Cryosite Limited
Annual Report 2020

Plain-text annual report

Cryosite Limited ABN 86 090 919 476 Appendix 4E 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 2020. Comparative amounts (unless otherwise indicated) relate to the year ended 30 June 2019. 2. Results for Announcement to the Market 2.1 Revenue from ordinary activities: 2.2 Profit(loss) from ordinary activities after tax attributable to members: 2.3 Net profit (loss)for the period attributable to members: Up Up $1,041k $2,045k to to $A'000 9,014k 1,480k Up $3,202k to 1,480k 3. Dividends 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 Current period Previous corresponding Period Net tangible asset backing per ordinary security (0.7) cents (3.7) cents 8 CRYOSITE LIMITED ABN 86 090 919 476 Annual Report for the year ended 30 June 2020 CRYOSITE LIMITED ANNUAL REPORT Table of Contents Page Corporate Information Director’s Report Corporate Governance Auditor’s Independence Declaration 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 Corporate Information 1 Summary Of Significant Accounting Policies 2 Significant Accounting Judgements, Estimates And Assumptions 3 Transition To AASB 16 4 Segment Information 5 Revenue 6 Expenses 7 Income Tax 8 Earnings Per Share 9 Cash And Cash Equivalents 10 Statement Of Cash Flow Reconciliation 11 Current Assets - Trade and Other Receivables 12 Current Assets - Inventories 13 Prepayments 14 Other Assets 15 Non-Current Trade and Other Receivables 16 Non-Current Assets - Investment in Subsidaries 17 Non-Current Assets - Plant And Equipment 18 Non-Current Assets - Intangible Assets 19 Deferred Costs 20 Current Liabilties - Trade And Other Payables 21 Unearned Income 22 Deferred Revenue 23 Provisions 24 Contributed Equity and Accumulated Losses 25 Reserves 26 Commitments And Contigencies 27 Auditors Remuneration 28 Related Party Disclosures 29 Share-Based Payments Expense 30 Key Management Personnel 31 Financial Instruments 32 Parent Entity Financial Information 33 34 Legal Claim Legal Settlement 35 Independent Auditor’s Report ASX Additional Shareholder Information 1 2 11 13 14 15 16 17 18 19 19 19 28 30 31 32 32 33 35 36 36 37 38 38 38 38 39 39 40 40 40 41 41 42 42 43 44 44 45 45 46 47 51 52 52 53 56 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: Email: +61 2 8865 2000 corporate@cryosite.com SHARE REGISTER Link Market Services Limited Level 8, 580 George Street Sydney NSW, 2000 Telephone: +61 1300 554 474 AUDITORS Mazars Risk & Assurance Pty Limited Level 12, 90 Arthur Street North Sydney NSW, 2060 Telephone: +61 2 9922 1166 WEBSITE www.cryosite.com Cryosite Limited Annual Report 30 June 2020 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 2020. 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 (appointed 2 March 2018) Mr. Andrew Kroger (appointed 21 November 2011) Non-executive Non-executive Mrs. Nicola Swift (appointed 31 October 2016) Executive chairman 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 30,000 1,300,000 Executive Chairman Chair of the Audit and Risk Committee Company Secretary Mr. Andrew Kroger, BEc. LLB, Non-Executive Director 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 18,889,612 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 30 June 2020 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) 2020 3.16 3.03 2019 (3.68) (3.62) DIVIDENDS No dividends were paid during the financial year. The total dividends declared were $nil (2019: 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 Storage and Logistics This business provides specialist temperature-controlled storage, sourcing, labelling, status management, secondary packaging, schedule drug distribution, destruction, returns and biological storage 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 Overview The year ended 30 June 2020 has been a financially successful year. Net comprehensive profit after tax was up $3.2m to $1.5m (2019 loss of $1.7m) and Operating cash inflow was $1.4m (2019 cash outflow of $648k). More importantly, the year has been a transformational one in terms of positioning the Company for long term growth. As foreshadowed in the half year report, the company in the past 6 months has spent approximately $1m on infrastructure and operating system improvements. This has positioned Cryosite to take on a far larger market by expanding our services into adjoining markets and customers. The $1m investment has raised the Company’s physical, technical and human resources standards, to meet the requirements of this expanded market. We have upgraded:      the standard of our facilities temperature controlled storage capacity new world class IT and compliance systems human resources with significant management changes being made during the year government licenses allowing us to provide a broader range of services a wider range of high values, registered and unregistered drugs. Cryosite currently operates predominately in the clinical trial logistics market. This is subject to very stringent international standards and Australian government mandated compliance and licensing requirements. This Cryosite Limited Annual Report 30 June 2020 3 Directors’ Report (continued) creates very high barriers to entry. These same standards and barriers to entry apply to products listed on the Register of Therapeutic Goods. These products represent a much larger market than clinical trial logistics. This is a natural market for the Company to expand into. Our focus will be on attracting low volume, high value, temperature controlled, highly regulated drugs, Cryosite’s specialty. Profit For the 12 months ended 30 June 2020 the Company recorded a net comprehensive profit of $1.5m after tax (2019 loss of $1.7m). This was comprised of a legal settlement of $1.0m and an operating profit of $0.5m The $3.2m turnaround in profit of was driven by 2 factors.   $2.1m of the turnaround came from the receipt during the year of a legal settlement of $1m, versus the previous corresponding period where a legal settlement generated a loss of $1m. Details of these legal matters is set out in notes 34 and 35 of these accounts. $1.1m of the turnaround came from improvements in the underlying business. The underlying business returned to a profit after tax of $0.48m versus the previous corresponding periods loss of $0.55m. The turnaround in the operating performance was driven by i. ii. a growth in gross sales of 13% ($1m) from the previous corresponding period and a reduction in expenses of ($100k) from the previous corresponding period. It should be noted the second half of the year incurred significant one-off redundancy costs and costs that associated with implementation of the changes necessary to reposition the Company. Cash While placing an emphasis on change management we have also kept a prudent eye on cash management. Total cash on hand increased by $142k, Operating cash inflow was $1.3m, including $1.0m legal settlement inflow (2019 cash outflow of $648k