Cryosite Limited
Appendix 4E
ABN 86 090 919 476
Full year report
Results for announcement to the market
1. Details of Reporting Period
The financial information contained in this report is for the year ended 30 June 2019. Comparative
amounts (unless otherwise indicated) relate to the year ended 30 June 2018.
2. Results for Announcement to the Market
2.1 Revenue from ordinary activities:
Up
34.6%
to
7,973k
$A'000
2.2 Profit(loss) from ordinary activities after tax
attributable to members:
2.3 Net profit (loss)for the period attributable to
members:
3. Dividends
Down
38.8%
to
(1,723)
Down
38.8%
to
(1,723)
The Board of Cryosite has recommended that no dividends be paid.
4. Commentary on the results to the market
The audited annual accounts are attached. Please refer to these for full results and commentary.
1B5. NTA backing
8
Net tangible asset backing per ordinary security
Current period
Previous
corresponding
Period
(3.7) cents
4.0 cents
CRYOSITE LIMITED
ABN 86 090 919 476
Annual Report
for the year ended 30 June 2019
CRYOSITE LIMITED ANNUAL REPORT
Table of Contents
Page
Corporate Information
Director’s Report
Auditor’s Independence Declaration
Corporate Governance
Directors Declaration
Consolidated Statement Of Profit And Loss And Other Comprehensive Income
Consolidated Statement Of Financial Position
Consolidated Statement Of Changes In Equity
Consolidated Statement Of Cashflows
Notes To The Financial Statements
1 Corporate Information
2 Summary Of Significant Accounting Policies
3 Significant Accounting Judgements, Estimates And Assumptions
4 Transition To AASB 15
5 Segment Information
6 Revenue
7 Expenses
8 Income Tax
9 Earnings Per Share
10 Cash And Cash Equivalents
11 Statement Of Cash Flow Reconciliation
12 Current Assets - Trade and Other Receivables
13 Current Assets - Inventories
14 Prepayments
15 Other assets
16 Non-Current Trade And Other Receivables
17 Non-Current Assets - Investment in Subsidaries
18 Non-Current Assets - Plant And Equipment
19 Non-Current Assets - Intangible Assets
20 Deferred Costs
21 Current Liabilties - Trade And Other Payables
22 Unearned Income
23 Deferred Revenue
24 Provisions
25 Contributed Equity and Accumulated Losses
26 Reserves
27 Commitments And Contigencies
28 Auditors Remuneration
29 Related Party Disclosures
30 Share-Based Payments Expense
31 Key Management Personnel
32 Financial Instruments
33 Parent Entity Financial Information
34 Discontinued Operations
35 Legal Settlement
Independent Auditor’s Report
ASX Additional Shareholder Information
1
2
16
17
18
19
20
21
22
23
23
23
34
38
40
42
42
43
45
47
48
49
50
50
51
51
51
52
52
54
54
55
55
55
56
57
57
58
58
59
62
63
67
68
69
70
74
CRYOSITE LIMITED ANNUAL REPORT
Corporate Information
DIRECTORS
Mr. Bryan Dulhunty (Executive Chairman)
Mr. Andrew Kroger (Non-Executive Director)
Mrs Nicola Swift (Non-Executive Director)
COMPANY SECRETARY
Mr. Bryan Dulhunty (CoSA Life Science - Corporate)
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
13a Ferndell Street
SOUTH GRANVILLE NSW 2142
Telephone:
Fax:
Email: corporate@cryosite.com
+61 2 8865 2000
+61 2 8865 2090
SHARE REGISTER
Link Market Services Limited
Level 8, 580 George Street
SYDNEY NSW, 2000
Telephone:
+61 2 8260 7111
AUDITORS
Mazars Risk & Assurance Pty Limited Level 12, 90 Arthur Street
NORTH SYDNEY NSW, 2060
Telephone:
+61 2 9922 1166
INTERNET ADDRESS
www.cryosite.com
Cryosite Limited Annual Report
1
Directors’ Report
The directors present their report together with the financial statements on the consolidated entity (the Group)
consisting of Cryosite Limited (the Company) and the entity it controlled for the year ended 30 June 2019.
DIRECTORS
The following persons were directors of Cryosite Limited during the whole of the financial year and up to date
of this report unless otherwise stated:
Mr. Bryan Dulhunty
Mr. Andrew Kroger
Mrs. Nicola Swift
Executive Chairman (Non- executive up to the 27th June 2019)
Non-executive
Non-executive
Names, qualifications, experience, interests and special responsibilities
Bryan Dulhunty, BEc, CA
Mr. Dulhunty brings a wealth of life science experience to the position having been involved in the industry for
the past 20 years. Mr. Dulhunty provides a range of consulting services to the life science industry. Mr. Dulhunty
has served as a director of a number of listed ASX and non-listed life science companies, including holding the
positions of Executive Chairman and Managing Director of Viralytics Ltd from 2005 to 2012. Mr. Dulhunty is a
Chartered Accountant and holds an Economics Degree from Sydney University. Mr. Dulhunty was appointed to
the Board on 2nd March 2018 and Executive Chairman on the 27th June 2019.
Interest in shares and options at date of report
Shares
Options
Special responsibilities
Mr. Andrew Kroger, BEc. LLB, Non-Executive Director
30,000
1,300,000
Executive Chairman
Chair of the Audit and Risk Committee
Company Secretary
Mr. Kroger has had a career in stockbroking, law and general management including two years running Forsayth
Group in 1990 which was Australia’s ninth largest gold producer at that time. Mr. Kroger is the owner of Process
Wastewater Technologies LLC, a company with its major business being in wastewater in the United States. Mr.
Kroger has a Bachelor of Economics and a Bachelor of Laws from Monash University. Mr. Kroger was appointed
to the Cryosite Limited board in November 2011.
Interest in shares at date of report
17,315,291
Mrs. Nicola Swift, BA (Mod) Legal Science, MA, CFA, GAICD, Non-Executive Director
Mrs. Swift has an extensive background in the international investment management and securities industry as
a research director, portfolio manager and equity analyst. She has over 16 years of experience gained in London,
Sydney and Boston with various global institutional investors. Mrs Swift is a Chartered Financial Analyst, a
graduate of the Australian Institute of Corporate Directors and holds an Honours Law degree and a Masters of
Arts from Trinity College Dublin. She is the CEO of Heads Over Heels Connections Pty Ltd and is also a Director
of Ascham Foundation Ltd and Ascham School Ltd. Mrs. Swift was appointed to the Board on 3 November 2016.
Interest in shares at date of report
Nil
Special responsibilities
Chair of the Remuneration and Nominations
committee
Cryosite Limited Annual Report
2
Directors’ Report (continued)
COMPANY SECRETARY
Bryan Dulhunty, BEc, CA
Company Secretarial Services for Cryosite Limited are provided by CoSA Life Science - Corporate, a Company
Secretarial firm specialising in the Life science industries.
EARNINGS PER SHARE
Basic earnings per share (cents)
Diluted earnings per share (cents)
2019
(3.68)
(3.62)
2018
(2.65)
(2.61)
DIVIDENDS
No dividends were paid during the financial year. The total dividends declared were $nil (2018: nil).
PRINCIPAL ACTIVITIES
The company’s principal activities are the provision of supply chain logistics, management of pharmaceutical
products used in clinical trials, management of biological materials and long-term storage of cord blood and
tissue samples.
Cryosite operates through two operating segments:
Clinical Trials & Biological Services Logistics
This business provides specialist temperature-controlled storage, sourcing, labelling, status management,
secondary packaging, schedule drug distribution, destruction, returns and biological services to the clinical
trial and research industry.
Cord Blood and Tissues Storage
This business provides long term storage for cord blood and tissue samples.
REVIEW OF OPERATIONS
In the 2018 Chairman’s letter to shareholders it was stated that “2019 will be a challenging year for the Company
however the Company expects to end the year with a clear focus and a profitable and growing clinical trial
logistic business supported by the long-term storage of Cord Blood and Tissue contracts” and this is exactly what
occurred.
The Company reporting sales growth of 34% to $7,912k, incurred a loss after tax of $1,723k and an operating
cash outflow of $648k for the year ended 30 June 2019.
These results are driven by a combination of one off costs, significant changes in accounting standards affecting
our cord blood and tissue business segment, discontinuation of the processing of cord and tissue samples and
changes to the sales product mix of the clinical trials logistic segment.
One off costs
The company incurred two one off costs totaling $1,488k;
- ACCC fine and related costs of $1,157k reported in other items in the profit and loss statement (refer note 35)
and
-impairment losses of $331k as reported within expenses. (refer note 7)
These items are discussed in detail in the annual report.
Cryosite Limited Annual Report
3
Directors’ Report (continued)
Sales
Total sales revenue grew $2,048k to $7,912k. Cord blood and tissue revenue grew by $2,168 offset by a decline
in clinical trial logistic revenue of $120k.
Cord blood and tissue revenue grew substantially despite the company ceasing to process cord blood and tissue.
This growth in revenue is the result of the introduction of a new accounting standard AASB 15. The effect of this
standard has been to reinstate revenue and costs previously recorded in past periods as deferred revenue and
costs on the Statement of Financial Position. Each year we then take to account a proportion of the total revenue
and costs from prior periods spread over the life of the original contracts. The accounting effect of this is set
out in note 4.
It is important to note that the revenue and costs are principally deferred accounting entries and do not
represent cash flow.
Clinical trial logistics saw revenue decline by $120k to $5,190k. This was due to a change in the sales product
mix. As previously announced, a client, at the start of the year, consolidated their warehousing and logistics
management of a commercial scale product with an international distribution company. This product was a high
margin product for Cryosite. While Cryosite’ s was able to introduce a new product offering to its existing client
base and grow sales, the margins on this new product was much lower than the sales we lost.
Operating Loss after tax
As noted above one off costs of $1,488k contributed to the after tax loss of $1,723k. Other significant
contributions to the loss was a decline in the clinical trial logistics margin of $457k as a result of the change in
product sales mix discussed above, business development costs of $252k and system development costs of
$183k. These items were offset by an increase in cord blood and tissue margin to $872k primarily due to the
adoption of AASB 15 as noted above.
Operating cash outflow
The Company incurred an operating cash outflow of $648k for the period. Similar to the operating profit before
tax, operating cash flow were affected by a number of unique one-off factors. One off cash payments relating
to the ACCC fine and related costs of $687k and net cash outflows relating to our operating segments of $521k
which was largely driven by an increased focus on business development ($458k) and system development
costs($187k). These outflows were partially offset by cash inflows from the cord blood and tissue segment of
$593k from the run off of customers paying down long-term cord blood and tissue plans.
Outlook
As can be seen from the above analysis the company faces a number of challenges.
Operating profit: Excluding one off costs the business is fundamentally breaking even as a result of the loss of a
high margin customer and fixed costs now having to be covered by the clinical trial segment instead of being
spread over both the cord blood business segment and the clinical trial segment.
As set out in the trading update of 27 June 2019 the Company has taken steps to address these challenges.
Within the clinical trial segment there are a number of opportunities to increase gross margins as well as
significant savings that can be made by using more appropriate business development strategies. The nature of
this segment is it operates in a highly regulated environment and is dominated by a small number of large
international pharmaceutical companies. The Company has had long term relationships with the majority of
these companies. The management of these relationships require a very professional operational relationship
based on trust and reliability. We are now taking steps to deepen these relationships with the provision of
additional high margin services, provision of more extensive data and an extension of our partnership by
assisting our customers in meeting challenges that occur in the rapidly changing regulatory environment in
Cryosite Limited Annual Report
4
Directors’ Report (continued)
Australia.
Operating cashflow: In terms of operating cashflow we are faced with similar challenges. As set out above we
will address these issues by offering higher margin product, driving efficiencies and cost cutting as set out in our
trading update of 27 June 2019.
The Company does face an additional cash challenge. The cord blood segment continues to store cord and tissue
under 18 and 25 year contracts. The majority of these contracts had upfront or short-term payments terms
covering the storage of the samples for the life of the contract. We are now in the run-out period of the
remaining payment term contracts. As these amounts are received future cash flows will be reduced.
The Company continues to hold substantial cord blood and tissue assets and is looking at ways to generate
further long term cash and profitability from them.
Returning Cryosite to a company generating an appropriate return on capital will not be a quick process but the
initial steps are being taken. I do note that the Company does have a cash balance of $3,919k and no borrowing.
Australian Competition and Consumer Commission (“ACCC”)
As previously outlined in the 2018 Annual Report, on 23 June 2017 Cryosite entered into an agreement (Sale
Agreement) to license, under the Cryosite brand, the collection, processing and storage of umbilical cord blood
and tissue (CBT) and to sell certain of its CBT banking assets to Cell Care Australia Pty Ltd (Cell Care).
On the 11th July 2018, the Company was notified by the ACCC that it would commence civil proceedings against
Cryosite in the Federal Court of Australia. At the time it was reported that the Company would incur substantial
legal costs with the potential to incur financial penalties in the 2019 financial year.
The ACCC alleged in the proceeding that Cryosite breached the CCA by including a competition restraint
provision in the Sale Agreement, which required Cryosite to refer all sales enquiries to Cell Care from the date
of signing of the contract to the date on which the transaction closed. This constituted a 'cartel provision'.
Further to this, the Company agreed to a settlement with the Australian Competition and Consumer Commission
(ACCC) in relation to the proceeding against Cryosite in the Federal Court of Australia.
While Cryosite agreed to the inclusion of the restraint clause in the Sale Agreement and referred 12 customers
to Cell Care under this clause, Cryosite had no intention to breach the CCA and had no awareness that the Sale
Agreement contained a clause which would contravene the CCA. It is to be noted that Cryosite retained external
lawyers to advise it in relation to the drafting and terms of the Sale Agreement; that Cryosite’s external lawyers
were involved in the negotiation of the Sale Agreement, but did not raise any concerns about cartel provisions;
and any suggested changes to the draft Sale Agreement made by Cell Care were considered and agreed upon by
the Board of Cryosite following legal advice.
Cryosite is obviously disappointed to have been party to the proceeding.
Under the terms of the settlement, the ACCC applied to the Federal Court seeking declarations that by entering
into the Sale Agreement, Cryosite entered into a contract containing a cartel provision in contravention of
section 44ZZRJ of the CCA and that, including by referring 12 customer enquiries, Cryosite gave effect to a cartel
provision in contravention of section 44ZZRK of the CCA. The ACCC sought a pecuniary penalty of $1.1m
(including legal costs) against Cryosite, with Cryosite being allowed to pay the penalty in instalments with
$250,000 (including legal costs) to be paid within 30 day' of the Court's order and the balance to be paid in 10
equal annual instalments from 2020 to 2029. Cryosite agreed to the declarations of contravention and orders
against it.
On the 13th February 2019, the Federal Court of Australia approved this settlement.
The Company has taken up these costs as “other liabilities” on the balance sheet. These costs (after discounting
Cryosite Limited Annual Report
5
Directors’ Report (continued)
of the non-current portion of the other liabilities) plus the legal costs associated with this action has resulted in
total expense of $1,157,386 being recorded in the profit and loss. Details of these expenses are outlined in Note
35.
Adoption of Accounting Standard AASB 15
On the 1st July 2018, the Company adopted Accounting Standard AASB 15 – Revenue from Contracts with
Customers. This will a significant impact on future results of the Cord Blood and Tissue Storage, as the standard
changes the timing and recognition of revenue and associated costs of long-term contracts.
As previously noted in our 2018 annual report, the initial effect of the introduction of this standard was to
reduce net assets of the Company on the 1st July 2018 as outlined below:
Assets
Liabilities
Equity
30-Jun-18
7,743,679
5,800,264
1,943,415
AASB 1015
opening
adjustment
1-Jul-18
22,823,305 30,566,984
24,789,440 30,589,704
(1,966,135)
(22,720)
AASB 15 resulted in the booking of an opening adjustment to recognize deferred revenue (representing
collection and processing fees recognised upfront at the inception of the contract) and deferred costs
(representing upfront costs on collection and processing of cord blood and tissue samples) as outlined in Note
4. These deferred balance sheet assets and liabilities will be taken to revenue and expense over the life of each
individual contract which ranges from18 years to 25 years.
