. PARENT ENTITY INFORMATION
The following information has been extracted from the books and records of the parent, Cellmid Limited, and has been
Accumulated Losses at the end of the year
(48,626,422)
(43,596,673)
prepared on the same basis as the consolidated financial statements. Investments in subsidiaries and intercompany loans are
accounted for at cost in the financial statements of the parent entity.
28. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The amounts recorded in legal fees and claim 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
Statement of Financial Position
International Pty Ltd and Ikon Communications (Ikon). Originally, 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. In August 2020 a cost assessment was completed by the Court and the
costs of $1,406,982 has been fully provided for as at 30 June 2020.
Guarantees
The Group has given bank guarantees as at 30 June 2020 of $134,290 (2019: $129,560) relating to the lease of commercial
office space. For information about guarantees given by entities within the Group, including information on the parent entity,
please refer to note 30.
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.
29. SHARE-BASED PAYMENTS
ASSETS
Current assets
Non current assets
Total Assets
LIABILITIES
Current liabilities
Non current liabilities
Total Liabilities
NET ASSETS
EQUITY
Issued capital
Accumulated losses
Share based payments reserve
Total Equity
Statement of Profit or Loss and Other Comprehensive Income
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.
Loss of the parent entity
Total comprehensive income
64
2020
$
2019
$
5,840,717
5,641,418
11,482,135
740,510
446,691
1,187,201
2,055,817
4,730,419
6,786,236
626,402
302,557
928,959
10,294,934
5,857,277
56,064,284
(46,347,554)
578,204
10,294,934
4,397,352
4,397,352
47,765,837
(42,012,510)
103,950
5,857,277
4,015,232
4,015,232
65
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
DIRECTORS’
DECLARATION
The directors of the company declare that:
1. the financial statements and notes, as set out on pages 30 to 65, 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 2020 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.
Dr David King
Director
Dated this 27th day of August 2020
66
67
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68
69
Cellmid 2020 Annual ReportCellmid 2020 Annual Report 70
71
Cellmid 2020 Annual ReportCellmid 2020 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.
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
%
84
1,028
458
864
188
29,100
3,055,445
3,665,510
28,699,576
89,797,235
0.02%
2.44%
2.93%
22.91%
71.70%
2,622
125,246,866
100.00%
NUMBER OF HOLDERS AND VOTING RIGHTS IN EACH CLASS OF SECURITIES
Balance
Percent
Class of Security
Ordinary Shares
Unlisted Options
No. of Holders
Voting Rights
2,622
12
Yes
No
This information is effective as at 19 August 2020.
20 LARGEST SHAREHOLDERS
Fully paid shares
Shareholders
MR DENNIS KEITH ECK
UBS NOMINEES PTY LTD
MOORE FAMILY NOMINEE PTY LTD (MOORE FAMILY SUPER FUND A/C)
MS JANET HEATHER CAMERON
JASGO NOMINEES PTY LTD (JASGO FAMILY A/C)
DIRECT CAPITAL GROUP PTY LTD
LTL CAPITAL PTY LTD
MR GREGORY GLENN WORTH (WORTH S/F A/C)
EVANEU (NOMINEES) PTY LTD & RICNEU (NOMINEES) PTY LTD
(EVAN RICKY NEUMANN A/C)
MRS REBECCA SHALALA
MR PETER HOWELLS
SEISTEND (SUPER) PTY LTD (DW KING SUPER FUND A/C)
CELL SIGNALS INC
CITICORP NOMINEES PTY LIMITED
DMX CAPITAL PARTNERS LIMITED
MR KEVIN PETER HOOPER & MR RONALD LESLIE HOOPER
(SATHNASH P/L SUPER FUND A/C)
MRS MARGARET ANN RYAN & MR MICHEAL RODNEY RYAN
P & M MAGUIRE SUPER PTY LTD (P & M MAGUIRE S/F A/C)
MR TREVOR GOTTLIEB
MR GERALD WILLIAM SIMMS
MR DARIN ANJOUL & MRS TANIA ANJOUL (TAN GROUP SUPER FUND A/C)
MR SCOTT JEFFREY RICHARD CHAPMAN
Top 20
Issued Share Capital
SUBSTANTIAL HOLDERS
12,497,152
3,663,378
3,500,000
2,958,618
2,331,578
2,031,000
1,850,000
1,824,000
1,657,894
1,643,720
1,500,000
1,300,000
1,300,000
1,271,121
1,225,000
1,100,000
1,100,000
1,000,000
914,974
900,000
850,000
774,474
9.98%
2.92%
2.79%
2.36%
1.86%
1.62%
1.48%
1.46%
1.32%
1.31%
1.20%
1.04%
1.04%
1.01%
0.98%
0.88%
0.88%
0.80%
0.73%
0.72%
0.68%
0.62%
47,192,909
125,246,866
37.68%
100.00%
Mr Dennis Keith Eck is an individual substantial shareholder of Cellmid Limited shares who holds 12,497,152 shares or 9.98%
of the voting rights.
72
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 994, with a total 2,251,519 shares, amounting to
1.80% of issued capital.
CLASSES OF UNQUOTED SECURITIES
Class of Security
Unlisted Options
HOLDING ANALYSIS UNQUOTED SECURITIES
Holding Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,0000
100,001 – 99,999,999
Totals
No. of Holders
Total Units
12
10,869,400
Holders
Total Units
-
-
-
-
12
12
-
-
-
-
%
-
-
-
-
10,689,400
10,689,400
100.00%
100.00%
73
Cellmid 2020 Annual ReportCellmid 2020 Annual Report
ADDITIONAL INFORMATION FOR
LISTED ENTITIES CONTINUED
CORPORATE
DIRECTORY
SUBSTANTIAL HOLDERS OF UNQUOTED SECURITIES
Substantial individual holders of unlisted options as at 19 August 2020 were:
• Direct Capital Group Pty Ltd (28.07%)
• Bluewave Biotechnology (23.39%)
CLASSES OF RESTRICTED SECURITIES
Class of Security / Restriction
Ordinary Shares – Voluntary Escrow
Ordinary Shares – Voluntary Escrow
Ordinary Shares – Voluntary Escrow
GENERAL
Cellmid is not currently conducting an on-market buy-back.
End Date
Total Units
13 Nov 2020
9 Oct 2020
250,000
184,646
19 June 2021
4,525,455
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 / Evolis Japan 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
Managing Director and Chief Executive Officer
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
74
75
Cellmid 2020 Annual ReportCellmid 2020 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
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Cellmid 2020 Annual Report