including legal settlement outflow of $250k). The company then invested $1m of this in capital and operational expenditure and $254k was a rent costs classified as a financing charge. The net result was a $142k increase in cash to bring cash on hand as at 30 June 2020 to $4.1m. The company has no debt. Outlook The Company starts the coming year in a positive tone. The first half will see the recently upgraded infrastructure drive higher standards, greater efficiencies and provide real time data for analysis so the business can be better managed. The pandemic will of course be a significant influence on the Company. The effect on clinical trials is a lagged effect. While the impact in the current year has been limited, we did see a reduction in clinical trial activity in May, June and July. We expect this reduction in clinical trial activity will continue into the first quarter, as a result of the 6 weeks shutdown in Victoria. Victoria is a major site of clinical trials. Cord Blood revenue is expected to remain flat. The cord blood business continues to securely store cord blood and tissue for existing clients under a variety of contracts, the longest of which is 25 years. 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 to provide additional ongoing services to our individual storage clients, to generate further long-term cash and profitability. There is much to be done at Cryosite to ensure shareholders receive an appropriate return on their investment, however as stated, we are starting the coming year with a positive tone and are excited by the opportunities. The Board and Management are grateful for the continuing support of the Company by employees and shareholders. Cryosite Limited Annual Report 30 June 2020 4 Directors’ Report (continued) EMPLOYEES AND DIVERSITY The Company employed 18 full-time equivalent employees as at 30 June 2020 (2019: 21 employees). The company has no set diversity objectives for achieving gender diversity, due to the company’s small size. The Company recognises the value of diversity in the workplace and is committed to providing equal opportunity for all its staff with 50% of current employees being female. There are numerous religions, 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 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 1,950,000 (2019: 3,314,946) unissued ordinary shares under the CEIP : Options Performance rights Total 2020 $ 1,950,000 - 1,950,000 2019 $ 2,600,000 714,946 3,314,946 Please refer to the remuneration report for further details. The circumstances under which Personnel is entitled to retain these options and performance rights if they 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 2020. 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 and the NSW Department of Health. 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. Cryosite Limited Annual Report 30 June 2020 5 Directors’ Report (continued) 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. 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 Director Non-Executive Director Chief Executive Officer (resigned 30/09/2019) On the 27th June 2019 it was announced that Mark Byrne had decided to step down as CEO and on the 30th September 2019, he left the company. Due to the relatively small number of employees, 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. Cryosite Limited Annual Report 30 June 2020 6 Directors’ Report (continued) 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. 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. Board and Non-Executive Directors As set out in our corporate governance policies, directors renumeration is set to attract a requisite skill set required to govern the company. The board has annual internal process to evaluate the performance of the board and its committees. Cryosite has two non-executive directors and an Executive Chairman. During the reporting period two of the three directors were deemed not to be-independent. The chairman, Mr. Dulhunty was not deemed to be independent due to his executive role and Mr. Andrew Kroger was not deemed to be independent, due to his substantial shareholding of the company with a relevant interest at the date of this report of 40.3%. Ms. Nicola Swift is considered to be independent. Due to the small size of the company a board skill matrix has not been developed. The board carries out an annual internal performance review of board, committees and individual directors. The last performance appraisal was carried out in July 2020. The remuneration of directors including the Chairman consists of fixed annual fees. Apart from reimbursement of expenses incurred on the Company’s behalf, non-executive directors are not eligible for any additional payments, unless directors take on additional or executive roles then they are entitled to additional fees. These additional fees are set out later in this report. Chairman of the Board: $75,000 maximum per annum, plus superannuation Non-Executive Directors: $60,000 maximum per annum, plus superannuation Performance based compensation is not part of the remuneration structure offered to non-executive directors. No options or performance rights 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 2020 total aggregate remuneration paid to non- executive directors was $142,200 (2019; $261,774). Executive Remuneration Executive total remuneration consists of the following components: Cryosite Limited Annual Report 30 June 2020 7 Directors’ Report (continued) Fixed Remuneration This comprised of a fixed base salary and statutory superannuation. This is reviewed annually although there is no guaranteed increase. Short Term Incentive Plans 2020 Due to the significant challenges facing the Company in 2020, 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. Payments to directors under this plan are set out in the remuneration table below. 2019 Due to the on-going challenges facing the Company, no formal STIP plan was put in place for 2019. Long Term Incentive Plan: Cryosite Employee Incentive Plan (CEIP) On 23 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. Nil performance rights were issued in 2020 (2019: nil). As at 30 June 2019, 714,946 performance rights were on issue. No performance rights had vested. On Mark Byrne’s resignation on 30 September 2020, these 714,946 performance rights lapsed. Options On the 27 June 2019, the board granted options to the following key management personnel: Options granted 27 June 2019 Total options issued as at 30 June 2019 Bryan Dulhunty* No 1,300,000 1,300,000 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 Grant date Vesting date Expiry date Period Exercise price 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. 