In 2019, the total adjustment to the profit and loss statement was:
Deferred Revenue
Deferred Costs
Net profit
Income tax
Net profit after income tax
$
2,259,252
(1,393,500)
865,752
238,068
627,684
This adjustment was allocated to the Cord Blood and Tissue Storage segment of the business. There is no impact
on cash and all adjustments are expected to reverse over the period of the contracts.
Full details of the impact of AASB 15 on the financial results is outlined in Note 4.
EMPLOYEES
The Company employed 21 full-time equivalent employees as at 30 June 2019 (2018: 23 employees).
The Company recognises the value of diversity in the workplace and is committed to providing equal opportunity
for all its staff with 51% of current employees being female. There are numerous religions and cultures and
where possible offer flexible work practices and work life balance as a key retention tool. Cryosite is committed
to providing a workplace free from any form of harassment, bullying and discrimination.
EMPLOYEE INCENTIVE PLANS
In February 2017, the Cryosite Employee Incentive Plan (CEIP) was introduced to attract, retain and motivate
Cryosite Limited Annual Report
6
Directors’ Report (continued)
management to strengthen their alignment with shareholder interests. This plan was ratified at the 2017 AGM.
As at the date of this report there are 3,314,946 (2018: 1,009,249) unissued ordinary shares under the CEIP split
between performance rights and options as noted:
Performance rights
Options
Total
2019
714,946
2,600,000
3,314,946
2018
1,009,249
-
1,009,249
Please refer to the remuneration report for further details. The circumstances under which a Key Management
Personnel is entitled to retain these performance rights and options if he or she should leave the Company
before the vesting date is controlled by the terms of the CEIP and is at the discretion of the Board.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than detailed in the above there were no significant changes in the state of affairs of the Group during
the year.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
As at the date of this report there are no significant events that have occurred since the 30th June 2019.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Board expects to focus on a growing clinical trial and biological services logistics business supported by the
long-term storage of cord blood and tissue for existing clients.
ENVIRONMENTAL REGULATIONS
The Company provides a range of services that require compliance to a variety of regulatory and statutory bodies
regulations, including the Therapeutic Goods Administration (TGA), the Office of Drug Control, the Department
of Agriculture and Water Resources, the NSW Department of Health, and the Office of the Gene Technology
Regulator (OGTR). Additionally, the Company must comply with the quality system requirements of many of its
customers. The Company has implemented a Company-wide quality management system to ensure that it meets
or exceeds the requirements of all these interests.
There have been no significant known breaches of the consolidated entity’s licence conditions or any regulations
to which it is subject. The Company, to the best of its knowledge, is not subject to any specific environmental
regulations.
BUSINESS RISKS
Most of the services that Cryosite provide to generate income require some form of statutory licensing or
compliance authority. The failure by Cryosite to attain and maintain such licences and approvals would have a
significant negative effect on the Company’s ability to continue to provide such services and to maintain its
viability. As referred to in other parts of this report, Cryosite is committed to mitigating risks in this area by the
implementation and maintenance of a Company-wide Quality Management System.
INSURANCE OF DIRECTORS AND OFFICERS
The Company has paid a premium in respect of a contract insuring all the Directors and Officers against liability,
except willful breach of duty, of a nature that is required to be disclosed under section 300(8) of the Corporations
Act 2001. In accordance with commercial practice, further details of the nature of the liabilities insured against
and the amount of the premium have not been disclosed.
Cryosite Limited Annual Report
7
Directors’ Report (continued)
In addition to the above, the Directors and certain Officers of the Company have entered into a Deed of
Indemnity and Access confirming the Company’s obligation to maintain an adequate Director and Officer
Liability insurance policy and confirming the individual Directors’ and Officers’ right to access board papers and
other Company documents. In return, the individual Directors and Officers have agreed to allow the Company
to conduct the defence should the event arise.
The Company has not otherwise, during or since the end of the financial year, indemnified or agreed to
indemnify an Officer or Auditor of the Company or of any related body corporate against a liability incurred as
such an Officer or Auditor.
REMUNERATION REPORT (Audited)
This remuneration report outlines the director and executive remuneration arrangements of the Company and
the Group in accordance with the requirements of the Corporations Act 2001 and Regulations. For the purposes
of this report, key management personnel (KMP) of the Group are defined as those persons having authority
and responsibility for planning, directing and controlling the major activities of the Company and the Group,
directly or indirectly, including any director (whether executive or otherwise) of the parent Company, and
includes an executive in the Parent and the Group receiving the highest remuneration.
This has been audited by Mazars Risk & Assurance Pty Limited and is included within the scope of the audit
report on pages 8-13.
Key Management Personnel
Details of the nature and amount of each element of remuneration for key management personnel of the
Company which includes those key management personnel receiving the highest compensation for the financial
year are as follows:
Mr. Bryan Dulhunty
Mr. Andrew Kroger
Mrs. Nicola Swift
Mr. Mark Byrne
Executive Chairman (Non- Executive Chairman up to the 27th June 2019)
Non-Executive Director
Non-Executive Director
Chief Executive Officer
On the 27th June 2019 it was announced that Mark Byrne has decided to step down up as CEO on the 30th
September 2019 and take up a new part time role of COO - Finance and Administration. He will continue to work
closely with the board. Mr Bryan Dulhunty has taken up the new role of executive chairman effective 27th June
2019.
Due to the relatively small number of employees, apart from Mark Byrne, there were or are no other executives
having authority and responsibility for planning, directing and controlling the activities of the entity either
directly or indirectly during the current year.
The role of the Nominations and Remuneration Committee
While the Board maintains the authority and responsibility for the oversight of the Company’s remuneration
policy and the principles and processes which underpins the policy, on 9 December 2016, the Board established
a Nominations and Remuneration committee to provide advice and recommendations to the Board on the
structure and level of remuneration for the directors, senior executives and Company secretary, and on the
design and award of all executive incentive plans.
The members of the committee are the independent non-executive director, Mrs. Nicola Swift (Chair) and
executive chairman Mr. Bryan Dulhunty.
Cryosite Limited Annual Report
8
Directors’ Report (continued)
Use of external remuneration consultants
As necessary the Nominations and Remuneration Committee obtained independent external recommendations
and advice from Crichton and Associates Pty Ltd on matters including the design of a long-term incentive plan
for employees, its implementation and management. No remuneration recommendations as defined in section
9B of the Corporations Act 2001 were received from Crichton and Associates Pty Ltd during this time period.
Crichton and Associates Pty Ltd were paid $5,837 for services including the management of the Cryosite
Employee Incentive Plan (CEIP).
Remuneration philosophy
The Company recognises the importance of structuring remuneration packages of its key management
personnel so as to attract and retain people with the qualifications, skills and experience to help the Company
achieve the required objectives. However, the Company understands that a prudent position must be observed
in the total remuneration expense.
Non-Executive Directors
Cryosite has two non-executive directors and a non-executive Chairman (who become the Executive Chairman
on the 27th June 2019). The remuneration of non-executive directors including the non-executive Chairman
consists of fixed annual fees exclusive of statutory superannuation as below. Apart from reimbursement of
expenses incurred on the Company’s behalf, non-executive directors are not eligible for any additional
payments.
Chairman of the Board:
Non-Executive Directors:
$75,000 per annum
$60,000 per annum
Performance based compensation is not part of the remuneration structure offered to non-executive directors.
No performance rights or options are held by any non-executive director.
Total remuneration paid to non-executive directors is determined by the Board from time to time for
presentation to and resolution by shareholders at the Annual General Meeting. The current maximum aggregate
remuneration paid to non-executive directors is $350,000 per year. During 2019 total aggregate remuneration
paid to non- executive directors was $261,775.
Executive Remuneration
Key management personnel (other than non-executive directors) are employed on standard contracts which
include a three month notice.
The Company may terminate the employee's contract without notice if serious misconduct has occurred. Where
termination with cause occurs, the executive is only entitled to that portion of remuneration that is fixed, and
only up to the date of termination. On termination with cause, any performance rights that have granted but
not vested will be forfeited.
The Company does compare remuneration paid to key management personnel with other similar companies to
ensure consistency.
Executive total remuneration consists of the following components:
Fixed Remuneration
This comprised of a fixed base salary and statutory superannuation. This is reviewed annually although there is
no guaranteed increase.
Cryosite Limited Annual Report
9
Directors’ Report (continued)
Short Term Incentive Plans
2019
Due to the on-going challenges facing the Company, no formal STIP plan was put in place for 2019.
2018
Due to the significant challenges facing the Company in 2018, no formal STIP plan was put in place. However,
the Board has awarded limited discretionary bonuses to executives on a reasonable basis, taking into account
the Company’s financial performance, in recognition of the efforts undertaken by the individuals.
Long Term Incentive Plan: Cryosite Employee Incentive Plan (CEIP)
On the 23rd February 2017, the Cryosite Employee Incentive Plan (CEIP) was established by the Company. On
invitation, the CEIP provides executives the opportunity to receive a long-term equity based incentive in each
financial year and is governed by the CEIP Plan Rules.
Performance Rights
Since the establishment of the CEIP, the company has granted a number of performance rights. This grant value,
subject to shareholder approvals, is defined as a % of fixed remuneration or as otherwise agreed. The following
%’s of fixed remuneration were used in determining the grant value for each executive. The grant value was
converted into the number of performance rights to be issued using the WVAP of Cryosite shares in the 30
trading days following the release of the Annual Report.:
Mark Byrne
2019
-
2018
30%
The following components of the CEIP for performance rights are as follows;
Up to 36 months from date of grant.
Vesting date
Vesting conditions
Performance conditions
Service conditions
Expiry date
Exercise of Rights
Performance rights will only vest after certain performance and conditions are
met.
Compound Annual Growth Rates (CAGR) of the Earnings per Share (EPS)
over measurement period need to be achieved from a base year.
Continuous employment with Cryosite from the date of the performance
rights are granted until the vesting date.
Performance rights will expire 1 month after the vesting date
Any Performance rights which meet the Vesting conditions will be
available for exercise up until the Expiry date.
The board has granted performance rights to the following key management personnel:
Mark Byrne
Balance granted as at 1st July 2017
Performance Rights granted 27/11/2017
Performance Rights granted 7/2/2018
Balance granted as at 30th June 2018
Balance granted as at 30th June 2019
No of Performance Rights
2019
-
-
2018
503,944
503,944
Mark Byrne
No
211,002
295,647
208,297
714,946
714,946
Cryosite Limited Annual Report
10
Directors’ Report (continued)
27 February 2017
1 September 2019
30 September 2019
7th February 2018
27 November 2017
1 September 2020
1 September 2020
30 September 2020
30 September 2020
1/7/2017 to
1/7/2017 to
30/6/2020
30/6/2020
1/7/2016 to 30/6/2019
2017
2017
2016
0.64 cents
0.48 cents
0.48 cents
Earnings per Share (EPS) Compound Annual Growth Rate (CAGR)
Conditions
Grant date
Vesting date
Expiry date
Period
Base Year
Basic EPS
Measure
Targets
CAGR of EPS
over
measurement
Period relative
to base year
Grant Date
< 20%
EPS (cents)Target
per plan
27-Nov-17
<0.83
27-Feb-17
< 1.10592
7-Feb-18
<0.83
20% to 25%
>25%
1.105592 to 1.25
>1.25
0.83 to 0.94
>0.94
0.83 to 0.94
>0.94
Percentage of
Performance
Rights that vest
0%
50-100% (pro-
rata)
100%
As at 30 June 2019, no performance rights had vested. Assumptions used to determine fair value of
performance rights are outlined in Note 30.
Options
On the 27th June 2019, the board granted options to the following key management personnel:
Options granted 27th June 2019
Total options issued as at 30th June 2019
Bryan Dulhunty*
No
1,300,000
1,300,000
* There is a restriction on settlement as they have been granted without shareholder approval and therefore
settlement will be restricted to on market purchase pursuant to ASX Listing Rule 10.15B. Shareholder approval
will be sought at the 2019 AGM and, if received, this restriction may no longer apply.
The following components of the CEIP for options are as follows;
Vesting date
Option price
Vesting conditions
Performance conditions
Service conditions
Expiry date
Exercise of Options
Up to 25 months from date of grant.
6 cents
Options will only vest after certain performance and conditions are met.
Earnings per Share (EPS), Operating cashflow
Continuous employment with Cryosite from the date of the options are
granted until the vesting date.
Options will expire 36 months after the vesting date.
Any options which meet the Vesting conditions will be available for
exercise up until the Expiry date.
Cryosite Limited Annual Report
11
Directors’ Report (continued)
Conditions
Grant date
Vesting date
Expiry date
Period
Exercise price
Targets
27 June 2019
1 September 2021
1 September 2024
27/6/2019 to 1/9/2021
6 cents
Conditions of Vesting
Positive Earnings per share (EPS)*
Positive Cashflow from Operations*
Continuous service
* Based on the 2021 audited accounts
Target date
30 June 2021
30 June 2021
30 June 2021
Percentage of Performance
Rights that vest
33.3%
33.3%
33.3%
COMPENSATION FOR KEY MANAGEMENT PERSONNEL 2019
Year Ended 30 June 2019
Short term benefits
Post
employment
benefits
Share
based
payments
Total
Share
based
payments
Performance
based
Salary &
Fees
$
Other Cash
benefits
$
Super
$
(2)
$
$
%
%
Non-Executive Directors
Andrew Kroger
60,000
-
5,700
-
65,700
0.0%
Bryan Dulhunty (1)*
-
130,264
-
110
130,375
0.1%
Nicola Swift
60,000
-
5,700
-
65,700
0.0%
Total Non-executive directors
Executives
120,000
130,264
11,400
110
261,775
0.0%
0.0%
0.1%
0.0%
0.0%
Mark Byrne
228,310
-
21,689
37,571
287,570
13.1%
13.1%
Total Executive
228,310
-
21,689
37,571
287,570
13.1%
13.1%
Total
348,310
130,264
33,089
37,681
549,345
6.9%
6.8%
* Bryan Dulhunty was appointed Executive Chairman on the 27th June 2019.
(1) This includes payments to made to COSA Pty which is owned by Bryan Dulhunty. During the year the company charged
the Company $48,502 for consulting services and $81,762 in respect to services provided by Bryan Dulhunty
as a director and company secretary of the company. Bryan Dulhunty became executive chairman on the 27th June 2019
(2) This relates to the fair value of performance rights and options granted under the Cryosite Employee Incentive Plan (CEIP)
Cryosite Limited Annual Report
12
Directors’ Report (continued)
COMPENSATION FOR KEY MANAGEMENT PERSONNEL 2018
Year Ended 30 June 2018
Non-Executive Directors
Short term benefits
Salary &
Fees
$
Other Cash
benefits
$
Post
employment
benefits
Share
based
payments
Total
Share
based
payments
Performance
based
Super
$
(3)
$
$
%
%
Andrew Kroger
60,000
-
5,700
-
65,700
-
Bryan Dulhunty (1),(2)
-
51,375
-
-
51,375
-
Nicola Swift
Stephen Roberts (1)
60,000
50,538
-
5,700
-
65,700
-
-
4,801
-
55,339
-
Total Non-executive directors
Executives
170,538
51,375
16,201
-
238,114
-
-
-
-
-
-
Mark Byrne (4)
226,026
20,000
21,472
31,740
299,239
10.6%
17.3%
Total Executive
226,026
20,000
21,472
31,740
299,239
10.6%
17.3%
Total
396,564
71,375
37,674
31,740
537,353
5.9%
9.6%
(1) Where directors or key personnel resigned or were appointed during the year payments shown above are for the period
served
(2) This includes payments to made to COSA Pty which is owned by Bryan Dulhunty. During the year the company charged
the Company $24,000 for company secretarial services and $27,375 in respect to services provided by Bryan Dulhunty
as a director of the company from 2nd March 2018.
(3) This relates to the fair value of performance rights granted under the Cryosite Employee Incentive Plan (CEIP)
(4) Other cash benefits relate to a discretionary bonus accrued by the Board to be paid in 2019 as recognition of the efforts
undertaken by the individual in 2018.
SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL
Ordinary Shares held in Cryosite
Limited
Bryan Dulhunty
Andrew Kroger
1 July 2018
30,000
17,315,291
Balance on
appointment /
(resignation)
-
-
Share purchases
-
-
30 June 2019
30,000
17,315,291
17,345,291
-
-
17,345,291
Ordinary Shares held in Cryosite
Limited
Bryan Dulhunty
Andrew Kroger
Stephen Roberts *
*resigned 2/3/2018
N/A
1 July 2017
16,016,906
669,519
Balance on
appointment /
(resignation)
30,000
-
(967,662)
Share purchases
-
1,298,385
298,143
30 June 2018
30,000
17,315,291
-
16,716,425
- 937,662
1,596,528
17,345,291
Cryosite Limited Annual Report
13
Directors’ Report (continued)
LOANS TO KEY MANAGEMENT PERSONNEL
There were no loans to key management personnel at the beginning of the year, at any time during the year,
or at the end of the year.
OTHER TRANSACTIONS AND BALANCES WITH KEY MANAGEMENT PERSONNEL
There were no other transactions during the year with key management personnel or with any key
management personnel related entities.
In 2018 the Company settled a legal matter with a former Director and former employee for an amount of
$276,818. Details of this are outlined in note 35.
DIRECTORS’ MEETINGS
During the financial year, the following meetings incurred and were attended by directors:
Directors
Andrew Kroger
Bryan Dulhunty
Nicola Swift
Directors Meetings
Eligible to
attend
13
13
13
Eligible
attended
13
13
13
Audit Risk Committee
Meetings
Remuneration and
Nomination Meetings
Eligible to
attend
-
3
3
Eligible
attended
-
3
3
Eligible to
attend
-
2
2
Eligible
attended
-
2
2
PROCEEDING ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporate Act 2001 for leave to bring proceedings
on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose
of taking responsibility on behalf of the Company for all or part of those proceedings.
AUDITOR’S INDEPENDENCE DECLARATION AND NON-AUDIT SERVICES
The directors have received the auditor’s independence declaration which is included on Page 16 of this report.
No director of Cryosite Limited is currently or was formerly a partner of Mazars Risk and Assurance Pty Ltd.
Non-audit services were provided by the entity’s auditor, Mazars Risk and Assurance Pty Ltd, during the financial
year. Details of the services provided are disclosed in Note 28 of the Financial Statements. The directors are
satisfied that the provision of non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services disclosed in Note 28 to the financial statements do not
compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following
reasons:
All non-audit services have been reviewed and approved to ensure that they do not impact the integrity or
objectivity of the auditor;
None of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for
the Company, acting as an advocate for the Company or jointly sharing economic risks and rewards.
Cryosite Limited Annual Report
14
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF CRYOSITE LIMITED AND
CONTROLLED ENTITY
I declare that, to the best of my knowledge and belief during the year ended 30 June 2019, there
have been:
— no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to the audit.
MAZARS RISK & ASSURANCE PTY LIMITED
Paul Collins
Director
Sydney, on this 21st day of August 2019
LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 – PO BOX 1994, NORTH SYDNEY NSW 2059
TEL: +61 2 9922 1166 - FAX: +61 2 9922 2044 – www.mazars.com.au
EMAIL: audit@mazars.com.au
MAZARS RISK & ASSURANCE PTY LIMITED – ABN: 39 151 805 275
Liability limited by a scheme approved under Professional Standards Legislation
Corporate Governance
Cryosite is committed to implementing the highest possible standards of corporate governance. In determining
what those high standards should involve, Cryosite has turned to the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations (ASX Principles) and has a corporate governance
framework that reflects those recommendations within the structure of the Company.
The Board of Cryosite approved an updated series of policies and charters in line with the amendments to the
ASX Principles. The Company’s policies and charters together form the basis of the Company’s governance
framework were in place for the financial year ended 30 June 2019 and to the date of signing of the directors’
report.
Within this framework:
-
-
-
-
the Board of Directors is accountable to shareholders for the performance of the Company;
the Company’s goals to achieve milestones are set and promulgated;
the risks of the business are identified and managed, and
the Company’s established values and principles underpin the way in which it undertakes its operations.
The Company has in place an entrenched, well developed governance culture which has its foundations in the
ethical values that the Board, management and staff bring to the Company and their commitment to positioning
the Company as a leader in its field.
In certain instances, due to the size and stage of development of Cryosite and its operations, it may not be
practicable or necessary to implement the ASX Principles in their entirety. In these instances, Cryosite has
identified the areas of divergence.
In accordance with its Shareholder Communications Policy, Cryosite has made its corporate governance policies
and charters publicly available on its website (www.cryosite.com).
Cryosite Limited Annual Report
17
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2019
Sale of goods and rendering of services
Other revenue
Revenue
Cost of providing services
Depreciation and amortisation
Impairment losses
Marketing expenses
Occupancy expenses
Administration expenses
Total expenses
Profit (loss)from continuing operations before tax
Income tax (expense) benefit
Loss after tax from continuing operations
Other items
Legal settlement, net of tax
Loss from discontinued operations, net of tax
Net comprehensive loss for the year
Earnings per share
Basic, profit for the year attributable to ordinary
equity holders of the parent
Diluted, profit for the year attributable to ordinary
equity holders of the parent
Earnings per share for continuing operations
Basic, profit for the year attributable to ordinary
equity holders of the parent
Diluted, profit for the year attributable to ordinary
equity holders of the parent
Notes
6
6
8
35
34
9
9
9
9
2019
$
2018
$
7,911,693
61,500
7,973,193
5,864,139
58,926
5,923,065
(4,603,392)
(271,018)
(330,873)
(403,862)
(615,342)
(2,036,979)
(8,261,466)
(2,535,338)
(338,448)
-
(152,297)
(615,769)
(1,962,848)
(5,604,700)
(288,273)
(276,884)
(565,157)
318,365
(393,645)
(75,280)
(1,157,386)
-
(169,416)
(995,743)
(1,722,543)
(1,240,439)
Cents
Cents
(3.68)
(2.65)
(3.62)
(2.61)
(0.012)
(0.002)
(0.012)
(0.002)
The above consolidated statement of profit and loss and other comprehensive income should be read in
conjunction with the accompanying notes.
Cryosite Limited Annual Report
19
Consolidated Statement of Financial Position
AS AT 30 JUNE 2019
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Income tax receivable
Other assets
Deferred costs
Total Current Assets
Non-Current Assets
Trade and other receivables
Deferred tax asset, net
Prepayments
Plant and equipment
Intangible assets
Deferred costs
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Unearned income
Provisions
Other liabilities
Deferred revenue
Total Current Liabilities
Non-Current Liabilities
Trade and other payables
Unearned income
Provisions
Other liabilities
Deferred revenue
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Share rights reserves
Accumulated losses
Notes
2019
$
2018
$
10
12
13
14
15
20
16
8(c)
15
18
19
20
21
22
24
35
23
21
22
24
35
23
3,919,897
838,100
22,859
279,369
29,081
476,262
1,381,183
6,946,751
186,502
2,412,234
-
387,181
6,978
13,232,356
16,225,251
23,172,002
876,942
23,066
155,804
47,464
2,250,487
3,353,763
441,682
-
237,799
578,144
20,276,684
21,534,309
24,888,072
(1,716,070)
4,535,827
1,359,131
23,845
289,078
21,680
152,277
-
6,381,838
243,264
148,938
290,205
622,654
56,780
-
1,361,841
7,743,679
455,046
425,414
261,156
-
-
1,141,616
441,682
3,998,804
218,162
-
-
4,658,648
5,800,264
1,943,415
25
26
25
5,861,788
69,532
(7,647,390)
5,861,788
40,339
(3,958,712)
TOTAL EQUITY
The above consolidated statement of financial position should be read in conjunction with the accompanying
note
(1,716,070)
1,943,415
Cryosite Limited Annual Report
20
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2019
CONSOLIDATED
Attributable to equity holders of the company
Contributed
capital
Accumulated
losses
Share Rights
reserve
Total equity
At 1 July 2018
5,861,788
(3,958,712)
40,339
1,943,415
Total comprehensive income (loss)
for the year
AASB 15 adjustment
Transactions with owners in their
capacity as owners
Performance rights / options
granted
Performance rights cancelled
-
-
-
-
(1,722,543)
(1,966,135)
-
-
-
(1,966,135)
-
-
52,121
(22,928)
52,121
(22,928)
At 30 June 2019
5,861,788
(7,647,390)
69,532
(1,716,070)
At 1 July 2017
5,861,788
(2,718,273)
5,091
3,148,606
Total comprehensive income (loss)
for the year
Transactions with owners in their
capacity as owners
Performance rights granted
-
-
(1,240,439)
-
(1,240,439)
-
35,248
35,248
At 30 June 2018
5,861,788
(3,958,712)
40,339
1,943,415
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
Cryosite Limited Annual Report
21
Consolidated Statement of Cashflows
FOR THE YEAR ENDED 30 JUNE 2019
Notes
2019
$
2018
$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers inclusive of GST
Payments to suppliers and employees inclusive of GST*
Interest received
6,941,491
7,719,025
(7,594,578)
(7,988,124)
5,551
7,193
Net cash flows from operating activities
11
(647,536)
(261,906)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment
Software development costs
Interest received - term deposits
Net cash flows (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Equity dividend paid
Net cash flows (used in) financing activities
18
19
(26,155)
(180,781)
-
57,761
31,606
(125)
41,806
(139,100)
-
-
-
-
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
(615,930)
(401,006)
4,535,827
4,936,833
Cash and cash equivalents at end of year
10
3,919,897
4,535,827
Cryosite Limited Annual Report
22
Notes to the Financial Statements
For the Year Ended 30 June 2019
1 CORPORATE INFORMATION
The financial report of Cryosite Limited and the controlled entity (the Group) for the year ended 30 June 2019
was authorised for issue in accordance with a resolution of the directors on 21st August 2019.
Cryosite Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on
the Australian Securities Exchange.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001, and Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board.
The financial report has been prepared on a historical cost basis, except when otherwise stated.
(a) Compliance with IFRS
The financial report complies with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
(b) Changes in accounting policy, accounting standards and interpretations.
(i) Amendments to AASBs and the new Interpretation that are mandatorily effective for the current period
AASB 9 Financial Instruments
AASB 15 Revenue Contracts with Customers
AASB 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement of Share-
based Payment Transactions
The relevant standards for the Group follow:
AASB 9, Financial Instruments
AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for
annual periods beginning on or after 1 July 2018, bringing together all three aspects of the accounting for
financial instruments: classification and measurement, impairment and hedge accounting.
Cryosite Limited Annual Report
23
Notes to the Financial Statements
For the Year Ended 30 June 2019
The impact of adopting AASB 9 follows:
(a) Classification and measurement
The classification and measurement requirements of AASB 9 did not have a significant impact on the Group.
(b) Impairment
The adoption of AASB 9 has fundamentally changed the Group’s accounting for impairment losses for financial
assets by replacing AASB 139’s incurred loss approach with a forward-looking expected credit loss (ECL)
approach. AASB 9 requires the Group to recognise an allowance for ECLs for all debt instruments not held at fair
value through profit or loss and contract assets.
In May 2019 the Company undertook a detailed review of current debtors as well as the history of collections
and write offs. Using this analysis and taking into account revenue history, it was concluded that trade
receivables required an expected provision of $73,475. Consequently, the provision for bad debts was increased
by $27,885 on the 30 June 2019.
It should be noted that the impact on the opening balance of AASB 9 was considered immaterial and no
disclosure on transition adjustment was considered required.
(c) Hedge accounting
The hedge accounting requirements of AASB 9 did not have a significant impact on the Group.
IFRS 15 (“AASB 15”) Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers (‘AASB 15’) introduces a single revenue recognition model
based on the transfer of goods and services and the consideration expected to be received for that transfer. The
standard became effective from 1 July 2018.
The Company has elected to apply the modified retrospective transition method with respect to implementation
of AASB 15. In this case AASB 15 is applied retrospectively to only the current period presented in the financial
statements with no restatement of the comparative period. As such, the cumulative effect of initially applying
AASB 15 will be recognised as an adjustment to retained earnings as at 1 July 2018 (the date of initial application).
On this basis, there is no impact to retained earnings as at the 30 June 2018.
Cord Blood and Tissue Storage segment is impacted by AASB 15 in respect to cord blood and tissue contracts.
The introduction of AASB 15 has a significant impact on the reported revenue and costs and statement of
financial position of the Company. It is important to note there is no change to the expected timing or amount
of cash impact collected from the cord blood and tissue contracts. These assets and liabilities will then be taken
to revenue and expensed over the life of each individual contract which ranges from 18 years to 25 years.
It should be noted that the Group has obtained legal advice which confirms that if any impact from AASB 15
adoption leads to negative net assets, the ability for the Company to declare dividends in the future will be
impacted.
The impact of adopting AASB 15 on the financial report is presented in Note 4.
Cryosite Limited Annual Report
24
Notes to the Financial Statements
For the Year Ended 30 June 2019
(ii) Standards and Interpretations issued not yet adopted
IFRS 16 Leases
IFRS 16 will be applied as of 1 January 2019 and the Company will use what is known as the “modified
retrospective” transition method, under which a liability is recognized at the transition date for an amount equal
to the present value of the residual lease payments alone, offset against a right- of- use asset adjusted for the
amount of prepaid lease payments or within accrued expenses; all the impacts of the transition will be deducted
from equity. The standard provides for various simplification measures during the transition phase; in particular,
the Group has opted to apply the measures allowing it to exclude leases with a residual term of less than twelve
months, exclude leases of low- value assets, continue applying the same treatment to leases that qualify as
finance leases under AASB 17, and not capitalise costs directly related to signing leases.
IFRS 16 will be applied from the 1 July 2019 and will impact the 30 June 2020. The financial impact of adopting
of AASB 16 as at 1 July 2019 (date of initial application) will be:
a.
b.
Recognition of right-of-use assets amounting to $792,831
Recognition of current lease liability of $230,180 and non-current lease liability of $562,651
In addition, the following impact to the profit or loss statement for year ending 30 June 2020 will be observed
subsequent to the date of initial application:
a.
b.
c.
Increase in depreciation expense relating to right-of-use assets amounting to $240,045 and,
Recognition of interest expense amounting to $24,420 and,
Reversal of rent expense of $254,600.
The overall estimated net profit and loss impact will amount to $9,865 for the year ending 30 June 2020.
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Cryosite Limited (the Company)
and its subsidiary (‘the Group’) as at 30 June each year.
Subsidiaries are all entities (including structured entities) over which the group has control. The group controls
an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the group. They are deconsolidated
from the date that control ceases.
The financial statements of the subsidiary are prepared for the same reporting year as the parent company,
using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All intercompany balances and transactions have been eliminated in full. Subsidiaries are consolidated from
the date on which control is transferred to the Group and cease to be consolidated from the date on which
control is transferred out of the Group. Investments in subsidiaries held by the Company are accounted for at
cost in the separate financial statements of the parent entity, less any impairment charges.
Cryosite Limited Annual Report
25
Notes to the Financial Statements
For the Year Ended 30 June 2019
(d) Foreign currency translation
Both the functional and presentation currency of the Company and its Australian subsidiary is Australian dollars
(A$). Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet date.
(e) Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.
Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the
parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying
amount of the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and
maintenance are recognised in the statement of comprehensive income as incurred.
Major Depreciation rates are:
2019
2018
Leasehold improvements
Plant and equipment:
-Fixture and fittings
-Information technology
-Warehouse equipment
-Office furniture and equipment
-Plant and equipment under lease
Lease term
Lease term
5-10 years
2-3 years
4-10 years
2.5-8 years
5 years
5-10 years
2-3 years
4-10 years
2.5-8 years
5 years
The assets’ residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate.
An item of plant and equipment is derecognised upon disposal or when no future economic benefits are
expected from its use or disposal.
(f) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Board.