27 June 2019 1 September 2021 1 September 2024 27/6/2019 to 1/9/2021 6 cents Cryosite Limited Annual Report 30 June 2020 8 Directors’ Report (continued) Targets 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 2020 Year Ended 30 June 2020 Short term benefits Post employment benefits Share based payments Total Share based payments Performance based Salary & Fees $ Other Cash benefits $ 33,333 - 75,000 150,012 40,000 60,000 168,333 190,012 62,042 62,042 - - 230,375 190,012 Directors Andrew Kroger Bryan Dulhunty*(1) Nicola Swift (2) Total directors Executives Mark Byrne (3) Total Executive Total Super $ (4) $ $ % % 3,167 7,125 5,700 15,992 5,506 5,506 21,498 - 5,017 - 5,017 - - 5,017 36,500 237,154 105,700 379,354 67,548 67,548 446,902 0.0% 2.1% 0.0% 1.3% 0.0% 0.0% 1.1% 0.0% 2.1% 0.0% 1.3% 0.0% 0.0% 1.1% *Executive Chairman (1) Bryan Dulhunty. Director fees paid to Bryan Dulhunty $75,000. Other Cash benefits are comprised of payments to CoSA Pty Ltd a related party of Bryan Dulhunty of Company secretarial Fees of $25,000, executive contract fees of $50,000 and an incentive bonus of $75,000k. (2) This includes payments to MGW Capital Pty Ltd which is a related party of Nicola Swift. During the year the MGW Capital Pty Ltd charged the Company $40,000 for consulting services performed by Nicola Swift. (3) Resigned on 30 September 2019. (4) This relates to the fair value of performance rights and options granted under the Cryosite Employee Incentive Plan CEIP). COMPENSATION FOR KEY MANAGEMENT PERSONNEL 2019 Year Ended 30 June 2019 Short term benefits Post- employment benefits Share based payments Total Share based payments Performan ce based Salary & Fees $ Other Cash benefits $ Super $ (2) $ $ % % Non-Executive Directors Andrew Kroger Bryan Dulhunty* (1) Nicola Swift Total directors 60,000 - 60,000 120,000 - 130,264 - 130,364 5,700 - 5,700 11,400 - 110 - 110 65,700 130,374 65,700 261,774 0.0% 0.0% 0.1% 0.0% 0.0% 0.1% 0.0% 0.0% Cryosite Limited Annual Report 30 June 2020 9 Directors’ Report (continued) Executives Mark Byrne Total Executive Total 228,310 28,310 348,310 - - 130,264 21,619 21,689 33,089 37,571 37,571 37,681 287,570 287,570 549,344 13.1% 13.1% 6.9% 13.1% 13.1% 6.8% * Bryan Dulhunty was appointed Executive Chairman on the 27 June 2019. (1) This includes payments made to CoSA Pty Limited, a related party of 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 27 June2019. (2) This relates to the fair value of performance rights and options granted under the Cryosite Employee Incentive Plan CEIP). SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL Ordinary Shares held in Cryosite Limited Bryan Dulhunty Andrew Kroger Ordinary Shares held in Cryosite Limited Bryan Dulhunty Andrew Kroger Balance on appointment / (resignation) - - - Balance on appointment / (resignation) - - - 1 July 2019 30,000 17,315,291 17,345,291 1 July 2018 30,000 17,315,291 17,345,291 Share purchases - 1,574,321 1,574,321 30 June 2020 30,000 18,889,612 18,919,612 Share purchases - - - 30 June 2019 30,000 17,315,291 17,345,291 Senior executive performance is renewed annually, a review was carried out in the current year. 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 options 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. 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 Mark Byrne resigned on 30 September 2019 and as result 714,946 performance rights were cancelled. There were no other transactions during the year with key management personnel or with any key management personnel related entities. Cryosite Limited Annual Report 30 June 2020 10 Directors’ Report (continued) DIRECTORS’ AND COMMITTEE MEETINGS During the financial year, the following meetings incurred and were attended by directors: Directors Bryan Dulhunty Andrew Kroger Nicola Swift Directors Meetings Eligible to attend 12 12 12 Eligible attended 12 12 12 Audit Risk Committee Meetings Eligible to attend 6 - 6 Eligible attended 6 - 6 Remuneration and Nomination Meetings Eligible attended 3 - 3 Eligible to attend 3 - 3 DIRECTORS, EXECUTIVES AND COMMITTEE AND PERFORMANCE REVIEW STRUCTURE Directors and Executives The board carries out an annual internal performance review of board members and board structure and makes appropriate changes to facilitate the business and minimize risk. The last performance appraisal was carried out in July 2020. Executives are evaluated by formalized performance review structure on and annual basis. The last performance appraisal was January 2020. Committees The board carries out an annual internal performance review of both the audit and risk and the renumeration and nomination committee committees. The last performance appraisal was carried out in July 2020. The board continually monitors the framework of the risk committee to ensure that it is responsive to the company’s working environment. 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. CORPORATE GOVERNANCE REPORT 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 2020 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. Cryosite Limited Annual Report 30 June 2020 11 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 2020, 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 Rose Megale Director Sydney, on the 28th of August 2020 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 13 MAZARS RISK & ASSURANCE PTY LIMITED – ABN: 39 151 805 275 Liability limited by a scheme approved under Professional Standards Legislation Consolidated Statement of Profit and Loss and Other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2020 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 Legal claim Total expenses Profit (loss) before tax Income tax (expense) benefit Profit (Loss) after tax Other items Legal settlement, net of tax Net comprehensive Profit (loss) for the year Earnings per share Basic, profit/(loss) for the year attributable to ordinary equity holders of the parent Diluted, profit/(loss) for the year attributable to ordinary equity holders of the parent Notes 6 6 7(d,f,g) 7(c) 34 8 35 9 9 2020 $ 2019 $ 8,919,846 94,338 9,014,184 7,911,693 61,500 7,973,193 (4,971,717) (437,554) - (57,604) (329,831) (2,410,954) 958,983 (7,248,677) (4,603,392) (271,018) (330,873) (403,862) (615,342) (2,036,979) - (8,261,466) 1,765,507 (285,328) 1,480,179 (288,273) (276,884) (565,157) - 1,480,179 (1,157,386) (1,722,543) Cents Cents 3.16 (3.68) 3.03 (3.62) 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 30 June 2020 15 Consolidated Statement of Financial Position AS AT 30 JUNE 2020 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 Right of use asset 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 Lease Liability Deferred revenue Total Current Liabilities Non-Current Liabilities Trade and other payables Provisions Other liabilities Lease Liability Deferred revenue Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Share rights reserves Accumulated losses TOTAL EQUITY Notes 2020 $ 2019 $ 10 12 13 14 15 20 16 8(c) 4 18 19 20 4,061,832 962,717 47,880 353,672 - 167,937 1,332,574 6,926,612 138,253 2,135,141 1,213,340 1,168,465 20,217 11,899,778 16,575,294 3,919,897 838,100 22,859 279,369 29,081 476,262 1,381,183 6,381,838 186,502 2,412,234 - 387,181 6,978 13,232,356 16,225,251 23,501,906 23,172,002 731,963 78,692 178,263 50,311 197,301 876,942 23,066 155,804 47,464 - 2,129,237 3,365,767 2,250,487 3,353,763 441,682 240,963 527,833 1,065,018 441,682 237,799 578,144 - 18,147,450 20,276,684 20,422,946 21,534,309 23,788,713 24,888,072 (286,807) (1,716,070) 5,861,788 18,616 (6,167,211) 5,861,788 69,532 (7,647,390) (286,807) (1,716,070) 21 22 24 35 4 23 21 24 35 4 23 25 26 25 The above consolidated statement of financial position should be read in conjunction with the accompanying note Cryosite Limited Annual Report 30 June 2020 16 Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED Attributable to equity holders of the company Contributed capital Accumulated losses Share Rights reserve Total equity At 1 July 2019 5,861,788 (7,647,390) 69,532 (1,716,070) Total comprehensive income (loss) for the year Transactions with owners in their capacity as owners Performance rights / options granted Performance rights cancelled - - - 1,480,179 - 1,480,179 - - 29,198 (80,114) 29,198 (80,114) At 30 June 2020 5,861,788 (6,167,211) 18,616 (286,807) 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 granted Performance rights cancelled - - - - (1,722,543) (1,966,135) - - (1,240,439) (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) The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Cryosite Limited Annual Report 30 June 2020 17 Consolidated Statement of Cashflows FOR THE YEAR ENDED 30 JUNE 2020 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers inclusive of GST Payments to suppliers and employees inclusive of GST* Legal Claim, net Income Tax Refund Government Incentive - Cash Boost Interest Received Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment Software development costs Interest received Net cash flows (used in) investing activities Notes 2020 $ 2019 $ 6,869,903 6,941,491 (6,621,284) (7,594,578) 958,983 21,035 50,000 - - - - 5,551 11 1,278,637 (647,536) 18 19 (889,530) (26,155) (20,317) 27,745 (882,102) - 57,761 31,606 CASH FLOWS FROM FINANCING ACTIVITIES Operating Lease Payments (including notional interest) Net cash flows (used in) financing activities (254,600) (254,600) - - Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at beginning of year 141,935 (615,930) 3,919,897 4,535,827 Cash and cash equivalents at end of year 10 4,061,832 3,919,897 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Cryosite Limited Annual Report 30 June 2020 18 Notes to the Financial Statements For the Year Ended 30 June 2020 1 CORPORATE INFORMATION The financial report of Cryosite Limited and the controlled entity (the Group) for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of the directors on 28 August 2020. 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 1023 Interpretation 23 – Uncertainty over Income Tax Treatment  AASB 16 - Leases The relevant standards for the Group follow: AASB 16 Leases The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the lease payments will aggregate both principal and interest components into financing activities. The impact of adopting AASB 16 on the year ended 30 June 2020 financial report, is presented in Note 4. Cryosite Limited Annual Report 30 June 2020 19 Notes to the Financial Statements For the Year Ended 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. (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 are 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: 2020 2019 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. Cryosite Limited Annual Report 30 June 2020 20 Notes to the Financial Statements For the Year Ended 30 June 2020 (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. 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. (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. (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 30 June 2020 21 Notes to the Financial Statements For the Year Ended 30 June 2020 (j) Trade and other receivables Trade receivables (current), which generally have 30-day terms, are recognised initially at fair value less expected credit loss and any allowance for impairment. 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. Cryosite Limited Annual Report 30 June 2020 22 Notes to the Financial Statements For the Year Ended 30 June 2020 (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 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: (i) (ii) the number of awards that, in the opinion of directors of the Group, will ultimately vest. This opinion is the extent to which the vesting period has expired and 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 30 June 2020 23 Notes to the Financial Statements For the Year Ended 30 June 2020 (p) Leases AASB 16 has been applied as of 1 July 2019 and the Group will use what is known as the “modified retrospective” transition method, under which a liability is recognised 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. Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. (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. Revenue from cord blood and cord tissue storage 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). This resulted in the recognition of "Deferred revenue" and "Deferred costs" in the statement of financial position that are unwound to revenue and costs for the remaining contract period. Cryosite Limited Annual Report 30 June 2020 24 Notes to the Financial Statements For the Year Ended 30 June 2020 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. 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. Cryosite Limited Annual Report 30 June 2020 25 Notes to the Financial Statements For the Year Ended 30 June 2020 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. (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 Cryosite Limited Annual Report 30 June 2020 26 Notes to the Financial Statements For the Year Ended 30 June 2020 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 are calculated as above based on net profit after tax. (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. 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. Cryosite Limited Annual Report 30 June 2020 27 Notes to the Financial Statements For the Year Ended 30 June 2020 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: 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 $2,015,010 unconfirmed (2019: $2,418,851) tax losses carried forward of which $231,429 have been brought to account as deferred tax asset, that are available for offset against future taxable profits of the company. 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 Cryosite Limited Annual Report 30 June 2020 28 Notes to the Financial Statements For the Year Ended 30 June 2020 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 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.  