(g) Intangible assets
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are considered to modify the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible
assets with finite lives is recognised in the statement of profit or loss as the expense category that is consistent
with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to
determine whether the indefinite life continues to be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
Cryosite Limited Annual Report
26
Notes to the Financial Statements
For the Year Ended 30 June 2019
Licence fees
Where licences are acquired for the purposes of assisting in research and development or for the entity’s use
of patented techniques or processes in conducting operations, the costs are capitalised. Licenses acquired
during the financial year have been assessed as having a useful life in line with that of the underlying patent
and associated methodologies.
Software development
Software development costs are capitalised at the direct costs and amortised on a straight line basis over the
period of their expected benefit being their finite life of 3 years. Amortisation starts at the time that the
technology is activated and is used by both internal and external customers. The capitalised costs of platform
technology include the direct costs of external consultants and any supporting software acquired from a third
party.
Intellectual Property
The costs of the Stemlife assets are capitalised and amortised on a straight line basis over the period of their
expected benefit being their finite life of 9 years. Amortisation starts at the time of the acquisition. These costs
include the direct costs paid to Stemlife for the assets and the legal fees incurred in the transaction.
The assessment of useful life is reviewed annually by the Board to determine whether the assumptions made
continue to be appropriate and supportable. If not, the useful life assessment is changed on a prospective
basis.
(h) Prepayments
Payments made in advance of services are recognised at the time of payment and classed as prepayments on
the balance sheet. As the services are incurred, the relevant amounts are recognized as an expense in the
profit and loss statement.
In June 2018, an assessment confirmed that these costs do not meet the recognition criteria as capitalised
costs under AASB 138, specifically the control criteria. This is on the basis the hardware and applications are
controlled by the contracted service provider and cannot be transferred to another party or host under the
agreement. In absence of specific guidance under AASB, the accounting hierarchy under AASB 108 para 12
has been applied which allows the use of recent pronouncements of other standard setting bodies. Based on
this, costs incurred in 2018 relating to the implementation & development of applications were capitalised as
a prepayment reflecting the economic benefits to be consumed over the contract service period.
From 1st July 2019, all costs (including training and data conversion) associated with the implementation &
development of application are expensed as incurred.
The assessment of useful life of prepayments is reviewed annually by the Board to determine whether the
assumptions made continue to be appropriate and supportable. If not, the useful life assessment is changed
on a prospective basis. Based on the 30th June 2019 review the board determined that prepayments associated
with capitalised applications were impaired and written down by $291, 093.
(i) Inventories
Inventories consist of consumables used in the provision of services. Inventories are valued at the lower of
cost and net realisable value. Cost is determined by actual purchase price. Net realisable value is the estimated
selling price in the ordinary course of business, less estimated costs of completion and the estimated costs
necessary to make the sale.
Cryosite Limited Annual Report
27
Notes to the Financial Statements
For the Year Ended 30 June 2019
(j) Trade and other receivables
Trade receivables (current), which generally have 30 day terms, are recognised initially at fair value less an
allowance for impairment as per AASB 9 requirements.
The adoption of AASB 9 has fundamentally changed the Group’s accounting for impairment losses for financial
assets by replacing AASB 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach.
AASB 9 requires the Group to record an allowance for ECL’s for all loans and other debt financial assets not held
at FVPL.
The Group’s ECL is based on an estimated percentage of past due receivables that are expected to default based
on historical experience.
(k) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank, in hand and short-term
deposits with an original maturity 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.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
(l) Trade and other payables
Trade and other payables are carried at amortised costs and due to their short term nature, they are not
discounted. They represent liabilities for goods and services provided to the Group prior to the end of the
financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect
of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days
of recognition.
(m) Employee leave benefits
Wages, Salaries and Annual Leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled
within 12 months of the reporting date are recognised in provisions in respect of employees’ services up to the
reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses
for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or
payable. Unused sick leave on termination of employment is forfeited.
Long Service Leave
The liability for long service leave is recognised and measured as the present value of expected future payments
to be made in respect of services provided by employees up to the reporting date using the projected unit credit
method. Consideration is given to the expected future wage and salary levels, experience of employee
departures, and periods of service. Expected future payments are discounted using market yields at the
reporting date on national government bonds with terms to maturity and currencies that match, as closely as
possible, the estimated future cash outflows.
(n) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
Cryosite Limited Annual Report
28
Notes to the Financial Statements
For the Year Ended 30 June 2019
obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is
presented in the statement of comprehensive income net of any reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
(o) Share-based payment transactions
The group provides benefits to employees including executive directors of the Group in the form of share based
payment transactions, whereby the employees render services in exchange for rights over shares (‘equity-
settled transactions’) under the Cryosite Employee Incentive Plan (CEIP) or individually negotiated share based
payment arrangements.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the
date at which they are granted. The fair value is determined using a Black Scholes model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions
linked to the price of the shares of the Company (‘market conditions’).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over
the period in which the performance conditions are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date
reflects:
the extent to which the vesting period has expired and
(i)
(ii) the number of awards that, in the opinion of directors of the Group, will ultimately vest. This opinion is
formed based on the best available information at balance date.
No adjustment is made for the likelihood of market performance conditions being met as the effect of these
conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition.
Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the
terms had not been modified. In addition, an expense is recognised for any increase in the value of the
transaction as a result of the modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is substituted
for the cancelled award, and designated as a replacement award on the date that it was granted, the cancelled
and new award are treated as if they were a modification of the original award, as described in the previous
paragraph.
In the case where outstanding equity-settled awards have expired, the relevant amounts in respect to these
awards in the share reserves are transferred to retained earnings.
Cryosite Limited Annual Report
29
Notes to the Financial Statements
For the Year Ended 30 June 2019
(p) Leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified
as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying
amount of the leased asset and recognised over the lease term on the same bases as the lease income.
Operating lease payments are recognised as an expense in the statement of comprehensive income on a
straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received
and subsequently reduced by allocating lease payments between rental expense and reduction of the liability.
(q) Revenue from contracts with customers
Rendering of services
The Group provides the following services:
a.
b.
specialist temperature-controlled storage, sourcing, labelling, status management, secondary packaging,
schedule drug distribution, destruction, returns and biological services and;
long term storage for cord blood and tissue samples.
The Group identified that the above services are distinct and have assessed the revenue recognition in
accordance with AASB 15 separately.
Revenue from clinical trials and biological services logistics services
Revenue from clinical trials pertain to processing and distribution of samples for clinical testing. The Group has
assessed that each sample processed is distinct from each other and that asset is transferred to the customer
at the completion of the service. Accordingly, the Group assessed that the performance obligation is satisfied
at that point in time and revenue is recognised as and when the customer obtains control of the asset.
The revenue recognition policy for clinical trials under AASB 15 is consistent with the provisions of the old
standard, AASB 118 – Revenue; hence, clinical trials revenue is not impacted by the adoption of AASB 15.
Revenue from cord blood and cord tissue storage
Prior to the adoption of AASB 15, the Group accounted for the collection and processing of cord blood and
tissue samples as a separate performance obligation from the storage service. Accordingly, upfront fees and
costs related to collection and processing activities were recognised immediately as revenue and costs at the
inception of the contract while the storage fee component is recognised as unearned revenue and amortised
throughout the contract term of either 18 or 25 years.
Under AASB 15, the Group assessed that the collection, processing and storage services for cord blood and
tissue samples constitute a single performance obligation because none of the services are distinct and
marketed independently of the others. In addition, it was determined that the performance obligation is
performed over time (i.e throughout the storage contract period of 18 or 25 years).
The Group performed a re-allocation of the contract consideration to recognise upfront revenue and costs
throughout the life of the storage contract. This resulted to the recognition of “Deferred revenue” and
“Deferred costs” in the statement of financial position as at 1 July 2018. These balance sheet items will unwind
to revenue and costs for the remaining contract period.
Cryosite Limited Annual Report
30
Notes to the Financial Statements
For the Year Ended 30 June 2019
Interest revenue
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Dividend income
Dividends: revenue is recognised when the Company’s right to receive the payment is established.
(r)
Income tax and other taxes
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates
and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance
date.
Deferred income tax is provided on all temporary differences at the balance date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
-
-
Except where the deferred income tax liability arises from the initial recognition of an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, except where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused
tax assets and unused tax losses, to the extent that it is probable that the taxable profit will be available against
which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses
can be utilised:
-
Except where the deferred income tax asset relating to the deductible temporary difference arises from
the initial recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
In respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against which
the temporary differences can be utilised. The carrying amount of deferred income tax assets is reviewed at
each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent
that it has become probable that future tax profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the balance date.
Cryosite Limited Annual Report
31
Notes to the Financial Statements
For the Year Ended 30 June 2019
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement
of comprehensive income.
Revenues, expenses and assets are recognised net of the amount of GST except:
- where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and
receivables and payables are stated with the amount of GST included the net amount of GST recoverable
from, or payable to, the taxation authority is included as part of receivables or payables in the statement
of financial position.
-
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation
authority, are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
(s) Contributed equity
Contributed capital bares no special terms or conditions affecting income or capital entitlements of the
shareholders. Ordinary share capital is recognised at the fair value of the consideration received by the
company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a
reduction of the share proceeds received.
(t) Share options reserve
The share options reserve captures the equity component of the company’s equity settled transactions of the
share based payments schemes.
(u) Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value
less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that
suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
Cryosite Limited Annual Report
32
Notes to the Financial Statements
For the Year Ended 30 June 2019
(v) Earnings per share
Basic EPS is calculated as net profit attributable to members of the parent, adjusted to exclude costs of servicing
equity (other than dividends) and preference share dividends, divided by the weighted average number of
ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members of the parent, adjusted for:
-
-
Costs of servicing equity (other than dividends) and preference share dividends;
The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have
been recognised as expenses; and
- Other non-discretionary changes in revenues or expenses during the year that would result from the
dilution of potential ordinary shares
Divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted
for any bonus element.
The basic EPS and diluted EPS for continuing operations are calculated as above based on net profit after tax
from continuing operations rather than net profit attributable to members of the parent.
(w) Fair value measurement
The Group measures financial instruments at fair value at each balance sheet date. Fair values of financial
instruments measured at amortised cost are disclosed at Note 32.
Fair value is the price that would be received to sell an asset or pair to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based on
the presumption that the transaction to sell the asset or transfer the liability takes place either:
-
-
In the principle market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability accessible
to the Group.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in the highest and best use. The Group uses valuation techniques that are appropriate
in the circumstances and for which sufficient data are available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of unobservable inputs.
For the purpose of fair value disclosure, the Group has determined classes of assets and liabilities on the basis
of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy.
(x) Current versus non-current classification
The Group presents assets and liabilities in statement of financial position based on current/non-current
classification.
An asset as current when it is:
-
-
-
-
Expected to be realised or intended to sold or consumed in normal operating cycle;
Held primarily for the purpose of trading;
Expected to be realised within 12 months after the reporting period, or
Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
Cryosite Limited Annual Report
33
Notes to the Financial Statements
For the Year Ended 30 June 2019
All other assets are classified as noncurrent.
A liability is current when:
-
-
-
-
It is expected to be settled in normal operating cycle;
It is held primarily for the purpose of trading;
It is due to be settled within 12 months after the reporting period, or
There is no unconditional right to defer the settlement of the liability for at least 12 months after the
reporting period.
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
(y) Current versus non-current classification
A discontinued operation is a component of an entity that either has been disposed of, discontinued or is
classified as held for sale, and
(i)
(ii)
(iii)
represents a separate major line of business or geographical area of operations;
is part of a single co-ordinated plan to dispose of a separate major line or geographical area of
operations; or,
is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single
amount as profit or loss after tax from discontinued operations in the statement of profit or loss.
Additional disclosures are provided in Note 34. All other notes to the financial statements include amounts for
continuing operations, unless indicated otherwise.
3
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates that affect
the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its
judgements and estimates on historical experience and on other various factors it believes to be reasonable
under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that
are not readily apparent from the source. Actual results may differ from these estimates and estimates under
different assumptions and conditions.
Management has identified the following critical accounting estimates and judgements:
Capitalised Development Costs
Initial capitalisation of development costs is based on management’s judgement that technological and
economic feasibility is confirmed, usually when a product development project has reached a defined
milestone. In determining the amounts to be capitalised, management makes assumptions regarding the
expected future cash generation of the project, discount rates to be applied and the expected period of
benefit. At 30 June 2019, the carrying amount of capitalised development costs was nil (2018: $nil).
Cryosite Limited Annual Report
34
Notes to the Financial Statements
For the Year Ended 30 June 2019
Revenue from contracts with customers
The Group applied the following judgements that significantly affect the determination of the amount and
timing of revenue from contracts with customers:
Determining the timing of satisfaction of performance obligations
The Group concluded that the revenue from collection, processing and storage of cord blood and tissue
should be recognised over time because the customer simultaneously receives and consumes the benefits
provided by the Group. The Group determined that the contract term of 18 or 25 years is the best method to
determine the timing of satisfaction of performance obligations.
Consideration of significant financing component in a contract
The storage contract for cord blood and cord tissue is either 18 or 25 years and the payment options
available to the customers follow:
i.
ii.
iii.
Upfront payment of the full contract price at inception of the contract;
Instalment payment of either 12 or 24 months; and,
Partial upfront settlement with the remaining balance paid in instalment throughout the life of the
contract (referred to by the Group as “Annual plans”).
Management determined that there is a significant financing component included in the annual plans because
the total amount paid under this plan is significantly higher than the upfront cash payment. The amount of
financing component attributed to the contract is determined as the difference between the total Annual plan
payments and the upfront cash payment.
Taxation
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws and the
amount and timing of future taxable income. The group’s accounting policy for taxation requires
management’s judgement as to the types of arrangements considered to be a tax on income in contrast to
an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred
tax liabilities are recognised in the statement of financial position. Deferred tax assets, including those arising
from unrecouped tax losses, capital losses and temporary differences, are recognised only where it is
considered more likely than not that they will be recovered, which is dependent on the generation of
sufficient future taxable profits.
The Group has $2,418,851 unconfirmed (2018: $981,322) tax losses carried forward which have not been
recognised on the statement of financial position. Assumptions about the generation of future taxable profits
and repatriation of retained earnings depend on management’s estimates of future cash flows. Judgements
are also required about the application of income tax legislation. These judgements and assumptions are
subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter
expectations, which may impact on the amount of deferred tax liabilities or assets recognised on the
statement of financial position and the amount of other tax losses and temporary differences not yet
recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and
liabilities may require adjustment, resulting in a corresponding credit or charge to the statement of
comprehensive income.
Share Based Payment Transactions
The group measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined using a binomial
model. The accounting estimates and assumptions relating to equity-settled share based payments would
Cryosite Limited Annual Report
35
Notes to the Financial Statements
For the Year Ended 30 June 2019
have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but
may impact on expenses and equity.
Estimated Useful Lives of Assets
The estimation of the useful lives of assets and their residual values has been based on historical experience
as well as manufacturers’ warranties. In addition, the condition of assets is assessed at least once per year
and considered against the remaining useful life. Adjustments to useful lives are made when considered
necessary. The estimated useful life of licenses acquired has been based upon the useful life of the patents
and associated methodologies underpinning the license. The assessment of useful life is reviewed annually
by the Board to determine whether the assumptions made continue to be appropriate and supportable given
the license conditions and underlying patents. If the useful life assessment is assessed as inappropriate, either
due to a change in license conditions or patents, it is changed on a prospective basis.
As result of the decision to cease the collection and processing of cord blood and tissue samples, the board
reviewed and concluded that these licences were impaired. Refer Note 18 for the details of the impairment
loss recognised.
Long Service Leave Provision
The liability for long service leave is 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.
Make Good Provisions
includes
A provision has been made for the present value of anticipated costs for future restoration of leased
premises. This provision
future cost estimates associated with dismantling, closure,
decontamination and permanent storage of historical residues. The calculation of any provision requires
assumptions such as application of environmental legislation, plant closure dates, available technologies and
engineering cost estimates. These uncertainties may result in future actual expenditure differing from
amounts provided. Any provision recognised will be periodically reviewed and updated based on the facts
and circumstances available at the time. Changes to the estimated future costs are recognised in the
statement of financial position by adjusting both the expense or asset and provision. The appropriateness of
the make good provision is assessed annually.