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 Cryosite Limited Annual Report 30 June 2020 29 Notes to the Financial Statements For the Year Ended 30 June 2020 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  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. 4 TRANSITION TO AASB 16 The entity has adopted AASB 16 with effect from 1 July 2019 but has not restated comparatives for the 2019 reporting period, as permitted under the specific transitional provisions in the standard. The entity leases the premises housing its principle place of business. Until the 2019 financial year, such leases were classified as operating leases with payments being charged to the profit and loss. From 1 July 2019, in line with AASB 16, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The right-of-use asset is amortised over the lease term on a straight-line basis. The reclassifications and the adjustments arising from the new leasing rules have been recognised in the opening balance sheet on 1 July 2019. a. b. Recognition of right-of-use assets amounting to $1,440,841 Recognition of current lease liability of $178,522 and non-current lease liability of $1,262,319 Lease liabilities have been measured at the present value of the remaining lease payments, discounted using the RBA June 2019 Lending Rate - Small business variable rate as of 1 July 2019. The movement from lease commitments to lease liabilities is reconciled as follows: Operating lease commitments disclosed as at 30 June 2019 Option of the lease extension of 3 years recognized as at 1 July 2019 Discounted using the RBA June 2019 Lending Rate - Small business variable rate of 5.45% Lease liability recognised as at 1 July 2019 Lease payments made from 1 July 2019 to 30 June 2020 Lease liability as at 30 June 2020 The recognised right-of-use assets relates to property and is comprised as follows: Property right of use recognised as at 1 July 2019 Accumulated Amortisation for year ended 30 June 2020 Lease Asset as at 30 June 2020 30 June 2020 $ 870,603 835,768 (265,530) 1,440,841 (178,522) 1,262,319 1,440,841 (227,501) 1,213,340 The consolidated entity has elected to adopt a modified retrospective application of the standard as permitted by AASB 16. Cryosite Limited Annual Report 30 June 2020 30 Notes to the Financial Statements For the Year Ended 30 June 2020 4 TRANSITION TO AASB 16 (continued) The balance at 30 June 2020 is made up of: Lease asset – non-current Total Assets Lease liability – current Leases liability – non-current Total Liabilities 5 SEGMENT INFORMATION Identification of Reportable Segments 2020 $ 1,213,340 1,213,340 197,301 1,065,018 1,262,319 2019 $ - - - - - 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: Clinical Trials and Biological Services Logistics Specialist temperature-controlled storage, sourcing, labelling, status management, secondary packaging, schedule drug distribution, destruction, returns and biological services. Storage of cord blood and tissue samples. Cord Blood and Tissue Storage The accounting policies used by the Company in reporting segments internally are the same as those contained in note 1 to the accounts. Operating Segments 2020 Operating Segment Clinical Trials and Biological Storage and Logistics $ Cord Blood and Tissue $ Unallocated $ Total $ Revenue 6,234,092 2,685,754 94,338 9,014,184 Net operating profit Legal claim Government incentive - cash boost Net profit before tax Tax Net profit after tax Total Comprehensive Income net of tax 2,900,935 - - 2,900,935 - 2,900,935 2,900,935 894,717 - - 894,717 (238,572) 656,145 656,145 (3,039,129) 958,984 50,000 (2,030,145 (46,756) (2,076,901) (2,076,901) 756,523 958,984 50,000 1,765,507 (285,328) 1,480,179 1,480,179 Segment Assets 30 June 2020 Segment Liabilities 30 June 2020 Depreciation and Amortisation 1,680,568 459,760 (60,499) 13,860,462 20,744,170 (98,284) 7,960,876 2,584,783 (278,771) 23,501,905 23,788,713 (437,554) Cryosite Limited Annual Report 30 June 2020 31 Notes to the Financial Statements For the Year Ended 30 June 2020 5 SEGMENT INFORMATION (continued) 2019 Clinical Trials and Biological Storage and Logistics $ Cord Blood and Tissue $ Unallocated $ Total $ Operating Segment 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 - 992,951 - 992,951 872,450 (238,592) 633,858 - 633,858 (2,153,674) (38,292) (2,191,966) (1,157,386) (3,349,352) (288,273) (276,884) (565,157) (1,157,386) (1,722,543) Segment Assets 30th June 2019 Segment Liabilities 30th 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) 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 Government incentive – cash boost 7 EXPENSES (a) Legal costs Continuing operations Legal settlement Legal Claim Total (b) Lease payments Lease payments-operating leases Consolidated 2020 $ 6,234,092 2,685,754 8,919,846 44,318 50,000 94,318 9,014,164 2019 $ 5,189,717 2,721,978 7,911,695 61,498 - 61,498 7,973,193 Consolidated 2020 $ 57,816 - 41,017 98,833 2019 $ 101,573 407,626 - 509,199 - 363,704 35 34 Cryosite Limited Annual Report 30 June 2020 32 Notes to the Financial Statements For the Year Ended 30 June 2020 7 EXPENSES (continued) (c) Employee benefits expense s and salaries Superannuation costs Consolidated 2020 $ 2020 $ 1,965,815 182,769 2,148,584 2,126,477 208,507 2,334,984 (d) Depreciation – plant & equipment 18 and 19 203,075 260,996 (e) Impairment loss (f) Amortisation of Intangibles (g) Amortisation of Leases (h) Finance Costs 8 INCOME TAX 18 19 4 4 - 330,873 6,978 10,022 227,501 114,314 - - (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 Under provision prior year Consolidated 2020 $ (285,328) 2019 $ (151,037) (285,328) (151,037) (277,735) - (277,735) (7,593) (285,328) (276,884) 125,847 (151,037) - (151,037) (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% (2019:27.5%) Tax losses not recognised Other items Under provision prior year Income tax (expense) benefit 1,715,508 (471,765) 111,056 82,974 (7,593) (285,328) (1,571,503) 432,163 (370,571) (212,629) - (151,037) Cryosite Limited Annual Report 30 June 2020 33 Notes to the Financial Statements For the Year Ended 30 June 2020 INCOME TAX (continued) 8 (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 Superannuation Payable Accruals Lease Liability Tax Losses carried forward Impairment and depreciation of plant & equipment Prepayments Consumables Net deferred tax asset – normal operations Consolidated 2020 2019 $ $ 5,576,089 (3,638,897) 1,937,192 6,194,971 (4,018,719) 2,176,252 60,287 17,582 46,494 2,750 5,363 13,661 63,643 1,336 - (13,167) 197,949 56,492 16,225 20,206 - 6,322 - 75,663 67,787 (875) (6,286) 235,982 Net deferred tax assets 2,135,141 2,412,234 (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 $2,015,919 (2019: $2,418,851), of which $231,429 (2019: $231,429) have been brought to account as a deferred tax asset that are available for offset against future taxable profits of the company. The unrecognized deferred income tax asset of $490,735 (2019: $665,184) 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 Cryosite Limited Annual Report 30 June 2020 34 Notes to the Financial Statements For the Year Ended 30 June 2020 8 INCOME TAX (continued) 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. 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 2020 $ 2019 $ 3.16 3.03 (3.68) (3.62) 1,480,179 (1,722,543) No.No. of shares 46,859,563 46,859,563 1,480,179 (1,722,543) No. of shares 46,859,563 46,859,563 1,950,000 727,234 48,809,563 47,586,797 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 30 June 2020 35 Notes to the Financial Statements For the Year Ended 30 June 2020 10 CASH AND CASH EQUIVALENTS Cash at bank and on hand Short-term deposit Total Cash and Cash Equivalents Consolidated 2020 $ 60,076 4,001,756 4,061,832 2019 $ 329,275 3,590,622 3,919,897 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 $4,061,832 (2019: $3,919,897). 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 intangibles Impairment loss for prepayments Provision for dividend Other Equity 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 (Increase) in other current assets 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 Increase (Decrease) in bonus provision Increase in employee benefits Net cash flow from operating activities Consolidated 2020 $ 2019 $ 1,480,179 - (1,722,543) (56,157) 437,554 - - 1,402 (50,916) (446,935) 618,884 1,381,185 (379,823) (2,250,133) (25,021) (74,303) (12,571) 38,033 308,325 190,656 - (47,463) 55,626 29,759 - 27,004 1,278,637 271,650 39,780 291,093 - (29,880) 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) (44,194) (647,536) Cryosite Limited Annual Report 30 June 2020 36 Notes to the Financial Statements For the Year Ended 30 June 2020 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 2020 $ 913,350 (169,068) 744,282 218,435 962,717 2019 $ 652,545 (73,475) 579,070 259,030 838,100 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 Balance at end of period Consolidated 2020 $ 73,475 95,593 169,068 2019 $ 45,590 27,885) 73,475 (b) Analysis of trade receivables aging and allowance for expected credit losses. 2020 Current Non-Current 16 Total Consolidated Expected Credit Loss Rate Total Provision Calculated 2019 Current Non-Current Total Consolidated Expected Credit Loss Rate Total Provision Calculated Total $ Not yet Due $ 0-30 Days $ 31-60 Days $ 61-90 Days $ +91 Days $ 913,350 643,684 138,253 138,253 161,150 - 1,051,603 782,367 8.8% 70,801 15.7% 169,593 161,150 2.1% 3,395 13,207 - 13,207 19.8% 2,620 8,257 - 8,257 60.1% 3,805 87,052 - 87,052 100.0% 88,972 652,545 460,673 186,502 186,502 839,047 647,175 - 11.3% 73,475 54,522 - 54,552 - 22,657 - 22,657 - 41,659 - 41,659 - 73,034 - 73,034 - Cryosite Limited Annual Report 30 June 2020 37 Notes to the Financial Statements For the Year Ended 30 June 2020 12 TRADE AND OTHER RECEIVABLES – CURRENT (continued) 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 Inventories 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 15 OTHER ASSETS Bank guarantee security deposit Term Deposit Total 16 TRADE AND OTHER RECEIVABLES – NON-CURRENT Trade receivables Trade receivables due under term payment plans Consolidated 2020 $ 2019 $ 47,880 47,880 22,859 22,859 Consolidated 2020 2019 $ $ 279,369 74,303 - 353,672 289,078 (9,721) (888) 279,369 Consolidated 2020 $ 167,937 - 167,937 2019 $ 152,277 323,985 476,262 Consolidated 2020 $ 2019 $ 138,252 186,502 For analysis of maximum exposure to credit risk at the time of reporting refer to Note 12(b) Cryosite Limited Annual Report 30 June 2020 38 Notes to the Financial Statements For the Year Ended 30 June 2020 17 INVESTMENT IN CONTROLLED ENTITY Name – Cryosite Distribution Pty Limited Equity interest held by the consolidated entity Investment 2020 % 2019 % 2020 $ 2019 $ Country of incorporation – Australia 100 100 20 20 18 PLANT AND EQUIPMENT Leasehold Improvements Fixtures and fittings Information Technology Warehouse Equipment Office furniture & equipment $ $ $ $ $ Total $ 211,613 133,829 263,378 4,313,674 31,254 4,953,748 - - - - - - 26,155 (632) 26,155 (632) Cost At 1 July 2018 Additions Disposals At 30 June 2019 211,613 133,829 263,378 4,339,197 31,254 4,979,271 Additions Disposals 19,854 (200,000) - - 87,967 866,155 10,382 984,358 (160,515) (1,006,968) - (1,367,484) At 30 June 2020 31,467 133,829 190,829 4,198,384 41,636 4,596,145 Depreciation and Impairment At 1 July 2018 Depreciation charge Disposals At 30 June 2019 Depreciation charge Disposals At 30 June 2020 (200,734) (78,986) (229,253) (3,805,997) (16,124) (4,331,094) (2,212) (6,994) (19,992) (227,715) (4,715) (261,628) - - - 632 - (632) (202,946) (85,890) (249,245) (4,033,080) (20,839) (4,592,090) (2,223) 200,000 (6,994) (12,630) (169,339) (11,890) (203,076) - 160,516 1,006,968 - 1,367,484 (5,169) (92,974) (101,359) (3,195,451) (32,729) (3,427,682) Net Book Value - 30 June 2019 Net Book Value - 30 June 2020 8,667 26,298 47,849 40,856 14,133 306,117 10,415 387,181 89,470 1,002,933 8,907 1,168,465 Cryosite Limited Annual Report 30 June 2020 39 Notes to the Financial Statements For the Year Ended 30 June 2020 19 INTANGIBLE ASSETS Cost At 30 June 2019 Additions Impairment loss At 30 June 2020 Amortisation and impairment At 30 June 2019 Amortisation Impairment loss At 30 June 2020 Net book value – 30 June 2019 Net book value – 30 June 2020 Software Development Software $ 131,232 20,317 (131,232) 20,317 (124,254) (6,978) 131,232 - 6,978 20,317 Total $ 131,232 20,317 (131,232) 20,317 (124,254) (6,978) 131,232 - 6,978 20,317 During the year the company developed, validated and constructed a new Cord Blood database, the costs have been capitalised, to reflect the future value of the database as contracts expire and are extended. The costs will be amortised over a 5-year period. 20 DEFERRED COSTS Current Non-current Consolidated 2020 $ 2019 $ 1,332,574 11,899,778 1,381,183 13,232,356 13,232,352 14,613,539 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 Consolidated 2020 $ 2019 $ 389,339 342,624 731,963 239,694 637,248 876,942 441,682 441,682 441,682 441,682 Cryosite Limited Annual Report 30 June 2020 40 Notes to the Financial Statements For the Year Ended 30 June 2020 21 TRADE AND OTHER PAYABLES (continued) Fair value 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 $ +91 Days $ 2020 Consolidated 2019 Consolidated 389,339 239,694 - - 260,306 129,428 - 172,279 57,719 9,696 - - Other balances within trade and other payables are not past due. It is expected that these other balances will be paid. 22 UNEARNED INCOME Current 23 DEFERRED REVENUE Current Non-current 24 PROVISIONS Current Annual leave Long service leave Dividend payable Consolidated 2020 $ 78,692 78,692 2019 $ 23,066 23,066 Consolidated 2020 $ 2019 $ 2,129,237 18,147,450 20,276,687 2,250,487 20,276,684 22,527,171 Consolidated 2020 $ 2019 $ 124,941 53,322 - 178,263 130,403 24,019 1,382 155,804 Cryosite Limited Annual Report 30 June 2020 41 Notes to the Financial Statements For the Year Ended 30 June 2020 24 PROVISIONS (continued) 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 2020 $ 2019 $ 40,963 200,000 240,963 37,799 200,000 237,799 130,403 (5,462) 124,941 61,818 32,467 94,285 177,895 (47,492) 130,403 40,358 21,460 61,818 Nature and timing of long service leave provision is based on the accounting policy and the significant estimations and assumptions applied in the measurement of this provision as in Note 3. Nature and timing of lease make-good provision In June 2019 the current lease agreement with Allsup Pty Limited for the premises in Granville, was extended until 31 October 2025. The make good provision remains at $200,000 in respect of the Group’s obligation to reflect this arrangement regarding the leased premises. 