Impairment for expected credit losses on trade receivables
In accordance with AASB 9, the Group uses a provision matrix to calculate ECLs (expected credit losses) for
trade receivables and contract assets. The provision rates are based on days past due for groupings of various
customer segments that have similar loss patterns (i.e., by geography, product type, customer type and rating,
and coverage by letters of credit and other forms of credit insurance).
The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate
the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting
date, the historical observed default rates are updated and changes in the forward-looking estimates are
analysed. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions.
The Group’s historical credit loss experience and forecast of economic conditions may also not be
representative of customer’s actual default in the future.
Cryosite Limited Annual Report
36
Notes to the Financial Statements
For the Year Ended 30 June 2019
Impairment of Non-Financial Assets other than Indefinite Life Intangible Assets
The Company assesses impairment of non-financial assets other than indefinite life intangible assets at each
reporting date by evaluating conditions specific to the Company 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.
In 2018 following management’s decision to cease the collection and processing of cord blood and cord tissue
samples, board reviewed all non-financial assets associated with these operations and, as a result of this
review, concluded that these assets were impaired. Refer to Note 34 for the impairment loss recognised.
Prepayments
In 2018 the Company incurred costs in the implementation and development of a new technology
applications. These costs were capitalized and expensed over a period of time to reflect the economic
benefits that will be consumed as a result of using this technology over this period. Based on the 30th June
2019 review the board determined that prepayments associated with capitalised applications were impaired
and written down by $291, 093. From 1st July 2019, these costs are expensed as incurred.
Discontinued Operations
In October 2017, the Company completed the closure of the laboratory operations and the departure of staff
associated with the collection and processing of cord blood and tissue samples. This resulted in the
termination of operations associated with collection and processing of cord blood and tissue samples which
has been disclosed separately in the accounts as discontinued operations.
Discontinued operations result for 2018 includes revenue from a small number of contracts collected and
processed in 2018. It also includes normal operating and employment costs associated with the activities of
collection and processing which were separately identified up to the time of closure. Additional costs, such
as redundancies and legal fees, associated with the actual closure have also been included.
Further, as result of the decision to cease the collection and processing of cord blood and tissue samples, the
board reviewed all non-financial assets associated with these operations and, as a result of this review,
concluded that these assets were impaired. Consequently, they resolved to write down these assets by
$555,586 in 2018.
Cryosite Limited Annual Report
37
Notes to the Financial Statements
For the Year Ended 30 June 2019
4
TRANSITION TO AASB 15
The consolidated entity has elected to adopt a modified retrospective application of the standard as permitted
by AASB 15. The standard has therefore been applied to the current financial year only with an adjustment to
opening retained earnings to reflect the cumulative impact of adoption on all contracts that were incomplete
as at 1 July 2018. Comparative figures are therefore not affected.
The adjustment to opening statement of financial position is a decrease in equity by $1,964,675.
The current financial year impact on the financial statements of adopting AASB 15 as compared to AASB 111,
AASB 118 and related interpretations that were in effect before change, is as follows:
Statement of profit or loss and other comprehensive income
Revenues
Expenses
Costs of providing services
Depreciation and amortisation expense
Impairment loss
Marketing expenses
Occupancy expenses
Administration expenses
2019
AASB 15
$
2019
AASB 111/118
$
Variance
$
7,973,193
5,713,941
2,259,252
(4,603,392)
(3,209,892)
1,393,500
(271,018)
(330,873)
(403,862)
(615,342)
(271,018)
(330,873)
(403,862)
(615,342)
(2,036,979)
(2,036,979)
-
-
-
-
-
Profit from continuing operations before tax
(288,273)
(1,154,025)
865,752
Income tax (expense) benefit
(276,884)
(38,816)
(238,068)
Profit after tax from continuing operations
(565,157)
(1,192,841)
627,684
Legal settlement, net of tax
(1,157,386)
(1,157,386)
Discontinued operations
Profit/(loss) after tax from discontinued operations
-
-
-
-
Total comprehensive income, net of tax
(1,722,543)
(2,350,227)
627,684
Cryosite Limited Annual Report
38
Notes to the Financial Statements
For the Year Ended 30 June 2019
4
TRANSITION TO AASB 15 (continued)
2019
AASB 15
$
2019
AASB 111/118
$
Variance
$
3,919,897
3,919,897
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Income tax receivable
Other assets
Deferred costs
Total Current Assets
Non-Current Assets
Trade and other receivables
Deferred tax assets, net
Deferred costs
Plant and equipment
Intangible assets
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Unearned Income
Deferred revenue
Other liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Trade and other payables
Deferred revenue
Other liabilities
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Share rights reserves
Accumulated losses
TOTAL EQUITY
838,100
22,859
279,369
29,081
476,262
1,381,183
6,946,751
186,502
2,412,234
13,232,356
387,181
6,978
16,225,251
23,172,002
876,942
23,066
2,250,487
47,464
155,804
3,353,763
441,682
20,276,684
578,144
237,799
21,534,309
24,888,072
(1,716,070)
838,100
22,859
279,369
29,081
476,262
-
5,565,568
186,502
235,982
-
387,181
6,978
816,643
6,382,211
876,942
23,066
47,464
155,804
1,103,276
441,682
-
578,144
237,799
1,257,625
2,360,901
4,021,310
-
-
-
-
-
-
1,381,183
1,381,183
-
2,176,252
13,232,356
-
-
15,408,608
16,789,791
-
-
-
2,250,487
-
20,276,684
-
-
20,276,684
22,527,171
(5,737,380)
-
(5,737,380)
(5,737,380)
-
2,250,487
5,861,788
69,532
(7,647,390)
(1,716,070)
5,861,788
69,532
(1,910,010)
(4,021,310)
Cryosite Limited Annual Report
39
Notes to the Financial Statements
For the Year Ended 30 June 2019
4
TRANSITION TO AASB 15 (continued)
Explanation of significant changes
The consolidated entity previously recognised revenue from cord blood services as follow:
Revenue from the rendering of non-storage services, such as collection and processing of biological
samples, is recognised upon the delivery of the service to the customers; and,
Revenue from storage services is recognised over the period of the storage contract. Where the Group has
a long term contract with its customers to provide cord blood services, a receivable is recognised at its net
present value with a corresponding amount recognised as unearned income in the statement of financial
position.
AASB 15 required the collection, processing and storage services to be treated as a single performance
obligation as none of the services are marketed as a stand-alone service. Consequently, the timing of revenue
recognition and profit for cord blood and cord tissue collection and processing services has changed with the
related revenue now recognised over time in accordance with the contract term of 18 or 25 years.
Deferred revenue represents the upfront collection and processing fees recognized immediately to revenue at
inception of the contract. Deferred costs represent upfront costs, such as laboratory fees, attributable for the
collection and processing of cord blood and tissue samples. These are capitalised and amortised over the
remaining life of the storage contracts.
5
SEGMENT INFORMATION
Identification of Reportable Segments
The Company has identified its operating segments based on the internal reports that are reviewed and used
by the Board of Directors (the chief operating decision makers) in assessing performance and in determining
the allocation of resources. The segment information provided is consistent with the internal management
reporting.
Two reportable segments have been identified as follows:
Cord Blood and Tissue Storage
Storage of cord blood and tissue samples
Clinical Trials and Biological Services Logistics Specialist temperature-controlled storage, sourcing, labelling,
status management, secondary packaging, schedule drug
distribution, destruction, returns and biological services.
The accounting policies used by the Company in reporting segments internally are the same as those contained
in note 1 to the accounts.
Cryosite Limited Annual Report
40
Notes to the Financial Statements
For the Year Ended 30 June 2019
5
SEGMENT INFORMATION (continued)
Operating Segments
2019
Operating Segment
Clinical Trials
and
Biological
Services
Logistics
Cord Blood
and Tissue
Unallocated
Total
Revenue
5,189,717
2,721,978
61,498
7,973,193
Net profit before tax
Tax
Net profit after tax
Legal settlement, net of tax
Total Comprehensive Income net of tax
992,951
872,450
(2,153,674)
(288,273)
(276,884)
(565,157)
(1,157,386)
(1,722,543)
Segment Assets 30 June 2019
Segment Liabilities 30 June 2019
Depreciation and Amortisation
563,320
498,158
(104,767)
17,277,866
23,170,103
(117,183)
5,330,816
1,219,811
(49,068)
23,172,002
24,888,072
(271,018)
2018
Operating Segment
Clinical Trials
and
Biological
Services
Logistics
Cord Blood
and Tissue
Unallocated
Total
Revenue
5,310,826
553,313
58,926
5,923,065
Net profit before tax
Tax
Net profit after tax
Legal settlement, net of tax
Discontinued Operations
Total Comprehensive Income net of tax
2,006,242
24,978
(1,712,854)
318,365
(393,645)
(75,280)
(169,415)
(995,743)
(1,240,438)
Segment Assets 30th June 2018
Segment Liabilities 30th June 2018
Depreciation and Amortisation
1,284,519
177,168
(126,839)
1,026,461
4,865,900
(148,668)
5,432,699
757,196
(62,941)
7,743,679
5,800,264
(338,448)
Cryosite Limited Annual Report
41
Notes to the Financial Statements
For the Year Ended 30 June 2019
6
REVENUE
Customer contract revenues
Revenue from clinical trials, logistics and biorepository services
Revenue from cord blood and cord tissue storage*
Other revenue
Bank interest
Consolidated
30-Jun-19
$
30-Jun-18
$
5,189,717
2,721,978
7,911,695
61,498
7,973,193
5,310,826
553,313
5,864,139
58,926
5,923,065
* The consolidated entity has adopted AASB 15 ‘Revenue from Contracts with Customers’ using the modified
retrospective application method. Refer to Note 4 for impact.
35
7
EXPENSES
(a) Legal costs
Continuing operations
Legal settlement
Total
(b) Lease payments
Lease payments-operating leases
(c) Employee benefits expense
Continuing operations
Wages and salaries
Superannuation costs
Discontinued operations
Wages and salaries
Superannuation costs
Total Company
Wages and Salaries
Superannuation
Total
(d) Depreciation
Depreciation – plant & equipment
18 and 19
(e) Impairment loss
Continuing operations
Discontinued operations
Total
(f) Amortisation of Intangibles
Amortisation of Intangibles
18
34
19
101,573
407,626
509,199
172,313
198,677
370,990
363,704
318,753
2,126,477
208,507
2,334,984
-
-
-
2,126,477
208,507
2,334,984
2,090,603
205,913
2,296,516
390,563
37,104
427,667
2,481,166
243,017
2,724,183
260,996
362,866
330,873
-
330,873
-
555,586
555,586
10,022
61,881
Cryosite Limited Annual Report
42
Notes to the Financial Statements
For the Year Ended 30 June 2019
8
INCOME TAX
(a) Income tax expense
The major components of income tax are:
Statement of comprehensive income
Current income tax (expense)/benefit
Income tax expense reported in the statement of comprehensive income
Income tax (expense)/benefit is attributable to the following:
Continuing operations
Legal settlement (refer note 35)
Discontinued operations (refer note 34)
Consolidated
30-Jun-19
$
(151,037)
(151,037)
(276,884)
125,847
-
(151,037)
30-Jun-18
$
(46,095)
(46,095)
(393,645)
64,261
283,289
(46,095)
(b) Numerical reconciliation between aggregate tax expense recognised in the statement of
comprehensive income and tax expense calculated per the statutory income tax rate
A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the
Group's applicable income tax rate follows:
Accounting profit(loss) before tax
Income tax calculated at 27.5% (2018:27.5%)
Tax losses not recognised
Capital losses on impairment loss of intangible assets
Other items
Income tax (expense) benefit
(c) Deferred tax assets, net
Deferred income tax at 30 June relates to the following:
Deferred taxes arising from AASB 15 adoption
Deferred tax asset on deferred revenue
Deferred tax liability on deferred costs
Net deferred tax asset – AASB 15
Deferred taxes arising from normal business operations
Post-employment benefits
Provision for tax and audit fees
Provision for doubtful debts
Rent accruals
Impairment and depreciation of plant and equipment
Deferred tax assets
Prepayments
Consumables
Deferred tax liabilities
Net deferred tax asset – normal operations
Net deferred tax assets
(1,571,503)
432,163
(370,571)
-
(212,629)
(151,037)
(1,194,344)
328,444
(269,863)
(88,927)
(15,749)
(46,095)
6,194,971
(4,018,719)
2,176,252
56,942
16,225
20,206
6,322
143,450
243,144
(875)
(6,286)
(7,161)
235,982
2,412,234
-
-
-
70,340
15,753
12,537
-
58,628
157,258
(1,763)
(6,557)
(8,320)
148,938
148,938
Cryosite Limited Annual Report
43
Notes to the Financial Statements
For the Year Ended 30 June 2019
8
INCOME TAX (continued)
(d) Tax (expense) benefit related to items of other comprehensive income.
There were no items of comprehensive income during the year giving rise to any income expense (benefit).
(e) Tax losses
The Group has unconfirmed tax losses arising in Australia of $2,418,851(2018: $981,322) that are available
for offset against future taxable profits of the company. The deferred income tax asset of $665,184 (2018:
$269,863) arising from these losses has not been brought to account at reporting date, as realisation of the
benefit is not probable at this point in time. The Group will continue to review this regularly to determine
whether to recognize these tax losses as deferred tax asset in the future.
Tax consolidation
Effective from 1 July 2002, Cryosite Limited and its 100% owned subsidiary formed a tax consolidated group.
On formation of the tax consolidated group, the entities in the tax consolidated group agreed to enter into a
tax sharing deed which will, in the opinion of the directors, limit the joint and several liabilities of the wholly-
owned entities in the case of default by the head entity Cryosite Limited. The tax sharing deed was signed
on 12 May 2011.
The entities have also agreed to enter into a tax funding agreement under which the wholly-owned entities
fully compensate the Company for any current tax payable assumed and are compensated by the Company
for any current tax loss, deferred tax assets and tax credits that are transferred to the Company under the
tax consolidation legislation. The tax consolidated current tax liability or current year tax loss and other
deferred tax assets are required to be allocated to the members of the tax consolidated group in accordance
with UIG 1052. The group uses a group allocation method for this purpose where the allocated current tax
payable, current tax loss, deferred tax assets and other tax credits for each member of the tax consolidated
group is determined as if the company is a stand-alone taxpayer but modified as necessary to recognise
membership of a tax consolidated group. The funding amounts are determined by reference to the amounts
recognised in the wholly-owned entities’ financial statements which is determined having regard to
membership of the tax consolidated group.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice
from the head entity, which is issued as soon as practicable after the end of each financial year. The head
entity may also require payment of interim funding amounts to assist with its obligations to pay tax
instalments. The funding amounts are recognised as current inter-company receivables or payables.
Cryosite Limited Annual Report
44
Notes to the Financial Statements
For the Year Ended 30 June 2019
9
EARNINGS PER SHARE
The following reflects the income used in the basic and diluted
earnings per share computations:
Basic earnings per share
Diluted earnings per share
Basic EPS disclosure
Earnings used in EPS calculation
Net profit attributable to ordinary equity holders of
the parent
Weighted average number of ordinary shares for
basic earnings per share
Diluted EPS disclosure
Earnings used in diluted EPS calculation
Net profit attributable to ordinary equity holders
of the parent
Weighted average number of ordinary shares for
basic earnings per share
Shares deemed to be used for no consideration –
performance rights & options
Weighted average number of ordinary shares used in the
calculation of diluted EPS
Consolidated
30-Jun-19
$
30-Jun-18
$
(3.68)
(3.62)
(2.65)
(2.61)
(1,722,543)
(1,240,439)
(1,722,543)
(1,240,439)
No. of shares
46,859,563
46,859,563
(1,722,543)
(1,240,439)
(1,722,543)
(1,240,439)
No. of shares
46,859,563
46,859,563
727,234
640,114
47,586,797
47,499,677
There have been no other transactions involving ordinary shares or potential ordinary shares since the
reporting date and before completion of these financial statements.