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 2020 $ 5,861,788 2019 $ 5,861,788 Beginning of the financial year End of the financial year 2020 2019 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 30 June 2020 42 Notes to the Financial Statements For the Year Ended 30 June 2020 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 options reserve Share rights reserve Balance at the end of year 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 2020 $ (7,647,390) - 1,480,179 (6,167,211) 2019 $ (3,958,712) (1,966,135) (1,722,543) (7,647,390) Consolidated 2020 $ 18,616 - 18,616 2019 $ 1,001 68,531 69,532 Consolidated 2020 $ 69,532 29,198 (80,114) 18,616 2019 $ 40,339 52,121 (22,928) 69,532 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. Cryosite Limited Annual Report 30 June 2020 43 Notes to the Financial Statements For the Year Ended 30 June 2020 27 COMMITMENTS AND CONTINGENCIES (a) Operating lease commitments – Group as lessee Group as lessee Commercial Property Security deposits The security deposit for the lease at Granville is covered by a bank guarantee for $167,937 issued by the Commonwealth Bank of Australia. Cash deposit is held as security as per note 15. Plant and equipment The Group had a number of operating leases on items of plant and equipment used in day to day operations of the business, these finished in November 2019. 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. Consolidated 2020 $ 2019 $ - - - 4,880 - 4,880 Consolidated 2020 $ 2019 $ 71,002 70,717 5,300 76,302 5,750 76,467 Cryosite Limited Annual Report 30 June 2020 44 Notes to the Financial Statements For the Year Ended 30 June 2020 29 RELATED PARTY DISCLOSURES 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. This included payments to made to CoSA Pty which is a party related to Bryan Dulhunty. During the year the company charged the Company $150,012 (2019 $130,264) for consulting service in respect to services provided by Bryan Dulhunty as a director and company secretary of the company. During the year total payments of $40,000 were made to MGW Pty Ltd a related party of Nicola Swift, a director of the Company. 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 $36,992 (2019: $3,708,145). 30 SHARE-BASED PAYMENTS EXPENSE Total Expense (income) recognized in the profit and loss relating to share based payments: Options Performance rights Consolidated 2020 $ 2019 $ 18,615 (69,312) (49,920) 1,001 52,121 52,121 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. Options There were no options granted during the 2020 year. Options granted 27th June 2019 Balance granted as at 30th June 2019 Options cancelled in June 2020 Balance as at 30th June 2020 Key management personnel No 1,300,000 1,300,000 - 1,300,000 Staff No 1,300,000 1,300,000 (650,000) 650,000 Total No 2,600,000 2,600,000 (650,000) 1,950,000 Cryosite Limited Annual Report 30 June 2020 45 Notes to the Financial Statements For the Year Ended 30 June 2020 30 SHARE-BASED PAYMENTS EXPENSE (continued) 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 Target date 30 June 2021 30 June 2021 30 June 2021 Percentage of Performance Rights that vest 33.3% 33.3% 33.3% Conditions of Vesting Positive Earnings per share (EPS)* Positive Cashflow from Operations* Continuous service * Based on the 2021 audited accounts As at 30 June 2020, no options had vested. 31 KEY MANAGEMENT PERSONNEL (a) Key Management Personnel Directors Mr. Bryan Dulhunty Mr. Andrew Kroger Mrs. Nicola Swift Executive Chairman Director Director Executive Mr. Mark Byrne (resigned 30 September 2019) 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 30 June 2020 46 Notes to the Financial Statements For the Year Ended 30 June 2020 31 KEY MANAGEMENT PERSONNEL (Continued) (b) Compensation for key management personnel Directors Short-term employee benefits*(1) Post-employment benefits Share base payments Sub-total directors Key Management Personnel Short-term employee benefits Post-employment benefits Share base payments Sub-total key management personnel Total compensation 2020 $ Consolidated 2019 $ 358,345 15,992 5,017 379,354 62,042 5,506 - 67,548 446,902 250,265 11,400 110 261,775 228,310 21,689 37,571 387,571 549,345 *This includes payments to made to CoSA Pty which is a party related to Bryan Dulhunty. During the year the company charged the Company $150,012 (2019 $130,264) for consulting service in respect to services provided by Bryan Dulhunty as a director and company secretary of the company. (1) In addition, included payment to MGW Capital Pty Ltd which is a party related to Nicola Swift for $40,000 for consulting services performed by Nicola Swift. 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 30 June 2020 47 Notes to the Financial Statements For the Year Ended 30 June 2020 32 FINANCIAL INSTRUMENTS (Continued) Financial assets Interest bearing deposits Cash and equivalents Other assets Current receivables Non-Current receivables Total Financial Labilities Trade creditors and accruals Note 10 10 15 12 16 21 2019 Note Financial assets Interest bearing deposits Cash and equivalents Other assets Current receivables Non-Current receivables Total Financial Labilities Weighted average effective interest % 1.05% 0.01% 1.80% - - Weighted average effective interest % Floating Interest $ Non-Interest bearing $ Total $ 4,001,756 60,076 167,937 - - 4,229,769 - - - 962,717 138,253 1,100,970 4,001,756 60,076 167,937 962,717 138,253 5,330,739 - 389,339 389,339 Floating Interest $ Non-Interest bearing $ Total $ 10 10 15 12 16 2.13% 0.46% 2.13% - - 3,590,622 329,275 476,262 - - - - - 838,100 186,502 3,590,622 329,275 476,262 838,100 186,502 4,396,159 1,024,602 5,420,761 Trade creditors and accruals 21 - 239,693 239,693 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. Cryosite Limited Annual Report 30 June 2020 48 Notes to the Financial Statements For the Year Ended 30 June 2020 32 FINANCIAL INSTRUMENTS (Continued) 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. 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 2019. 