Cryosite Limited Annual Report
45
Notes to the Financial Statements
For the Year Ended 30 June 2019
9 EARNINGS PER SHARE (continued)
The following reflects the income used in the basic and diluted
earnings per share for continuing operations computations:
Basic earnings per share
Diluted earnings per share
(0.012)
(0.012)
(0.002)
(0.002)
Consolidated
30-Jun-19
$
30-Jun-18
$
Basic EPS for continuing operations disclosure
Earnings used in EPS for continuing operations
calculation
Net profit attributable to ordinary equity holders of
the parent
Weighted average number of ordinary shares for
basic earnings per share for continuing operations
Diluted EPS for continuing operations disclosure
Earnings used in diluted EPS for continuing
operations calculation
Net profit attributable to ordinary equity holders
of the parent
Weighted average number of ordinary shares for
basic earnings per share
Shares deemed to be used for no consideration –
performance rights & options
Weighted average number of ordinary shares used in the
calculation of diluted EPS
(565,157)
(75,280)
(565,157)
(75,280)
No. of shares
46,859,563
46,859,563
(565,157)
(75,280)
(565,157)
(75,280)
No. of shares
46,859,563
46,859,563
727,234
640,114
47,586,797
47,499,677
There have been no other transactions involving ordinary shares or potential ordinary shares since the
reporting date and before completion of these financial statements.
Cryosite Limited Annual Report
46
Notes to the Financial Statements
For the Year Ended 30 June 2019
10 CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short-term deposit
Total Cash and Cash Equivalents
Consolidated
2019
$
329,275
3,590,622
3,919,897
2018
$
534,181
4,001,697
4,535,877
Cash at bank and on hand earns interest at floating rates based on daily bank deposit rates. Short-term
deposits are made for varying periods of between one day and six months depending on the immediate
cash requirements of the group and earn interest at the respective short-term deposit rates.
The fair value of cash and cash equivalents for the consolidated group and parent entity is $3,919,897 (2018:
$4,688,104).
Change in comparative figures
During the period, the Company has modified the statement of financial position where bank guarantee of
$152,227 was previously included as part of short term deposits is now presented separately under “Other
assets” in Note 15.
Comparative amounts in the statement of financial position were reclassified to be consistent with current
year presentation. The effect of the above reclassification follows:
Statement of Financial Position for the period ended 30 June 2018
Cash and cash equivalents 4,688,104
-
Other assets
As previously presented Reclassification
(152,227)
152,227
As represented
4,535,877
152,227
Reconciliation of cash
For purposes of the Statement of Cash Flow, cash and cash equivalents as at 30 June 2019 and the prior
year are as shown above.
Cryosite Limited Annual Report
47
Notes to the Financial Statements
For the Year Ended 30 June 2019
11 STATEMENT OF CASH FLOW RECONCILIATION
Reconciliation of the net profit after tax to the net cash
flows from operations
Net profit
Less: Transfer to investing activities
Adjustments for non-cash items
Depreciation and amortisation of non-current assets
Impairment loss for discontinued operations
Impairment loss for intangibles
Impairment loss for prepayments
Increase (Decrease) in employee benefits – LSL
Cancellation of performance rights
Grant of Performance rights
Changes in assets and liabilities
(Increase) Decrease in trade and other receivables
Decrease (Increase) in deferred tax asset – AASB 15
Decrease (Increase) in deferred costs – AASB 15
Increase (Decrease) in deferred tax liability -AASB 15
Increase (Decrease) in deferred revenue -AASB 15
Decrease (Increase) in inventory
Decrease (Increase) in prepayments
Decrease in deferred tax asset
Decrease (Increase) in other assets
Increase (Decrease) in trade and other creditors
Increase (Decrease) in current other liabilities
Increase (Decrease) in non- current other liabilities
Decrease (Increase) in unearned income
Increase (Decrease) in income tax provision
Decrease in employee claims provision
Increase (Decrease) in bonus provision
Increase (Decrease) in dividend provision
Increase in employee benefits – annual leave
Consolidated
2019
$
2018
$
(1,722,543)
(56,157)
(1,240,439)
(42,680)
271,650
-
39,780
291,093
3,298
(22,928)
52,808
574,702
621,294
1,393,500
(2,259,250)
(383,216)
986
8,822
(87,044)
(323,985)
421,896
80,189
545,418
(777)
(8,079)
-
(41,501)
-
(47,492)
424,138
555,586
-
-
(49,145)
-
35,248
1,214,737
-
-
-
-
57,240
(446,850)
54,817
-
(626,214)
-
-
(59,461)
-
(130,000)
41,501
22
(50,406)
Net cash flow from operating activities
(647,536)
(261,906)
Cryosite Limited Annual Report
48
Notes to the Financial Statements
For the Year Ended 30 June 2019
12
TRADE AND OTHER RECEIVABLES – CURRENT
Trade receivables
Allowance for impairment loss (a)
Other receivables
Carrying amount of trade and other receivables
(a) Allowance for impairment loss
Consolidated
2019
$
652,545
(73,475)
579,070
259,030
838,100
2018
$
1,319,588
(45,590)
1,273,998
85,133
1,359,311
Trade receivables (current), which generally have 30 day terms, are recognised initially at fair value less an
allowance for impairment as per AASB 9 requirements.
As per AASB 9, the Group’s accounting for impairment losses for financial assets is based on a forward-looking
expected credit loss (ECL) approach. The Group’s ECL is based on an estimated percentage of past due
receivables that are expected to default based on historical experience.
Movements in the provision for impairment loss were as follows:
Balance at the beginning of the period
Increase(reduction) in impairment loss
Balance at the end of the period
(b) Analysis of trade receivables
At 30 June, the ageing analysis of trade receivables is as follows:
Consolidated
2019
$
45,590
27,885
73,475
2018
$
40,515
5,075
45,590
Total
Not yet
due
0-30
Days
31-60
Days
$
$
$
$
61-90
Days*
PDNI
$
+91
Days*
PDNI
$
+91
Days*
CI
$
2019
Current
Non-Current
cURRENTDDD
Total
Consolidated
DDDDcUCurr
ent
2018
652,545
186,502
460,673
186,502
54,522
-
22,657
-
41,659
-
73,034
-
839,047
647,175
54,522
22,657
41,659
73,034
799,829
243,264
1,319,588
243,264
Current
Non-Current
Total
Consolidate
d
*For 2018, aging is based on pre AASB 9 requirements and was split into the following categories:
1,562,852 1,043,093
192,661
-
197,058
-
42,163
-
41,682
-
192,661
197,058
42,163
41,682
-
-
-
45,590
-
45,590
Past due not impaired (“PDNI”)
Past due considered impaired (“CI”)
Cryosite Limited Annual Report
49
Notes to the Financial Statements
For the Year Ended 30 June 2019
12
TRADE AND OTHER RECEIVABLES – CURRENT (continued)
In 2019, as noted in 11(a), the impairment loss is based on ECL and not specific to certain debtors.
Other balances within trade and other receivables do not contain impaired assets and are not past due. It
is expected that these other balances will be received when due.
(c) Fair value and credit risk
Due to the nature of these receivables, their carrying value is assumed to approximate their fair value. The
maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the
Group’s policy to transfer (on-sell) receivables to special purpose entities.
13
INVENTORIES
Consumables at cost
Total Inventories at cost
14
PREPAYMENTS
Current
Balance at beginning of period
Additions (reductions) during the year
Impairment loss
Balance at end of period
Non-Current
Balance at beginning of period
Additions (reductions) during the year
Impairment loss
Balance at end of period
Consolidated
2019
$
22,859
22,859
2018
$
23,845
23,845
Consolidated
2019
2018
$
$
289,078
(9,721)
(888)
279,369
290,205
-
(290,205)
-
132,433
156,645
-
289,078
-
290,205
-
290,205
In 2018 prepayments included a payment for a new technology platform had been split into current of $72,551
and non-current of $290,205. During the year we expensed $71,663 of this new technology platform resulting
in current balance of $888. In June 2019, an impairment review was conducted and it determined that this
asset was fully impaired and subsequently this asset was written down to nil.
Cryosite Limited Annual Report
50
Notes to the Financial Statements
For the Year Ended 30 June 2019
15
OTHER ASSETS
Bank guarantee*
Term Deposit**
Total
2019
$
152,277
323,985
476,262
Consolidated
2018
$
152,277
-
152,277
*Bank guarantee is a reclassification from cash on hand as outlined in Note 10.
** This term deposit matures on the 28th October 2019 with an annual interest of 1.75%.
16
TRADE AND OTHER RECEIVABLES – NON CURRENT
Consolidated
2019
$
2018
$
Trade receivables
Trade receivables due under term payment plans
186,502
243,264
The maximum exposure to credit risk at the time of reporting is the carrying value of the receivables.
17
INVESTMENT IN CONTROLLED ENTITY
Name – Cryosite Distribution Pty
Limited
Equity interest held by the
consolidated entity
Investment
2019
2018
2019
2018
Country of incorporation – Australia
100
100
%
%
$
20
$
20
Cryosite Limited Annual Report
51
Notes to the Financial Statements
For the Year Ended 30 June 2019
18
PLANT AND EQUIPMENT
Leasehold
Improvements
Fixtures
and fittings
Information
Technology
Warehouse
Equipment
Office
furniture &
equipment
$
$
$
$
$
Total
$
200,000
108,635
234,555
4,214,685
14,358
4,772,233
11,613
25,194
28,823
98,989
16,896
181,515
211,613
133,829
263,378
4,313,674
31,254
4,953,748
-
-
-
-
-
-
26,155
(632)
-
-
26,155
(632)
Cost
At 1 July 2017
Additions
At 30 June 2018
Additions
Disposals
At 30 June 2019
211,613
133,829
263,378
4,339,197
31,254
4,979,271
Depreciation and Impairment
At 1 July 2017
Depreciation charge
Impairment loss*
At 30 June 2018
Depreciation charge
Disposals
At 30 June 2019
(200,000)
(73,075)
(199,172)
(3,369,462)
(11,507)
(3,853,216)
(734)
(5,911)
(30,081)
(321,523)
(4,617)
(362,866)
-
-
-
(115,012)
-
(115,012)
(200,734)
(78,986)
(229,253)
(3,805,997)
(16,124)
(4,331,094)
(2,212)
(6,994)
(19,992)
(227,715)
(4,715)
(260,996)
-
-
-
632
-
632
(202,946)
(85,980)
(249,245)
(4,033,080)
(20,839)
(4,592,090)
Net Book Value - 30 June 2018
10,879
Net Book Value - 30 June 2019
8,667
54,843
47,849
34,125
14,133
507,677
306,117
15,130
10,415
622,654
387,181
*In 2018 as result of the decision to cease the collection and processing of cord blood and tissue samples, the
board reviewed the assets associated with these operations and, as a result of this review, concluded that
these assets were impaired and consequently they have resolved to write down these assets by $115,012.
19 INTANGIBLE ASSETS
Licenses
Licence fee - at cost
less Accumulated amortisation and impairment expense
Net Carrying Amount
Software development
Software development -at cost
less Accumulated amortisation and impairment expense
Net Carrying Amount
Intellectual property
Stemlife storage contracts - at cost
less Accumulated amortisation and impairment expense
Net Carrying Amount
Total Net Carrying Amount
Consolidated
2019
$
2018
$
255,310
(255,310)
-
294,615
(287,637)
6,978
152,763
(152,763)
-
6,978
255,310
(255,310)
-
294,615
(237,835)
56,780
152,763
(152,763)
-
56,780
Cryosite Limited Annual Report
52
Notes to the Financial Statements
For the Year Ended 30 June 2019
19
INTANGIBLE ASSETS (continued)
Reconciliations of the written down values at the beginning and end of the current and previous financial
year are set out below:
Licences
$
234,610
-
(2,750)
(231,860)
-
-
-
-
-
Software
development
$
224,625
-
(50,641)
(117,204)
56,780
-
(10,022)
(39,780)
6,978
Intellectual
property
$
100,000
-
(8,490)
(91,510)
-
-
-
-
-
Total
$
559,235
-
(61,881)
(440,574)
56,780
-
(10,022)
(39,780)
6,978
Balance at 30 June 2017
Additions
Amortisation for the year
Impairment loss
Balance at 30 June 2018
Additions
Amortisation for the year
Impairment loss
Balance at 30 June 2019
Licence Fee
During the 2014 financial year, the Company entered into an exclusive licensing agreement within Australia
and New Zealand to assist with the in-house development of new technologies to develop the range of stem
cell service offerings. The Directors have assessed a finite life to the licence in line with the underlying patents
and associated methodologies. The assessment of useful life is reviewed annually by the Directors to
determine whether the assumptions made continue to be appropriate and supportable. If not, the useful life
assessment is changed on a prospective basis. In 2018, the Company has ceased the collection and processing
of new cord blood and cord tissue samples. As a result, the remaining net book value of the licence fee is fully
impaired during the year. Refer to Note 34.
Software Development
During the 2016 and 2017 financial years, the Company has invested in the development of in-house software
to enhance its operating capability. These costs include the direct costs of external consultants and any
supporting software acquired from a third party. The assessment of useful life is reviewed annually by the
Board to determine whether the assumptions made continue to be appropriate and supportable. If not, the
useful life assessment is changed on a prospective basis.
In 2018, the Company has ceased the collection and processing of new cord blood and cord tissue samples.
As a result, software associated with this segment is considered fully impaired during the year. Refer to Note
34.
Intellectual Property
In 2017, the Company acquired the storage contracts from a liquidated company called Stemlife. The cost
reflects the direct costs paid to Stemlife and the legal fees incurred in the transaction. The assessment of
useful life is reviewed annually by the Directors to determine whether the assumptions made continue to be
appropriate and supportable. If not, the useful life assessment is changed on a prospective basis.
In 2018, the Company has ceased the collection and processing of new cord blood and cord tissue samples.
As a result, the remaining net book value of intellectual property is fully impaired during the year. Refer to
Note 34.
Cryosite Limited Annual Report
53
Notes to the Financial Statements
For the Year Ended 30 June 2019
20 DEFERRED COSTS
Current
Non-current
Consolidated
2019
$
1,381,183
13,232,356
14,613,539
2018
$
-
-
Deferred costs represent upfront costs, such as laboratory fees, attributable for the collection and processing
of cord blood and tissue samples. These are capitalised and amortised over the remaining life of the storage
contracts as required under AASB 15.
21 TRADE AND OTHER PAYABLES
CURRENT LIABILTIES
Trade payables
Other payables
Total current payables
NON-CURRENT LIABILTIES
Client deposits
Total non-current payables
Fair value
Consolidated
2019
$
239,694
637,248
876,942
2018
$
163,486
291,560
455,046
441,682
441,682
441,682
441,682
Trade payables are non-interest bearing and are normally settled on 30 to 90 day terms. Therefore, their
carrying value is assumed to be their fair value.
Other payables are non-interest bearing and are on ranging from 30 days to 12 month terms. Their
carrying value is assumed to be fair value.
At 30 June, the ageing analysis of trade payables is as follows:
Total
$
Not Yet due
$
0-30
Days
$
31-60
Days
$
61-90
Days
$
2019
Consolidated
2018
Consolidated
239,694
-
172,279
57,719
9,696
163,486
114,149
43,379
-
5,958
+91
Days
$
-
-
Other balances within trade and other payables are not past due. It is expected that these other balances will
be paid.
Cryosite Limited Annual Report
54
Notes to the Financial Statements
For the Year Ended 30 June 2019
22 UNEARNED INCOME
Current
Non-current
Consolidated
2019
$
23,066
-
23,066
2018
$
425,414
3,998,804
4,424,218
Prior to adoption of AASB 15, the majority of unearned income represented cord blood and tissue storage
income received in advance for services to be rendered under long-term storage contracts. Subsequent to the
adoption of AASB 15 on 1 July 2018, the full amount associated with cord blood and tissue storage is reclassed
to deferred revenue.
23 DEFERRED REVENUE
Current
Non-current
Consolidated
2019
$
2,250,487
20,276,684
22,527,171
2018
$
-
-
-
Prior to adoption of AASB 15, the Group immediately recognises to revenue the amount received for collection
and processing of cord blood and cord tissue. Subsequent to adoption of AASB 15 on 1 July 2018, upfront
revenue was reclassed to deferred revenue, which is amortised over the term of the contract.
24 PROVISIONS
Current
Annual leave
Long service leave
Provision for bonuses
Dividend payable
Non-current
Long service leave
Lease make good
Movements in provisions
Annual leave
Balance at beginning of the year
Arising /(taken) during the year
Long Service Leave
Balance at beginning of the year
Arising / (taken) during the year
Consolidated
2019
$
2018
$
130,403
24,019
-
1,382
155,804
37,799
200,000
237,799
177,895
(47,492)
130,403
40,358
21,460
61,818
177,895
40,358
41,501
1,382
261,156
18,162
200,000
218,162
228,301
(50,406)
177,895
72,449
(32,091)
40,358
Nature and timing of long service leave provision is based on the accounting policy and the significant
Cryosite Limited Annual Report
55
Notes to the Financial Statements
For the Year Ended 30 June 2019
estimations and assumptions applied in the measurement of this provision as in Note 3.
24 PROVISIONS (Continued)
Provision for Bonuses
Balance at beginning of the year
Raised (paid) during the year
Nature and timing of lease make-good provision
2019
$
2018
$
41,501
(41,501)
-
-
41,501
41,501
In accordance with the current lease agreement with Allsup Pty Limited for the premises in Granville, at the
end of the lease term in October 2019, the Group may either restore the leased premises in Granville to its
original condition or alternatively remove unfixed chattels and equipment and pay an amount of $150,000
(excluding GST). In June 2019 the current lease agreement was extended for another 3 years until 31 October
2022 and this make good provision was increased to $165,000. This was considered adequate based on the
Company’s current agreement with Allsup Pty Limited and the understanding reached to date.
The provision of $200,000 has been raised in respect of the Group’s obligation to reflect this arrangement
regarding the leased premises and is included in the carrying amount of plant and equipment. Because of the
long-term nature of the liability, the greatest uncertainty in estimating the provision is the actual cost that
may ultimately be renegotiated and finalised with Allsup Pty Limited covering either a renewal of the existing
or negotiating a new lease with them though $200,000 is considered fairly stated in either circumstance.
For the relevant accounting policy and the significant estimations and assumptions applied in the
measurement of this provision refer to Note 3.
25 CONTRIBUTED EQUITY AND ACCUMULATED LOSSES
Ordinary shares
Movement in ordinary shares on issue
Consolidated
2019
$
5,861,788
2018
$
5,861,788
Beginning of the financial year
End of the financial year
2019
2018
Shares No.
46,859,563
46,859,563
$
5,861,788
5,861,788
Shares No.
46,859,563
46,859,563
$
5,861,788
5,861,788
Terms of conditions of contributed equity
Ordinary shares carry the right to receive dividends and entitle their holder to one vote, either in person or
by proxy, at a meeting of the Company.
Cryosite Limited Annual Report
56
Notes to the Financial Statements
For the Year Ended 30 June 2019
25
CONTRIBUTED EQUITY AND ACCUMULATED LOSSES (continued)
Movement in accumulated losses
Balance at the beginning of the year
AASB 15 adjustment
Net profit for the year
Balance at the end of the year
26
RESERVES
Share rights reserve
Movement in share options/rights reserve
Balance at the beginning of the year
Performance rights/options granted
Performance rights/options cancelled
Balance at the end of the year
Consolidated
2019
$
(3,958,712)
(1,966,135)
(1,722,543)
(7,647,390)
2018
$
(2,718,273)
-
(1,240,439)
(3,958,712)
Consolidated
2019
$
69,532
2018
$
40,339
Consolidated
2019
$
40,339
52,121
(22,928)
69,532
2018
$
5,901
35,248
(8,677)
40,339
The purpose of the share rights reserve is to record the value of share-based payments provided to employees
as part of their remuneration. Refer to Note 30 for further details of these plans.
27 COMMITMENTS AND CONTINGENCIES
(a) Operating lease commitments – Group as lessee
Group as lessee
Commercial property
On 1 November 2016, the company entered into a four-year lease over a commercial property at South
Granville in Sydney. This lease was renewed in June 2019 and extended another 3 years to 31st October
2020.
Future minimum rentals payable under commercial property leases as at 30 June are as follows:
Within one year
After one year but not more than five years
Consolidated
2019
$
254,600
616,003
870,603
2018
$
247,490
83,040
330,530
Cryosite Limited Annual Report
57
Notes to the Financial Statements
For the Year Ended 30 June 2019
27
COMMITMENTS AND CONTINGENCIES (continued)
Commercial Property Security deposits
The security deposit for the lease at Granville is covered by a bank guarantee for $152,227 issued by the
Commonwealth Bank of Australia. Cash deposit is held as security as per note 15.
Plant and equipment
The Group currently has a number of operating leases on items of plant and equipment used in day to day
operations of the business.
Leases have an average life of five years with renewal terms included in the contracts. Renewals are at the
option of the specific entity that holds the lease.
There are no restrictions placed upon the lessee by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
Within one year
After one year but not more than five years
(b) Plant and equipment commitments
There are no capital expenditure commitments at reporting date.
(c) Contingent Liabilities
The Group is not aware of any contingent liabilities at reporting date.
28
AUDITORS REMUNERATION
Amounts received or due and receivable by Mazars for:
- Audit or review of the financial report of the entity and any other
entity in the consolidated group
- Other services in relation to the entity and any other entity in the
consolidated group
29
RELATED PARTY DISCLOSURES
Consolidated
2019
$
4,880
-
4,880
2018
$
14,640
4,880
19,520
Consolidated
2019
$
2018
$
70,717
75,104
5,750
76,467
4,300
79,404
The consolidated financial statements include the financial statements of Cryosite Limited and its wholly
owned subsidiary Cryosite Distribution Pty Limited. For details, refer to Note 17.
During the year total payments of $130,264 were made to COSA Pty Ltd which is owned by Bryan Dulhunty,
a director of the Company. COSA Pty Ltd charged the Company $48,502 for consulting fees and $81,762
(directors fees of $75,000 plus 9.5% superannuation) in respect to services provided by Bryan Dulhunty as a
director and company secretary of the company during the year.
Cryosite Limited Annual Report
58
Notes to the Financial Statements
For the Year Ended 30 June 2019
29
RELATED PARTY DISCLOSURES (continued)
Cryosite Limited is the ultimate parent entity.
Cryosite Distribution Pty Limited neither has a bank account nor does it hold any cash in its own right. All
receipts and payments for this entity are made by Cryosite Limited, with the amounts charged against an
inter-company loan account. No interest is payable on this balance and no amounts are due and payable.
Cryosite Limited and Cryosite Distribution Pty Limited are part of a tax consolidation group and has entered
into a tax funding agreement. Under this agreement, payments are to be made for tax losses transferred
between entities in the group. Refer to Note 8.
Cryosite Limited has received a dividend from Cryosite Distribution Pty Limited for $3,708,145 (2018:
$3,500,000).
30
SHARE-BASED PAYMENTS EXPENSE
Total Expense (income) recognized in the profit and loss
relating to share based payments
Performance rights and options granted
Consolidated
2019
$
52,121
52,121
2018
$
35,248
35,248
Long Term Incentive Plan: Cryosite Employee Incentive Plan (CEIP)
On the 23rd February 2017, the Cryosite Employee Incentive Plan (CEIP) was established by the Company. On
invitation, the CEIP provides executives the opportunity to receive a long-term equity based incentive in each
financial year and is governed by the CEIP Plan Rules.
Full details of the performance rights and options issued to executives are noted in the remuneration report
which forms part of the Directors’ Report.
Performance Rights
Since the establishment of the CEIP, the company has granted a number of performance rights. This grant
value, subject to shareholder approvals, is defined as a % of fixed remuneration or as otherwise agreed. The
following %’s of fixed remuneration were used in determining the grant value for each executive. The grant
value was converted into the number of performance rights to be issued using the WVAP of Cryosite shares in
the 30 trading days following the release of the Annual Report.
The following components of the CEIP for performance rights are as follows;
Vesting date
Vesting conditions
Performance conditions
Service conditions
Expiry date
Exercise of Rights
Up to 36 months from date of grant.
Performance rights will only vest after certain performance and conditions are
met.
Compound Annual Growth Rates (CAGR) of the Earnings per Share (EPS)
over measurement period need to be achieved from a base year.
Continuous employment with Cryosite from the date of the performance
rights are granted until the vesting date.
Performance rights will expire 1 month after the vesting date
Any Performance rights which meet the Vesting conditions will be
available for exercise up until the Expiry date.
Cryosite Limited Annual Report
59
Notes to the Financial Statements
For the Year Ended 30 June 2019
30
SHARE-BASED PAYMENTS EXPENSE (continued)
The board has granted performance rights during the year to the following personnel:
Key management personnel
Staff
No of Performance Rights
2019
-
-
-
2018
503,944
294,303
798,247
Balance granted as at 1st July 2017
Performance Rights granted 27/11/2017
Performance Rights granted 7/2/2018
Balance granted as at 30th June 2018
Performance Rights cancelled
Balance granted as at 30th June 2019
Key management
personnel
No
211,002
295,647
208,297
714,946
-
714,946
Staff
No
-
294,303
-
294,303
(294,303)
-
Total
No
211,002
589,950
208,297
1,009,249
(294,303)
714,946
Conditions
Grant date
Vesting date
Expiry date
Period
Base Year
Basic EPS
Measure
27 February 2017
1 September 2019
30 September 2019
7th February 2018
27 November 2017
1 September 2020
1 September 2020
30 September 2020
30 September 2020
1/7/2017 to
1/7/2017 to
30/6/2020
30/6/2020
1/7/2016 to 30/6/2019
2017
2017
2016
0.64 cents
0.48 cents
0.48 cents
Earnings per Share (EPS) Compound Annual Growth Rate (CAGR)
Targets for performance rights
CAGR of EPS over
measurement
Period relative to
base year
Grant Date
< 20%
20% to 25%
>25%
27-Feb-17
< 1.10592
1.105592 to 1.25
>1.25
EPS (cents)Target per
plan
27-Nov-17
<0.83
0.83 to 0.94
>0.94
7-Feb-18
<0.83
0.83 to 0.94
>0.94
Percentage of
Performance
Rights that vest
0%
50-100% (pro-rata)
100%
As at 30 June 2019, no performance rights had vested.
Cryosite Limited Annual Report
60
Notes to the Financial Statements
For the Year Ended 30 June 2019
30
SHARE-BASED PAYMENTS EXPENSE (continued)
Options
On the 27th June 2019, the board granted options to the following personnel:
Key personnel management
Staff
No of Options*
2019
1,300,000
1,300,000
2,600,000
*In relation to the options to be issued to the key personnel management, there is a restriction on settlement
as they have been granted without shareholder approval and therefore settlement will be restricted to on
market purchase pursuant to ASX Listing Rule 10.15B. Shareholder approval will be sought at the 2019 AGM
and, if received, this restriction may no longer apply.
Options granted 27th June 2019
Balance granted as at 30th June 2019
Key management
personnel
No
1,300,000
1,300,000
Staff
No
1,300,000
1,300,000
Total
No
2,600,000
2,600,000
The following components of the CEIP for options are as follows;
Vesting date
Option price
Vesting conditions
Performance conditions
Service conditions
Expiry date
Exercise of Options
Conditions of options
Grant date
Vesting date
Expiry date
Period
Exercise price
Targets for options
Up to 25 months from date of grant.
6 cents
Options will only vest after certain performance and conditions are met.
Earnings per Share (EPS), Positive operating cashflow
Continuous employment with Cryosite from the date of the options
are granted until the vesting date.
Options will expire 36 months after the vesting date.
Any options which meet the Vesting conditions will be available for
exercise up until the Expiry date.
27 June 2019
1 September 2021
1 September 2024
27/6/2019 to 1/9/2021
6 cents
Conditions of Vesting
Positive Earnings per share (EPS)*
Positive Cashflow from Operations*
Continuous service
* Based on the 2021 audited accounts
Target date
30 June 2021
30 June 2021
30 June 2021
Percentage of Performance
Rights that vest
33.3%
33.3%
33.3%
As at 30 June 2019, no performance rights or options had vested.
Cryosite Limited Annual Report
61
Notes to the Financial Statements
For the Year Ended 30 June 2019
30
SHARE-BASED PAYMENTS EXPENSE (continued)
Assumptions used to determine fair value of performance rights and options
The fair value of the performance rights and options granted was calculated using a Black
Scholes model
using the following assumptions:
Date of effective valuation:
Fair value at valuation date
Risk-free rate:
Standard deviation (annualised):
Closing share price at Effective
Date:
Exercise price:
Expected life
Annualised dividend rate
27-Feb-17
$0.178
1.93%
45%
$0.200
$0.000
2.51
4.6%
27-Nov-17
$0.135
1.90%
50%
$0.135
$0.000
2.77
0.0%
7-Feb-18
$0.100
2.11%
50%
27-Jun-19
$0.0169
0.99%
50%
$0.100
$0.000
2.54
0.0%
$0.051
$0.060
3.00
0.0%
31
KEY MANAGEMENT PERSONNEL
(a) Key Management Personnel
Non-Executive Directors
Mr Bryan Dulhunty
Mr Andrew Kroger
Mrs Nicola Swift
Chairman (Non-executive) *
Director
Director
*Bryan Dulhunty was appointed Executive Chairman on the 27th June 2019.
Executive
Mr Mark Byrne
Chief Executive Officer
Due to the relatively small number of employees, there is only one key management personnel having
authority and responsibility for planning, directing and controlling the activities of the entity either directly
or indirectly.
Cryosite Limited Annual Report
62
Notes to the Financial Statements
For the Year Ended 30 June 2019
31
KEY MANAGEMENT PERSONNEL (continued)
(b) Compensation for key management personnel
Non-executive directors
Short-term employee benefits*
Post-employment benefits
Share base payments
Sub-total non-executive directors
Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share base payments
Sub-total key management personnel
Total compensation
2019
$
Consolidated
2018
$
250,265
11,400
110
261,775
228,310
21,689
37,571
387,570
549,345
221 ,913
16,201
-
238,114
246,026
21,472
31,740
299,238
537,352
*This includes payments to made to COSA Pty which is owned by Bryan Dulhunty. During the year the
company charged the Company $48,502 for consulting services and $81,762(directors fees of $75,000 plus
9.5% superannuation) (2018 $51,375) in respect to services provided by Bryan Dulhunty as a director and
company secretary of the company. Bryan Dulhunty became executive chairman on the 27th June 2019.
32
FINANCIAL INSTRUMENTS
The Group’s principal financial liabilities comprise of trade payables. The Group has various financial assets
such as trade receivables, cash and short-term deposits, which arise directly from its operations.
The Group does not enter into any derivative transactions. The main risks arising from the Group’s financial
instruments are cash flow interest rate risk and credit risk. The Board of Directors reviews and monitors each
of these risks.
(a) Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to:
-
-
cash and cash deposits with floating interest rates; and
assessments of appropriate discount rates for deferred arrangements.
The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate for
classes of financial assets is set out below:
Cryosite Limited Annual Report
63
Notes to the Financial Statements
For the Year Ended 30 June 2019
32
FINANCIAL INSTRUMENTS (continued)
2019
Note
Weighted
average
effective
interest
%
Floating
Interest
$
Non-Interest
bearing
$
Total
$
Financial assets
Interest bearing deposits
Cash and equivalents
Current receivables
Non-Current receivables
10
10
12
16
2.13%
0.46%
-
-
3,597,839
322,839
-
-
- 3,597,839
322,839
-
838,100
838,100
186,502
186,502
Total
3,920,678
1,024,602
4,945,280
Financial Labilities
Trade creditors and accruals
21
2.20%
-
239,693
239,693
2018
Note
Weighted
average
effective
interest
%
Floating
Interest
$
Non-Interest
bearing
$
Total
$
Financial assets
Interest bearing deposits
Cash and equivalents
Current receivables
Non-Current receivables
Total
Financial Labilities
Trade creditors and accruals
10
10
12
16
1.85%
0.59%
-
-
4,153,923
534,181
-
-
4,688,104
- 4,153,923
534,181
-
1,380,811
1,380,811
243,264
243,264
6,312,179
1,624,075
21
2.20%
114,149
340,897
455,046
Interest rate sensitivity analysis
The Group has no material exposure to any probable interest volatility.