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. Cryosite Limited Annual Report 30 June 2020 49 Notes to the Financial Statements For the Year Ended 30 June 2020 32 FINANCIAL INSTRUMENTS (Continued) (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 $6,926,612 (2019: $6,622,766) at balance date less current liabilities of $3,270,939 (2019: $3,029,778) an excess of current assets over current liabilities amounting to $3,685,673 (2019: $3,592,988). The Group generated a positive cashflow of $141,935 (2019: negative cash flow of $647,536) from operations during the current year. Liquidity risks are managed by matching the payment and receipt cycle. Maturity analysis of financial assets and liabilities based on management’s expectation. Year ended 30 June 2020 Consolidated Financial Assets Cash and cash equivalents Trade and other receivables Other assets Consolidated Financial liabilities Trade and other payables Net maturity Year ended 30 June 2019 Consolidated Financial Assets Cash and cash equivalents Trade and other receivables Other Assets Consolidated Financial liabilities Trade and other payables Net maturity Less than 6 months $ 6-12 months $ 1-5 years $ Greater than 5 $ Total $ 4,061,832 937,847 - 4,999,679 - 24,870 - 24,870 - 131,077 167,937 299,014 731,963 4,208,384 - 24,870 - 178,794 - 7,176 - 7,708 - 7,708 4,061,832 1,100,970 167,937 5,330,739 731,963 4,693,604 Less than 6 months $ 6-12 months $ 1-5 years $ Greater than 5 $ 3,919,897 841,444 323,985 5,085,326 - 25,737 - 25,737 - 178,794 - 178,794 876,942 4,208,384 - 113,823 - 178,794 - 7,708 - 7,708 - 7,708 Total $ 3,919,897 1,053,683 323,985 5,297,765 876,942 4,420,623 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 The Group has assessed liquidity risk to be low at balance date and at the date of this report based on total (f) Currency Risk The group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future Cryosite Limited Annual Report 30 June 2020 50 Notes to the Financial Statements For the Year Ended 30 June 2020 32 FINANCIAL INSTRUMENTS (Continued commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. In order to protect against exchange rate movements, the consolidated entity has established a foreign currency bank account, however minimal balances are maintained in foreign currency. Funds received in foreign currency are converted to local currency within 7 days of receipt. 33 PARENT ENTITY FINANCIAL INFORMATION The individual financial statements for the parent entity show the following aggregate amounts: ASSETS Total Current Assets Total Non-Current Assets TOTAL ASSETS (LIABILITIES Total Current Liabilities Total Non-Current Liabilities TOTAL LIABILITIES EQUITY Contributed equity Share option reserves Accumulated losses TOTAL EQUITY TOTAL COMPREHENSIVE INCOME Net Profit of the parent entity for the year net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR GUARANTEES ENTERED INTO BY THE PARENT ENTITY 2020 $ 2019 $ 7,492,162 19,553,832 7,333,042 19,625,106 27,045,994 26,958,148 3,430,747 23,902,034 3,592,160 25,140,477 27,332,781 28,732,637 5,861,788 18,616 (6,167,191) 5,861,788 69,532 (7,705,809) (286,787) (1,774,489) 1,536,027 1,536,027 (1,159,117) (1,159,117) No guarantees have been entered into by the parent entity in relation to the debts of its subsidiaries. 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 30 June 2020 51 Notes to the Financial Statements For the Year Ended 30 June 2020 34 LEGAL CLAIM Cryosite receive $1M in settlement of legal claim Arising from the ACCC settlement as outlined in Note 35, Cryosite entered into a deed of settlement under which the company was paid $1,000,000 on 30 September 2019, in settlement of the claim for loss and damage relating to legal services received by Cryosite in connection with the proposed 2017 transaction. The settlement sum is in full and final settlement of all claims by Cryosite relating to this matter. Legal claim received Legal fees incurred Net legal settlement before tax 35 LEGAL SETTLEMENT Penalty from ACCC Less discount factor due to payment plan Discounted penalty from ACCC Legal fees paid to ACCC Final ACCC settlement Final settlement Legal expenses incurred Pre-tax profit/(loss) for the financial year Income tax credit/(expense) Post-tax profit/(loss) for the financial year from legal settlement 2020 $ 2019 $ 1,000,000 (41,017) 958,983 - - - 2020 $ 2019 $ (1,050,000) 224,393 (825,607) (50,000) (875,607) (407,626) (1,283,233) 125,847 (1,157,386) - - - - - - - - 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. Other Liabilities – current Other Liabilities – non-current Total 2020 $ 50,311 527,833 2019 $ 47,464 578,144 578,144 625,608 Cryosite Limited Annual Report 30 June 2020 52 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 2020 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 14 to 52. 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 2020 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. 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. 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 53 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. 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. 54  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. Report on the Remuneration Report We have audited the Remuneration Report for the year ended 30 June 2020 as outlined on pages 6 to 10 of the financial report. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section the Corporations Act 2001. Our responsibility is to express an opinion on the 300A of 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 2020, complies with section 300A of the Corporations Act 2001. Yours sincerely, MAZARS RISK AND ASSURANCE PTY LTD Rose Megale Director Sydney, on the 28th of August 2020 55 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 17 July 2020. 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 2020 No of shares % of issued capital 2019 No of shares % of issued capital 18,889,612 9,129,995 40.31 19.48 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 No of shares % of ordinary shares Andrew Kroger and related entities Cell care Australia Pty Ltd BNP Paribas Nominees Pty Ltd Mr. Alistair David Strong Bell Potter Nominees Ltd Mrs. Jane Susan Milliken Mr. Stephen Roberts Sunnyit Pty Ltd H F A Administration Pty Limited CVF Australia Pty Ltd Paradyce Pty Ltd Mr. Gary Griffith Robins Castlereagh Equity Pty Ltd Wifam Investments Pty Ltd Integument Pty Ltd Wheen Finance Pty Limited Mr. Peter Howells MNJ Holdings Naron Nominees Pty Ltd Mantou Republic Pty Ltd 18,889,612 9,129,995 2,087,384 2,000,000 1,758,236 1,302,917 967,662 851,000 480,000 459,085 379,000 325,000 300,000 300,000 262,013 228,454 215,730 214,931 213,007 200,000 39,638,833 40.31 19.48 4.45 4.27 3.75 2.78 2.07 1.82 1.02 0.98 0.81 0.69 0.64 0.64 0.56 0.49 0.46 0.46 0.45 0.43 86.57 Cryosite Limited Annual Report 30 June 2020 56 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 38 217 61 100 41 4,572 13,831 822,506 480,359 2,848,994 42,693,873 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 124 and they hold 196,387 shares. Cryosite Limited Annual Report 30 June 2020 57 

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