(b) Credit Risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and
other receivables. The Group's exposure to credit risk arises from potential default of the counter party, with
a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is
addressed in each applicable note.
The Group trades with a number of types of customers, the main ones being:
-
Incorporated companies
- Research institutes both private and academic
-
Individuals.
Incorporated Companies
The Group trades with recognised, publicly listed companies and large unlisted proprietary companies and
as such collateral is not requested nor is it the Group's policy to securitise its trade and other receivables.
Cryosite Limited Annual Report
64
Notes to the Financial Statements
For the Year Ended 30 June 2019
32
FINANCIAL INSTRUMENTS (Continued)
Research institutes both private and academic
The Group also trades with research institutes that are either publicly, privately or government owned along
with recognised universities. Such customers are subject to credit search and collateral is not requested nor
is it the Group’s policy to securitise its trade and other receivables.
Individuals
The Group ensures that credit card information is obtained for all individual customers.
It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification
procedures including an assessment of their independent credit rating, financial position, past experience
and industry reputation. Risk limits are set for each individual customer in accordance with parameters set
by the Board. These risk limits are regularly monitored.
There are no significant concentrations of credit risk within the Group. There are no transactions that are not
denominated in the functional currency of the Group.
(c) Capital management
When managing capital, the boards’ objective is to ensure the entity continues as a going concern as well as
to maintain returns to shareholders. The board also aims to maintain a capital structure that ensures the
lowest cost of capital available to the entity. As part of regular reviews, management considers the cost of
capital and the risks associated with each class of capital. Upon review, the Group will balance its overall
capital structure through the payment of dividends, new share issues as well as the issue of new debt or the
redemption of existing debt. The Group's overall strategy remains unchanged from 2017. The Board of
Directors is responsible for assessing financial risks, related controls and other financial risk management
strategies. The Company deploys its assets and liabilities so as to manage risk at commercially appropriate.
levels, bearing in mind the constraints imposed by the consolidated entity’s size, results and other financial
circumstances. The Company aims to balance opportunities to improve profitability against related risks of
losses of assets or the incurrence of additional liabilities.
(d) Fair value
All financial assets and liabilities have been disclosed in the financial statements and notes thereto at their
carrying value, which approximates their net fair values. The fair value of the assets and liabilities is included
at the amount at which the instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Fair values of balances related to long term revenue contracts are
determined using a discounted cash flow method using discount rates that reflect the appropriate level of
risk over the life of the long term revenue stream.
(e) Liquidity Risk
The Group has assessed liquidity risk to be low at balance date and at the date of this report based on total
current assets, including cash and equivalents, of $6,622,766 (2018: $6,381,838) at balance date less current
liabilities of $3,029,778 (2018: $1,141,616) an excess of current assets over current liabilities amounting to
$3,592,988 (2018: $4,967,222) The Group generated a negative $647,536 (2018: $261,906) cash flow from
operations during the current year. Liquidity risks are managed by matching the payment and receipt cycle.
Cryosite Limited Annual Report
65
Notes to the Financial Statements
For the Year Ended 30 June 2019
32
FINANCIAL INSTRUMENTS (Continued)
Maturity analysis of financial assets and liabilities based on management’s expectation.
Year ended
30 June 2019
Less than 6
months
$
6-12
months
$
1-5 years
$
Greater
than 5
$
years
Total
$
Consolidated Financial Assets
Cash and cash equivalents
3,919,897
-
-
-
3,919,897
Trade and other receivables
841,444
25,737
178,794
7,708
1,053,683
Other assets
323,985
-
-
-
323,985
5,085,326
25,737
178,794
7,708
5,297,765
Consolidated Financial liabilities
Trade and other payables
Net maturity
Year ended
30 June 2018
876,942
-
-
-
876,942
4,208,384
25,737
178,794
7,708
4,420,623
Less than 6
months
$
6-12
months
$
1-5 years
$
Greater
than 5
$
years
Total
$
Consolidated Financial Assets
Cash and cash equivalents
4,535,827
-
-
-
4,535,827
Trade and other receivables
1,266,988
113,823
233,098
10,166
1,624,075
Consolidated Financial liabilities
Trade and other payables
455,046
-
-
-
455,046
5,802,815
113,823
233,098
10,166
6,159,902
Net maturity
5,347,769
113,823
233,098
10,166
5,704,856
The risk implied from the values shown in the table above, reflects a balanced view of cash inflows and
outflows. Trade payables and other financial liabilities mainly originate from investment in working capital
such as inventories and trade receivables. These assets are considered in the Group’s overall liquidity risk. To
monitor existing financial assets and liabilities as well as enable an effective controlling of future risks the
Directors monitor the expected settlement of financial assets and liabilities.
Cryosite Limited Annual Report
66
Notes to the Financial Statements
For the Year Ended 30 June 2019
33
PARENT ENTITY FINANCIAL INFORMATION
The individual financial statements for the parent entity show the following aggregate amounts:
(a) ASSETS
Total Current Assets
Total Non-Current Assets
TOTAL ASSETS
(b) LIABILITIES
Total Current Liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
(c) EQUITY
Contributed equity
Share option reserves
Accumulated losses
TOTAL EQUITY
2019
$
2018
$
7,333,042
19,625,106
5,777,743
1,361,861
26,958,148
7,139,603
3,592,160
25,140,477
1,161,023
4,658,649
28,732,637
5,819,672
5,861,788
69,532
(7,705,809)
5,861,788
40,339
(4,582,196)
(1,774,489)
1,319,931
(d) TOTAL COMPREHENSIVE INCOME
Net Profit of the parent entity for the year net of income tax
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
(1,159,117)
(1,159,117)
(1,364,490)
(1,363,490)
(e) GUARANTEES ENTERED INTO BY THE PARENT ENTITY
No guarantees have been entered into by the parent entity in relation to the debts of its subsidiaries.
(f) COMMITMENTS AND CONTINGENCIES OF THE PARENT ENTITY
Commitments and contingencies for the parent entity are the same as those disclosed in Note 27.
Cryosite Limited Annual Report
67
Notes to the Financial Statements
For the Year Ended 30 June 2019
34
DISCONTINUED OPERATIONS
In October 2017, the Company completed the closure of the laboratory operations and the departure of staff
associated with the collection and processing of cord blood and tissue samples. The Company will continue to
service its existing storage contracts until the full contract terms of either 18 or 25 years.
As result of the decision to cease the collection and processing of cord blood and tissue samples, the board
reviewed all non-financial assets associated with these operations and, as a result of this review, concluded
that these assets were impaired. Consequently, they resolved to write down these assets by the following
amounts:
Property, plant and equipment
Licence fees
Intellectual property
Software
Total impairment loss
2019
$
2018
$
-
-
-
-
-
115,012
231,860
91,510
117,204
555,586
No impairment was deemed necessary for the assets related to the storage and maintenance of cord blood
and tissue samples.
The results of operations related to collection and processing of cord blood and tissue samples are presented
below:
Revenue
Expenses
Impairment loss
Pre-tax profit/(loss) for the financial year
Income tax credit/(expense)
Post-tax profit/(loss) for the financial year from
discontinued operations
2019
$
2018
$
-
-
-
-
-
-
240,108
(963,554)
(555,586)
(1,279,032)
283,289
(995,743)
The storage revenue from existing cord blood and storage contracts are presented as part of continuing
operations from Cord Blood and Tissue segment (see Note 5 and Note 6).
Cryosite Limited Annual Report
68
Notes to the Financial Statements
For the Year Ended 30 June 2019
35
LEGAL SETTLEMENT
(a)
(a)
(b)
Penalty from ACCC
Less discounted factor due to payment plan
Discounted penalty from ACCC
Legal fees paid to ACCC
Final ACCC settlement
Final settlement to employee
Legal expenses incurred
Provision for employee claims reversed
Accruals reversed
Pre-tax expense
Income tax credit
Post tax loss from legal settlement
a)
Legal settlement to ACCC
Consolidated
2019
$
2018
$
(1,050,000)
224,393
(825,607)
(50,000)
(875,607)
-
(407,626)
-
-
(1,283,233)
125,847
(1,157,386)
-
-
-
-
-
(195,000)
(198,677)
130,000
30,000
(233,677)
64,261
(169,416)
On the 13th February 2019, the Company settled with the Australian Competition and Consumer Commission
(ACCC) in relation to the proceeding against Cryosite in the Federal Court of Australia.
Under the terms of the settlement, the Company agreed to pay a pecuniary penalty of $1.1m (including costs)
to the ACCC, with Cryosite being allowed to pay the penalty in instalments with $250,000 (including $50,000
in legal costs) to be paid within 30 days of the Court's order and the balance to be paid in 10 equal annual
instalments from 2020 to 2029. Background details to this settlement are outlined in the Directors Report.
The initial accounting treatment of the ACCC penalty was as follows:
Penalty
$
50,000
200,000
850,000
1,100,000
Income
Statement
Impact
$
Balance
Sheet
Impact
$
Classification
50,000
200,000
625,608
875,608
50,000 Other payables - current
200,000 Other liabilities - current
625,608 Other liabilities – non-current
875,608
Legal fees
Initial payment
Payment plan *
Total
On the 8th March 2019, Cryosite paid $250,000 resulting in a balance of $625,607 outstanding on 30th June
2019 made up of:
Other liabilities – current
Other liabilities – non-current
Total liabilities
$
47,464
578,144
625,608
*The payment plan of $850,000 has been discounted by $224,393 over a 10 year period using a discount rate
of 6% to reflect the 10 equal annual instalments of $85,000.
b)
Legal settlement to employee
A former Director and former employee made a claim against the company in respect to statutory entitlements
and an additional termination entitles. This claim was subsequently settled by the Group in 2018.
Cryosite Limited Annual Report
69
INDEPENDENT AUDITOR’S REPORT TO THE DIRECTORS OF CRYOSITE
LIMITED AND CONTROLLED ENTITY
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Cryosite Limited and controlled entity
(the “Group”), which comprises the statement of financial position as at 30 June 2019 and
statement of profit or loss and other comprehensive income, statement of changes in equity
and statement of cash flows for the year ended on that date, other selected explanatory notes
and the directors’ declaration as set out on pages 19 to 69.
In our opinion, the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and
of its financial performance for the year then ended; and
complying with Australian Accounting Standards to the extent described in Note 2
and the Corporations Regulations 2001.
Basis of Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Report section of our report. We are independent of the Group in accordance
with the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code
of Ethics for Professional Accounts (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of the Group, would be in the same terms if given to the
directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial report for the current year. We have determined that
there are no key audit matters to communicate in our report.
LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 – PO BOX 1994, NORTH SYDNEY NSW 2059
TEL: +61 2 9922 1166 - FAX: +61 2 9922 2044 – www.mazars.com.au
EMAIL: audit@mazars.com.au
MAZARS RISK & ASSURANCE PTY LIMITED – ABN: 39 151 805 275
Liability limited by a scheme approved under Professional Standards Legislation
Other Information
The directors of the group are responsible for the other information. The other information
comprises the information included in the “Annual Report”, but does not include the financial
statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information, and in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives
a true and fair view and have determined that the basis of preparation described in Note 2 to
the financial report is appropriate to meet the requirements of the Corporations Act 2001 and
is appropriate to meet the needs of the members. The directors’ responsibility also includes
such internal control as the directors determine is necessary to enable the preparation of a
financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the
Group to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a
whole is free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of
the financial report.
LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 – PO BOX 1994, NORTH SYDNEY NSW 2059
TEL: +61 2 9922 1166 - FAX: +61 2 9922 2044 – www.mazars.com.au
EMAIL: audit@mazars.com.au
MAZARS RISK & ASSURANCE PTY LIMITED – ABN: 39 151 805 275
Liability limited by a scheme approved under Professional Standards Legislation
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether
due to fraud or error, designs and performs audit procedures responsive to those risks,
and obtains audit evidence that is sufficient and appropriate to provide a basis for the
auditor’s opinion. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Conclude on the appropriateness of the director’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If the auditor concludes that a material
uncertainty exists, we are required to draw attention in the auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of
the auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report,
including the disclosures, and whether the financial report represents the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in
internal control that the auditor identifies during the audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable related safeguards.
LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 – PO BOX 1994, NORTH SYDNEY NSW 2059
TEL: +61 2 9922 1166 - FAX: +61 2 9922 2044 – www.mazars.com.au
EMAIL: audit@mazars.com.au
MAZARS RISK & ASSURANCE PTY LIMITED – ABN: 39 151 805 275
Liability limited by a scheme approved under Professional Standards Legislation
Report on the Remuneration Report
We have audited the Remuneration Report for the year ended 30 June 2019 as outlined on
pages 8 to 13 of the financial report. The directors of the company are responsible for the
preparation and presentation of the Remuneration Report in accordance with section 300A of
the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of Cryosite Limited for the year ended 30 June
2019, complies with section 300A of the Corporations Act 2001.
Yours sincerely,
MAZARS RISK AND ASSURANCE PTY LTD
Paul Collins
Director
Sydney, on this 21st day of August 2019
LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 – PO BOX 1994, NORTH SYDNEY NSW 2059
TEL: +61 2 9922 1166 - FAX: +61 2 9922 2044 – www.mazars.com.au
EMAIL: audit@mazars.com.au
MAZARS RISK & ASSURANCE PTY LIMITED – ABN: 39 151 805 275
Liability limited by a scheme approved under Professional Standards Legislation
ASX Additional Shareholder Information
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this
report is as follows. The information is current as at 12 August 2019.
SUBSTANTIAL SHAREHOLDERS
The names of any substantial shareholders who have notified the Company in accordance with section
671B of the Corporations Act 2001 are:
Shareholder
Andrew Kroger and related
entities
Cell Care Australia Pty Ltd
2019
No of shares % of issued capital
2018
No of shares % of issued capital
17,315,291
9,229,995
36.95
19.70
17,315,291
9,229,995
36.95
19.70
TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest holders of quoted shares are:
SHAREHOLDERS
LISTED ORDINARY SHARES
Andrew Kroger and related entities
Cell care Australia Pty Ltd
Mr Alistair David Strong
BNP Paribas Nominees Pty Ltd
Bell Potter Nominees Ltd
Mrs Jane Susan Milliken
Mr Stephen Roberts
Sunnyit Pty Ltd
Mr Theodore Onisforou
Talston Pty Ltd
H F A Administration Pty Limited
Mr Peter Howells
CVF Australia Pty Ltd
Wifam Investments Pty Ltd
Castlereagh Equity Pty Ltd
Mr Ashley McKeon
Integument Pty Ltd
Mr Gabriel Hewitt
Wheen Finance Pty Limited
Dr Anthony Francis Chan
No of shares
17,315,291
9,229,995
2,000,000
1,826,861
1,758,236
1,302,917
967,662
851,000
642,477
500,000
480,000
465,730
459,085
300,000
300,000
300,000
262,013
234,112
228,454
215,000
39,638,833
% of
ordinary
shares
36.95
19.70
4.27
3.90
3.75
2.78
2.07
1.82
1.37
1.07
1.02
0.99
0.98
0.64
0.64
0.64
0.56
0.50
0.49
0.46
84.59
Cryosite Limited Annual Report
74
ASX Additional Shareholder Information
DISTRIBUTION OF EQUITY SECURITIES
Number of Shareholders by Size of Holding
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Total
Voting Rights
No of
Holders
No of ordinary
shares
38
207
58
106
43
452
2
12,549
793,256
464,231
3,307,085
42,282,442
46,859,563
All ordinary shares carry one vote per share without restriction.
Number of shareholders holding less than a marketable parcel
The number of shareholders holding less than a marketable parcel of shares is 283 and they hold
1,070,036 shares.
Cryosite Limited Annual Report
75